Storm on the Horizon - Dallas Fed Prez warns of entitlement crisis

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Please sit tight while I walk you through the math of Medicare. As you may know, the program comes in three parts: Medicare Part A, which covers hospital stays; Medicare B, which covers doctor visits; and Medicare D, the drug benefit that went into effect just 29 months ago. The infinite-horizon present discounted value of the unfunded liability for Medicare A is $34.4 trillion. The unfunded liability of Medicare B is an additional $34 trillion. The shortfall for Medicare D adds another $17.2 trillion. The total? If you wanted to cover the unfunded liability of all three programs today, you would be stuck with an $85.6 trillion bill. That is more than six times as large as the bill for Social Security. It is more than six times the annual output of the entire U.S. economy.

Why is the Medicare figure so large? There is a mix of reasons, really. In part, it is due to the same birthrate and life-expectancy issues that affect Social Security. In part, it is due to ever-costlier advances in medical technology and the willingness of Medicare to pay for them. And in part, it is due to expanded benefits—-the new drug benefit program’s unfunded liability is by itself one-third greater than all of Social Security’s.

Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.

I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the “funded” entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well.

Let’s say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four—over 25 times the average household’s income.

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Full speech available here: http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm

candidate is addressing this in any meaningful way. It's depressing to think about.

programs, like with 5% of the world's population, spending more on national defense than the rest of the world combined so we will have enough nukes to blow up the world a thousand times over and to build the most sophisticated weaponry the world has ever known so we can achieve phenomenal kill ratios against people of color on their on territory. This may be a wee tad cynical and oversimplified, but everyone in this country with a lick of sense has seen this coming for decades, yet this nation has placed a 'puke in office for some 20 of the last 28 years, increasing the national debt about nine-fold, thus making it a near certainty that at some not-too-distant point, future social security recipients will see their benefits cut drastically, payroll taxes increased dramatically, or will be paid in dollars having little purchasing power a la Germany in the 1920s. Please refute or, in the least, don't kill the messenger. :P

and say BOTH parties have been completely irresponsible on the issue. Congress controls the budget, and we've had mostly Democratic-controlled Congress for much of the past three or four decades. Both parties pretend that the crisis doesn't exist.

The fix for this is going to be ugly and painful, and we don't have leaders who will tell the American people what they NEED to hear, even though they don't WANT to hear it.

weak on national defense, soft on communism, soft on crime, soft on drugs, and now, soft on terra that they have, in effect, let the 'pukes set the national agenda and bingo, what do we get: swollen defense budgets, burgeoning and unsustainable budget deficits and national debt, welfare only for the most affluent and large corporations, undermining/overthrowing governments that lean even a tad left of center (and all too often by acts of terrorism), a crumbling infrastructure, a lazy bizarre (pun intended), let the boys be boys approach to business, with the spoils (profits) being privatized and the losses from ineptitude/fraud being heaped upon the taxpayers, over crowded jails teeming with non-violent, mostly drug-related, offenders, the worst health delivery system in the industrialized world, we could go on and on, but one quickly gets the drift, to wit, 'pukes can't wait gut social security and Medicare. All this raises the central question: why do 'pukes hate everything ever good about America. Simple, it's 'cause they have an idea of governance completely foreign to the principles upon which this Republic was founded and in which they are busily implementing, step-by-step, day-by-day and calling it a fascist totalitarian police state would be much too nice a moniker. :D :P

... they're here to tell us that the money is gone. Every last one of them must go.

This was of Congress' doing, and each and every American--not just those who had the Baby Boom kids--but those of us who keep electing politicians to spend thirty years in Washington without fixing the mess.

The Fed has its problems, to be sure, but this isn't one of them.

We need real leaders in Washington who will, first, publicly admit that there IS a problem, and second, work together to try to fix it.

we manage to get universal, single payer health insurance in this country.

There is no way we can give full health care to seniors on the backs of people who don't have health care, themselves. It's unjust and has to be ended now.

In addition, since Medicare is the pool of people who are likely to cost the most in terms of care, and that pool is restricted to such people, there is no reasonable way to fix it without jacking up the premiums or denying care, both of them unconscionable.

Only by making the plan universal will we be able to expand the pool enough to fund it completely. That's how insurance works, you pay your whack when you don't need it and insurance pays you when you do.

Old folks who are of the "We got ours, screw you" mindset will find out they won't have theirs for much longer unless the healthcare issue is taken on completely and honestly and for all of us.