THE $102 TRILLION BAILOUT
December 4, 2008
With a bailout bill that totals $8.5 trillion so far and a "stimulus package" yet to come, the federal debt, currently about $6.3 trillion, can be expected to grow substantially in the next few years. But as a new report from the National Center for Policy Analysis notes, the official number is limited to debt held by the public; it does not include entitlement obligations.
According to the report's authors, economists Andrew Rettenmaier and Thomas Saving:
- Paying Social Security and Medicare benefits to current workers will cost $52 trillion.
- If these programs were funded by investments, they say, the government would have to set aside $102 trillion (about 7 times the size of the U.S. economy) to keep the programs solvent.
- Assuming the government continues to use current tax revenue to pay for Social Security and Medicare, the two programs will consume one-tenth of the federal budget by 2012, almost half by 2030, and 80 percent by 2070.
Rettenmaier and Saving concede that their preferred solution -- reforming Social Security and Medicare "so that each worker saves and invests funds for his own post-retirement pension and health care benefits" -- would impose a "substantial" burden on current workers, who would have to "save for their own benefits while at the same time paying taxes to fund the benefits of current retirees." But the alternatives -- a crushing tax burden and/or dramatic benefit cuts -- are even less appealing.
Source: Jacob Sullum, "The $102 Trillion Bailout," Reason, December 4, 2008; based upon: Andrew J. Rettenmaier and Thomas R. Saving, "Thinking About Tomorrow," National Center for Policy Analysis, Study No. 317, December 3, 2008.
For NCPA report:
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