|SITREP - April 27th 2012|
I have to apologize. It’s been so busy the last few weeks that I’ve neglected to report on two really critical developments that you should have been informed about.
First, the Trustees of both Medicare and Social Security came out with their annual report on the financial health of the programs under their care. The situation isn’t good. If you recall, in last year’s report, the Trustees of Medicare had to move forward by a few years the estimated date at which Medicare will fully exhaust its main trust fund.
Instead of happening almost twenty years out, it’s now closer to ten.
This year, Social Security had to make the same revision. They brought forward their own estimated bankruptcy date to 2033. It’s worth noting that following on the heels of the Trustees’ report, PIMCO, the world’s largest bond investment fund (and one of the single biggest holders of US government debt), issued their own estimate suggesting that the Trustees are being wildly optimistic in their assumptions about inflation and interest rates. If PIMCO’s own models are used, Social Security (like Medicare) will run out of funds in a little over a decade.
Let’s say we split the difference and assume Social Security has sixteen or seventeen years of solvency left and maybe Medicare has thirteen or fourteen. On what planet do you need to be living to think this is OK to ignore?
We’ve put forward proposals to deal with this. The President’s deficit commission has put forward proposals to deal with this. The “Gang of Six” in the Senate put forward a proposal to deal with this. The only person I know of who hasn’t put forward a proposal to deal with this is President Barack Obama.
As it would happen, the other bit of news I had intended to report is that the non-partisan Congressional Budget Office released its economic analysis of the President’s budget proposal. In a nutshell, the CBO said that his budget for 2013 would boost economic growth next year by extending the tax cuts some more, but that in the later part of the decade, his budget would reduce economic growth literally because it borrows so much money that there will be an insufficient level of investment capital left available for the private sector.
This might be the reason why the Senate unanimously rejected the President’s budget proposal last year, the House unanimously rejected it this year, and the Senate isn’t even going to try voting on it before the election. As an aside, this Sunday will mark three years to the day since the Senate passed its own budget proposal.
You couldn’t make this stuff up.