Obama Silent on Social Security, Medicare Crisis?

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On Fox News, we read:

If there were any doubts that President Obama has moved beyond trying to tackle the $18 trillion national debt, his State of the Union address should put them to rest: He’s over it.

The president on Tuesday night pitched an ambitious package of tax hikes for some, tax cuts for others, education aid and other government protections… But absent from Obama’s address was any mention of the national debt.

And, in a break from past addresses, he made no call for reforming entitlements like Social Security and Medicare, the latter being a major driver of deficits and debt. Instead, he pointed to those programs as models for how the government protects Americans from “adversity” and examples of the kind of “middle-class economics” he supports.

Senior administration officials, in a briefing before the address, admitted the omission of any call for entitlement reform is an acknowledgement that the chances of a “grand bargain” on the budget is not likely during the next two years.

As usual, I did not watch the State of the Union address. I avoid looking at and hearing Obama whenever I can, for the sake of my blood pressure. Reading his comments in written is less grating.

Obama refused to discuss the crisis in America’s gargantuan old-age entitlement programs, Medicare and Social Security. This likely means one of two things: 1) He is too incompetent to recognize the major entitlement disaster staring us all in the face, or 2) he is quite competent enough to recognize how dysfunctional these programs are, and he’s smart enough to stay away from them.

Social Security and Medicare are utterly doomed. They are beyond saving. I have discussed this over, and over, and over. At some point in our lifetimes, the US Government is going to default on these programs. The plug is going to get pulled, and all the oldsters who thought they could rely on Social Security and Medicare to feather their retirement nests are going to discover that the government lied to them for years. It will be a tragedy, but… oh well. The money simply will not be there.

The present value of the unfunded liabilities in Social Security and Medicare are over $220 trillion (Refer to my articles linked above for more information on this.) This is an unimaginably large number. There is no way, under the present system, how these liabilities could be legitimately paid off. There are really only two ways the government will be able to tackle this in the future: either by hiking taxes to tyrannical levels, or by inflating the currency. In my opinion, it’d be a combination of both. The government would pursue major tax hikes across the board, from low incomes to high incomes, and they would badger the Federal Reserve into monetizing the debt hardcore. In this situation, I predict inflation reaching unbearably high levels. Prices would rise considerably.

The problem is that both of these “solutions” have major constraints. First of all, history shows that Americans are unwilling to tolerate taxation over 20% of the GDP. The highest total taxation has ever gone was during WWII, at just over 20% of GDP. But Americans were only willing to tolerate that as long as the war continued. As soon as the war ended, demand for tax cuts went through the roof. Thankfully, we got them. The point is, if politicians think they’ll be able to raise taxes above 20% of GDP to keep our welfare programs afloat, they’d better think again. I sense literal riots in the streets if they try this.

As for inflation, even the Federal Reserve has it’s limits. At some point, the people at the Federal Reserve are not going to want to inflate any further, because doing so will be detrimental to themselves and their constituent banks. The politicians will demand inflation, but the Fed will refuse. At this point, Congress could nationalize the Federal Reserve and pursue their own inflationary agenda. This would be the absolute worst-case scenario for the dollar. But I don’t think Congress would try this. Conservatives would not allow it. A decent number of Liberals would probably oppose the move as well.

So my assertion, based on all these considerations, is this: Social Security and Medicare are absolutely doomed, and they are frankly beyond saving or reforming. There is nothing the government can do to “fix” these programs and make them solvent.

Obama may know this, if he has an ounce of brain matter at all, which is why he would avoid discussing it. What advantage does he have to gain from talking about it? He could lie and claim the programs are saveable “if we act now”. But people have been saying that we need to “act now” to save these problems for 30 years. If the time to “act now” to save these programs was in 1980, then how can we still have time to “act now” in 2015? The answer: we don’t. Nothing can be done to save these programs. Default is basically inevitable. Obama really has nothing to gain from discussing this. He is the most liberal President since Lyndon Johnson. He’s supposed to be the champion of welfare programs, not the prophet of their destruction. So, he will remain quiet on the subject. The disaster won’t come to fruition in the span of his political career, anyway. Why waste his time on it? He can let some future sucker deal with it. No skin off his back.

Conversely, Obama has proved himself to be a wildly out-of-touch and naive individual. It is possible that the he really is oblivious to the impending doom facing Social Security and Medicare. In this case, that would explain why he doesn’t discuss it: because he genuinely believes nothing is wrong. I’d like to believe he isn’t that clueless. Unfortunately, I can’t be sure.

The future for Social Security and Medicare is grim. If you are under roughly 40, do not expect to ever draw any significant amount of cash from these programs. Plan accordingly. Save money.

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