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The Unabridged And Illustrated Federal Budget For Dummies - Part 4: Entitlements

Tyler Durden's picture





 

In this final part of the four-part series from The Heritage Foundation, we look at the scale of the entitlement society we live in relative to the Federal Budget. Medicare, Medicaid, and Social Security spending is set to explode, placing enormous pressure on other priorities such as defense and the rest of the budget.

Entitlement Spending Will Nearly Double by 2050

Spending on Medicare, Medicaid, Social Security, and the Obamacare subsidies will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will more than double. Future generations will be left with an untenable debt burden.

 

Tax Revenues Devoured By Medicare, Medicaid, and Social Security in 2045

Spending on Medicare, Medicaid, the Obamacare subsidies, and Social Security will devour all revenues by 2045. Entitlement spending is already crowding out vital constitutional functions, such as defense.

 

Medicare Adding to Federal Deficits Faster than Other Government Spending Programs

Entitlement spending is the main cause of long-term runaway federal deficits. Medicare is the fastest-growing program due to retiring baby boomers, the effects of an aging population, and rising healthcare costs.

 

Social Security Deficits are Permanent and Growing

Social Security began running deficits in 2010, paying out $48.9 billion more in benefits than it received through payroll taxes. Nor will these deficits ever end, meaning that without reforms, Social Security will continue to add billions to the deficit and debt each year.

 

Without Entitlement Reform, Federal Spending Will Exceed 40 Percent of the Economy by 2050

The major entitlements— Medicare, Medicaid, the Obamacare subsidies, and Social Security—are pushing spending to unsustainable levels. These programs must be restructured to prevent crippling debt or tax burdens on future generations.

 

Discretionary Spending Cuts Alone Will Not Balance the Budget

Annual spending on entitlement programs is massive compared to other federal spending priorities. Cutting discretionary spending is necessary, but cuts to foreign aid alone or pulling out of Afghanistan will not close the deficit. Entitlement programs must be reformed.

 

Even Eliminating Defense Spending Completely Would Not Balance the Budget

Unsustainable entitlement spending is the key driver of future deficits. Rather than tackle them directly, some would cut defense. But even if spending on this crucial national priority was eliminated completely, entitlements would continue to drive deficits to unmanageable levels.

 

Letting Tax Cuts Expire Will Not Balance the Budget

Some call for letting all 2001 and 2003 tax cuts expire, including subjecting the middle class to the alternative minimum tax, in order to balance the budget. Under this scenario, unaffordable spending would still rise, and economic growth and job creation would suffer.

 

Balancing the Budget Without Cutting Spending Would Cause Taxes to Skyrocket

America is running massive deficits, and a balanced budget requirement is often considered a way to rein in red ink. Without serious entitlement and spending reforms, the level of taxes required to balance the budget would reach economically stagnating levels.

 

Hiking Taxes to Balance the Budget Would Require Doubling Tax Rates

The costs of Medicare, Medicaid, and Social Security are rising substantially. Paying for this spending solely through federal income tax increases would require more than a two-fold increase of current tax rates, even for the lowest tax bracket.

 

Taxing the Wealthy to Balance the Budget Will Not Work

Some argue for taxing the wealthy to reduce federal deficits. However, hiking taxes on taxpayers in the two highest brackets would increase their tax rates to mathematically impossible levels. To close the 2035 deficit, the top two tax rates would increase to 159 percent and 166 percent, and in 2050 they would reach 236 percent and 246 percent.

 

Government Policy Reform Needed to Keep Spending Low and End Deficits Without Raising Taxes

Bold, transformational reforms are needed to solve America's spending and debt crises. The Heritage plan, Saving the American Dream, solves these crises through spending, entitlement, and tax reforms. It reduces the size of government, encourages personal fiscal responsibility, and fosters economic growth. It balances the federal budget by 2021 and does not raise taxes.

Source: The Heritage Foundation

 


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Fri, 05/04/2012 - 00:17 | Link to Comment q99x2
q99x2's picture

Austerity for TBTF. Arrest the facists.

Fri, 05/04/2012 - 00:47 | Link to Comment Michael
Michael's picture

More anecdotal evidence of banks not having even a few thousand dollars of your money you may want to stash in your home safe. My friend had the same problem with Wells Fargo earlier in the week. Bank run Friday?

From Daily Paul;

"OK so I don't want to cause a panic but I have to tell everyone about an experience I just had at Bank of America. I just went into my local branch to deposit a check and get some cash back. When processing the transaction the teller (who happened to be a bank manager) asks what size bills I'd prefer. I tell her large bills and she asks if it's alright if she gives me a bunch of $20'S instead, because the bank is very low on large bills.

I half jokingly say sure and ask if there's been a bank run or something. The lady looks me dead in the eyes and says "Not yet, but there will be". I double take and say "What!?". She then says "Yeah, I don't know when it's going to happen but it'll be soon". I then say, "What do you mean?". She says, "Trust me... have a nice day". She did not seem mentally unstable or nutty in any way. She wasn't joking and was being very hush hush about the whole thing. Why would a person who works for a bank even talk about a bank run? That's like someone who works for the fire department telling you that your house is about to burn down.

To top it off, I get back to my desk and see this headline on drudge:

"Americans flee banks for home safes..." (http://www.smartmoney.com/plan/banking/more-americans-keepin...)"

I thought about it some more and I realize that the FDIC insures deposits... so it's not like we have to worry about our money "not being there" in one sense. Then it hit me, rapid currency devaluation would trigger a bank run because people would want to get their money out and convert it into hard commodities before it lost it's value.

Does anyone have more info on this? This has got me pretty rattled."

http://www.dailypaul.com/230644/alert-possible-bank-run-need-info

Fri, 05/04/2012 - 00:52 | Link to Comment Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

HAHA Mr. Hussein Obama's slogan "FORWARD!"  came from the Hitler youth; isn't that cool?

 

http://www.youtube.com/watch?feature=player_embedded&v=l_z_pHUKajc

Fri, 05/04/2012 - 01:42 | Link to Comment Michael
Michael's picture

New Ron Paul slogan against Obama Forward; "Examine the Past"!

You can't prosecute criminals like Jon Corzine without examining the past.

I say, Examine the Past!

Fri, 05/04/2012 - 02:13 | Link to Comment dognamedabu
dognamedabu's picture

Bank tellers have internet to, some may even read ZH. Sounds like my kind of bank teller. Either that or she was planning to heist the bank. Come to think of it, she really sounds like my kind of bank teller!

 

 

Fri, 05/04/2012 - 02:22 | Link to Comment dognamedabu
dognamedabu's picture

Sad thing is she probably only gets part time, no benefits, $12 an hour and has to be on the front line when meatheads come in and blame HER for all that is wrong with the system. If anything, she was doing a good job.. Customers comes first and man, telling your customer that get his cash well the gettings good is A+ service. She should get a $50 million dollar bonus. Oh wait, the guy planning to take your cash is first in line for that. Headoffice will send her a ham at xmas, pat her on her bum and say good work Becky! 

 

 

Fri, 05/04/2012 - 03:47 | Link to Comment Hobbleknee
Hobbleknee's picture

The FDIC doesn't have enough money to cover deposits.

Fri, 05/04/2012 - 08:23 | Link to Comment Commander Cody
Commander Cody's picture

No worries, the Bernank will just print some up.

Fri, 05/04/2012 - 00:20 | Link to Comment tobinajwels
tobinajwels's picture

This speaks the truth!

Fri, 05/04/2012 - 04:02 | Link to Comment cheesewizz
cheesewizz's picture

"Ignorance is bliss" Social Security is Not a entitlement. It is however a Trust fund and thats were the problem lies.

The trustee's have broken there fiduciary responsibility, By stealing our money over the years to fund who knows what.

You schmucks over here at ZH are all the time flapping your gums about not being mushrooms, lemmings and the masses.

Well guess what mushrooms....

Fri, 05/04/2012 - 09:12 | Link to Comment hellas4life
hellas4life's picture

how is something you pay into and that has a 2.7 trillion surplus an entitlemeny?  the problems from medicare don't stem from the actual program itself but from the exorbitant cost of care in this country.  see here http://www.zerohedge.com/news/welfare-great-delusion  and in fact, the overall cost of health care has grown about 1/3 less than the overall private market costs. 

 

Medicare Has Controlled Costs Better Than Private Insurance
.

Medicare Has Lower Administrative Costs Than Private Plans.
.

So-called “competition” in the private health care market has driven costs up.
.

  • In most local markets, providers have monopoly power. Consequently, private insurers lack the bargaining power to contain prices.
  • In most areas, two or three dominant insurers dominate the regional market, limit competition and make it extremely difficult if not impossible for new insurers to enter the marketplace and stimulate price competition.
  • Medicare Advantage, which enrolls seniors in private health plans, has failed to deliver care more efficiently than traditional fee-for-service Medicare. Both the CBO and the Medicare Payment Advisory Commission (MedPAC), the commission which advises congress on Medicare’s finances, have calculated that Medicare Advantage plans covering the same care as traditional Medicare cost 12 percent more.
  • Karen Ignagni, who heads America’s Health Insurance Plans (AHIP), the insurance industry’s trade association, has admitted that private plans cannot bargain down provider costs and has asked Washington to intervene.
Fri, 05/04/2012 - 00:21 | Link to Comment VyseLegendaire
VyseLegendaire's picture

Summary: its a ponzi scheme.

Fri, 05/04/2012 - 00:26 | Link to Comment DaBernank
DaBernank's picture

B-b-but, greedy corporations...

Fri, 05/04/2012 - 00:35 | Link to Comment The Alarmist
The Alarmist's picture

Heritage, like CBO, assumes ceteris paribus that there will be a civil society with willing taxpayers to continue to remain comparably productive and to continue to shoulder the burden. That is a rather tall order even in the USA in the face of such a mountain of demands. Game theory would suggest mass "defections" as an ever-increasing body of people learn to pretend to do the work their employers pretend to pay them for with Dollars that pretend to hold purchasing power.

Fri, 05/04/2012 - 00:38 | Link to Comment l1b3rty
l1b3rty's picture

to live the modern synthesis of capitalism and socialism.

 

http://silvervigilante.com

Fri, 05/04/2012 - 00:38 | Link to Comment Thunder_Downunder
Thunder_Downunder's picture

"Entitlements"

Makes it sound so slovenly...

 

These are promises that have been made IN EXCHANGE FOR CHEAPER LABOR today.. the full lifetime cost of keeping one american fat, dumb, and happy has ironically or perhaps not so ironically been can kicked down the road.

 

This is not about lazy people on couches... this is about the feds and the corps tricking people into undercharging for their labour....

Fri, 05/04/2012 - 00:49 | Link to Comment The Alarmist
The Alarmist's picture

Seems like a rather expensive way to shift the labor supply curve down and to the right. Are you sure that corporation-provided entitlements were not a rational move to meet the unrealistic demands of a sheltered labor force at a time when global labor was still not a viable alternative? As for government entitlements, are those really anything more than vote buying by morally bankrupt politicians?

Fri, 05/04/2012 - 01:28 | Link to Comment Thunder_Downunder
Thunder_Downunder's picture

It probably is rational, certainly the deferred payment makes it cheaper in real terms.. and cheaper still if you accept that it is not possible for everyone to redeem their claim simultaneously without diluting each claims value... this is just another 'unexpected consequence' of an out of control fiat currency. Massive deferred claims in the labour market... 

 

Rightly or wrongly Corps and Gov. have both received discounted labour under this scheme. The sold trust in the future... one of the easiest sales strategies in an environment full of uncertainty. This is a morally bankrupt situation.. but scarce resources are not assigned morally.

 

What irks me is that most analysis stops with the political spin "they're lazy entitled  slobs" when it seems likely other forces at play. I dunno if my position is right... i'm just an armchair commentor throughing popcorn...

 

Fri, 05/04/2012 - 00:58 | Link to Comment Bohm Squad
Bohm Squad's picture

Labor discounted at a rate that will never be realized - got it.  

Fri, 05/04/2012 - 01:30 | Link to Comment Thunder_Downunder
Thunder_Downunder's picture

yerp :)

 

But why aren't people discussing it in those terms.. I'm sure theres something we can all learn from this... aside from "the only person that has your interests at heart is you"....

Fri, 05/04/2012 - 02:26 | Link to Comment Bohm Squad
Bohm Squad's picture

re: discussing it in those terms

Probably because it would make people sick to know the future value of their social security tax (as one example) will be greater than the present value of their benefits when they retire.  I did some quick and dirty math calculating my own SS benefits vs. what I could invest if I made 8% more than I do now (SS tax is around 10% combined and I assumed a 5% return).  The discrepancy between FV and PV was ~15%.

I stopped at FV and PV.  One could go further and find that a draw down on savings is more beneficial than the annuity payment from the State...and so on.

I'm sure there are many other distortions in labor's discounted price as well.  Unrecognized inflationary pressure is one that jumps up at me.  Artificially low rates of return, another.

...Render unto Caesar...

Fri, 05/04/2012 - 08:21 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Interesting thought.  I also wonder what the value of your deposits or payment would be if you took into consideration the vaule of the Money when you made your payments.

What was the Dollar worth 50 years ago vs now.  Especially since the Fed has devalued the dollar so much since then.  If you could figure out what your dollar could buy in say gold 50 years ago and what it could buy today you could get an idea the true value of deposits made 50 years ago.

Yet, they are paying you "benifits" in depreciated dollars.

Fri, 05/04/2012 - 22:55 | Link to Comment Bohm Squad
Bohm Squad's picture

I think I understand what you are saying.  I used 5% as an arbitrary real rate of return and ignored inflationary effects.  One could just as easily say their ROI is 9%, but they'd have to discount the FV to get today's dollars.

Real Rate + Risk Rate + Inflation Rate = Interest Rate...hope that clarifies what I did.

In today's world though, Interest Rate = Whatever the Fed wants...but therein lies the original problem to which I replied.  :) 

Fri, 05/04/2012 - 00:46 | Link to Comment AustriAnnie
AustriAnnie's picture

"Entitlement spending is already crowding out vital constitutional functions, such as defense."

Um, right.  Because when military contractors get money from the federal goverments its not called welfare its called "defense."

"Defense" spending is nothing but welfare for corporations, with a side of death and destruction.

But what else would we expect from the Heritage foundation?

Fri, 05/04/2012 - 01:25 | Link to Comment AustriAnnie
AustriAnnie's picture

So at least two people think massive spending on war is justified.  

Its interesting how the Heritage people always hate gov't spending unless its going into their buddies' pockets.

 

Its also interesting that they place a tiny bubble with "War on Terror" spending, when they clearly left out the majority of defense spending in that statistic.

All so they can send a certain message.

I'm all for cutting entitlements, but they pool all the enitlements together so that nobody can see that defense is every bit as large of a spending bubble as the others.

 

Fri, 05/04/2012 - 01:31 | Link to Comment AustriAnnie
AustriAnnie's picture

They only count overseas contingency operations, which is only a small portion of defense spending.

http://comptroller.defense.gov/defbudget/fy2013/FY2013_Budget_Request_Ov...

In case anyone is willing to question Heritage's motives when it comes to discussing war spending.

Fri, 05/04/2012 - 02:36 | Link to Comment dognamedabu
dognamedabu's picture

You are right to question sources.. I do it without even thinking these days.. But numbers are numbers and if they want to chart certain numbers to look bigger or smaller, to me that is the readers job to disect the infomation into 'charts' they like. Like your analysis. Didn't take you long to 'spin' it towards your world view. Not to say your 'world view' is wrong it is just your way of looking at the data. Go make your own dot org make a bunch of charts based off real numbers and then submit it here at Zerohedge. 

Fri, 05/04/2012 - 02:45 | Link to Comment AustriAnnie
AustriAnnie's picture

I'm pointing out that Heritage tends to work toward one side of the two-party system.  They, too, have a cause they want the taxpayers to fund, and it is war.  The democrat bubble chart would look the same, but in reverse, with defense spending next to one portion of entitlement spending.  

Like anyone else here, I call bullshit when I see it.  And I'm providing facts for anyone who is interested.

When we question government statistics here on ZH, everyone is on board.  But I questions Heritage's sneaky stat manipulations (which are no accident, they are deliberate) and it seems to push some people's buttons.

I'm simply asking people to consider what Hertiage wants their money for.  

Fri, 05/04/2012 - 02:59 | Link to Comment dognamedabu
dognamedabu's picture

Good call. I am sure some didn't even think twice about it..Now they might. But gwad, I see charts all day and night..Here, from gov, from private orgs, ect ect.. I just think right off the bat, what lie am I trying to be told and how can I recalculate it to correctly fit into a truth I hold?

If some dude who wants to set the ME ablaze runs with one of their charts, so what? The guys an idiot. Your congressman? Well they are an idiot also..Most likely a psychopath as well. Most designer 'data' should be labelled 'for personal consumpution only.'

 

 

Fri, 05/04/2012 - 03:38 | Link to Comment dognamedabu
dognamedabu's picture

The democrat bubble chart? I hope you are not one of those who thinks that their votes count. I could sit here all day and makes charts so you feel good and urge you to vote for me.. Then once I am in, I'll send that defence contractor the bid cause they provide jobs and that is me..Mr Democrat.. Looking out for the working person.. Meanwhile no matter what chart they showed you, it is going to blow up..Not in their faces, they do 4 year stints..

Fri, 05/04/2012 - 07:43 | Link to Comment Leraconteur
Leraconteur's picture

If you eliminate the entire DOD budget and related, all 1,000 Billion, you still do not balance the budget.

The problem is so large and intractable, even stopping all OSCO doesn't fix this.

The maths no longer cares if you are with Brookings, Heritage or CATO.

Fri, 05/04/2012 - 07:34 | Link to Comment Northeaster
Northeaster's picture

Nice catch.

I used that link myself yesterday on a different thread elsewhere.

I agree, Heritage and others, whether it be right or left I disregard, it opens up fodder from the other side. Stick with "official" government data, it doesn't matter whether it's manipulated (I don't think it's outright false, as it's easy to use different formulas to get what you want to show) or not, use it against them.

If readers want to take what ZH posts as sacrosanct, more power to them. ZH does post some excellent data with some excellent analysis on the data, but some the opinion pieces are just that, opinion. The comments section is lacking these days, compared to two years ago when true pros would chime in with industry analysis often. Now it's few and far between, filled with "buy gold", "buy guns", "The Fed -insert derogatory comment-", etc. Here's to wishing some of the posters of old would return with some real professional/industry comment content.

Fri, 05/04/2012 - 09:30 | Link to Comment hellas4life
Fri, 05/04/2012 - 02:12 | Link to Comment Bohm Squad
Bohm Squad's picture

re: buddies' pockets

Petition from the Candlemakers - 2012 Non-Stop World Tour

Fri, 05/04/2012 - 09:48 | Link to Comment GCT
GCT's picture

Austri I was wondering the same thing.  Looking at the chart they left off the defense spending, but made sure the entitlement spending was huge.  funny how that works.  Some of their data is excellent when it come to the spending, but lacks the complete picture. 

Like many have stated once you get the pundits out of the room the Heritage foundation if you follow all the presented charts, does their best to keep the defense out of the picture unless they want to present how defense is getting screwed.  I will be honest I am for a strong defense, but that does not mean breaking this country to support it.

Honestly we can debate these issues to the "cows come home" and nothing is really going to change. You have the right wing organizations and the left wing organizations and both will tell you how either side is screwing you when in the end all politicians and bankers ae screwing us all.

 

Fri, 05/04/2012 - 06:28 | Link to Comment connda
connda's picture

Social Security is not a fucking Entitlement.  US citizens and their employers pay 12.4% of an individuals earning into the system.  I want my money back out of that system.

How to pay for it.  Well considering that SS funds was probably raided and funneled to Defense Spending in order to supply Entitlements to the MIC, I'm thinking that those funds should be diverted right back into Social Security.

Hell, FERS is more of an Entitlement program.  Congress members pay a whopping 1.8% of their salary for FERS with the government picking up the rest of the contribution. 

Fri, 05/04/2012 - 09:33 | Link to Comment Saro
Saro's picture

"I want my money back out of that system."

You can't, because it's not there anymore.  Your money was stolen to pay the SS benefits of the retirees of today, and if you don't help stop it, they'll happily steal from others to pay for your SS when you retire. 

It sucks that we're all getting swindled, but I'd rather break the cycle than pay the pain forward onto the next generation.

Fri, 05/04/2012 - 02:56 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

...the country is dead and most Americans, still working, are not willing to rise up and restore order. They are Laodicean Zombies that vote to elect one of two evils, which represent the NWO U.N. Agenda borderless corporate criminal global enterpise hell bent on their antichrist vision. The government employee (labor) is not an American, they serve as fascist pigs that enforce and account for the number of the market beast they need to feed. That's all these number represent, the selfish interest of mad cows that worship at the Suicide Vampire Squid alter, where the burning of the future is laid out as a child, that represents the future, and the Constitution of the country. 

It is time for this to end, and, for the restaining Spirit to (divest) leave with the host (labor). The judgment of fools is falling upon their heads and the prophetic strong delusion is assuming (aborting) it's last willful idiot. We are witnessing the counting of the numbers of the beast. Have no doubt, the black hole is at hand. http://www.youtube.com/watch?v=bemuI_pjn2A&feature=related

Fri, 05/04/2012 - 03:46 | Link to Comment Catullus
Catullus's picture

I love the % of GDP nonesense.  If you were honest about the GDP, you'd take out government spending.  The government doesn't produce anything.  Everything it does is a transfer of resources, so government spending as a % of the total economy would be greater than 100% by 2050.  The value of everything produced by the private economy in a given year is completely stolen by the government at that point.

Hey government worker under the age of 30, this is basically saying to you that your pension won't be around when you retire.  You think you have a great job with great benefits.  You don't.  Your employer is very much aware that they're not going to be able to keep this going into 2050.  There's simply not enough to steal.  There's no amount of tax increases that are going to solve this problem either.  They've just promised too much. And this all assumes a growing private economy and an interest rate that's probably significantly below what will probably happen over this amount of time.  Your friends who got jobs paying less but in the private sector are going to laughing at your misfortune in a couple of decades.

Fri, 05/04/2012 - 03:56 | Link to Comment dognamedabu
dognamedabu's picture

Private/public both are out to hang. Both will be laughing but probably b/c they will have legalised pot by then so both guys feel ok about retiring in their parents basement. 

Fri, 05/04/2012 - 03:59 | Link to Comment dognamedabu
dognamedabu's picture

It produces $1.4 trillion than otherwise wouldn't exist. Not bad for a private corp. Oh wait you can vote for its CEO but not for the BOD so I guess its one of those semi-private/public deals..like the FED

Fri, 05/04/2012 - 10:09 | Link to Comment TrulyStupid
TrulyStupid's picture

The biggest socialist employer is the armed forces. If you add in the spending to private wealth destruction contractors in this sector, real GDP would reflect observable reality... we're going down the tubes in an orgy of wealth destruction.

Fri, 05/04/2012 - 06:30 | Link to Comment plumber9
plumber9's picture

What do Congress and a condom have in common ?

Both make sure nothing happens while your being fucked....

Fri, 05/04/2012 - 07:06 | Link to Comment firstdivision
firstdivision's picture

Some call for letting all 2001 and 2003 tax cuts expire, including subjecting the middle class to the alternative minimum tax, in order to balance the budget. Under this scenario, unaffordable spending would still rise, and economic growth and job creation would suffer.

I have yet to figure out how letting tax cuts that were put in place in 2001 and 2003, would cause economic growth to suffer along with job creation.  Pre-2001 tax cuts, i.e. the 90's, seemed to thrive just fine.  Such statements that retiring tax cuts, that were put in place for temporary reasons, would cause the economy to suffer is speculative to say the least.

Fri, 05/04/2012 - 07:41 | Link to Comment kralizec
kralizec's picture

The first rule of budgeting according to the Democrat-Media Complex is "Thou shalt not touch entitlements, but thou shalt grotesquely increase their allotment annually for perpetuity regardless of deficits or debt burden, since the latter two are completely the fault of Ronald Reagan and the Flying Bush's."

Fri, 05/04/2012 - 09:54 | Link to Comment TrulyStupid
TrulyStupid's picture

No, the first rule is "thy shall not touch "defense" spending and defense "foreign aid" ". These are the sources of the ongoing malinvestment and misallocation of debased bucks. The corollary is "those that profit from such ballooning expenses are required to receive a tax cut"  in order to boost corporate profits and redirrect employment from productive wealth enhancing domestic  activities to the big job of wealth destruction.

Fri, 05/04/2012 - 08:03 | Link to Comment tarsubil
tarsubil's picture

My guess would be that the lines intersect in the second graph before 2020 not 2045. But then afterall, this is all academic.

Fri, 05/04/2012 - 12:47 | Link to Comment Matt
Matt's picture

What interest rate are they assuming on the debt? Don't they know that the higher the debt, the lower the interest rate on it will be, and the more of it that will go back to the Treasury via the Fed?

reduce defense 5 percent per year for 10 years to half its curent size, implement a 5 percent VAT, and increase payroll taxes. Do some kind of actual stimulus that builds infrastructure and employs lots of people; going to need a lot of immigrants to make up the payroll shortfalls, so something to bring in lots of young people on a path to make them citizens.

Explain to all the boomers if they don't support this plan, their entitlements will run out and they will get nothing. On the Fed side, announce a gradual scheduled increase in rates up to 4 percent over the next 2 years. There that's my solution.

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