Dallas Federal Reserve President Speaks Out on $99.2 trillion Entitlement Debt

Dallas Fed Res. President Speaks Out on $99.2 trillion

www.dallasfed.org

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.

(visit the link for the full news article)




[edit on 5/29/08 by aava]

In a speech given to the Commonwealth Club of California, Dallas Federal Reserve President Richard Fisher comments on a looming issue that could create even larger problems than our credit crunch and oil crisis combined.

I can not stress how important this is to the survival of our nations financial future! As much as I hate to admit it, entitlement programs are bankrupting us with obligations. This information is not really anything that new, but coming from a Fed President, it certainly carries some weight. I highly encourage people to read the speech in its entirety and send it to their respective representative. This issue needs to come to the front, as we cannot afford these programs in their current form.

LET PEOPLE KNOW THE STATUS QUO DOES NOT WORK!

www.dallasfed.org
(visit the link for the full news article)

Some highlights of interest:

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.

Suppose we decided to tackle the issue solely on the spending side. It turns out that total discretionary spending in the federal budget, if maintained at its current share of GDP in perpetuity, is 3 percent larger than the entitlement shortfall. So all we would have to do to fully fund our nation’s entitlement programs would be to cut discretionary spending by 97 percent. But hold on. That discretionary spending includes defense and national security, education, the environment and many other areas, not just those controversial earmarks that make the evening news. All of them would have to be cut—almost eliminated, really—to tackle this problem through discretionary spending.

Here is the MSM approach to reporting this event:

MarketWatch

It is quite amazing how that article glazes over all the pertinent information and goes straight to talk of the Federal Funds Rate. The entitlement math should be at the forefront of an investors mind, as it will shake up the bond markets and treasuries (at least) for some time to come.


As a closing, I leave you with his words:

Of late, we have heard many complaints about the weakness of the dollar against the euro and other currencies. It was recently argued in the op-ed pages of the Financial Times [3] that one reason for the demise of the British pound was the need to liquidate England’s international reserves to pay off the costs of the Great Wars. In the end, the pound, it was essentially argued, was sunk by the kaiser’s army and Hitler’s bombs. Right now, we—you and I—are launching fiscal bombs against ourselves. You have it in your power as the electors of our fiscal authorities to prevent this destruction. Please do so.

[edit on 5/29/08 by aava]

I am living in canada and here we have universal care service,almost free drug benefit.
We are 1/10 of the U.S. population and it not cost us 9.9 billions.
those guys are Crooks and Liars sold to insurance corp.

have a nice day.

Those are indeed some scary large numbers. There's a lot of ambiguity and unknowns there, too -- I don't really think it's valid to equate $1 in medical care, in today's dollars, with whatever might be required to fund those mandates 50, 20, or even 10 years in the future. The translation ratios are simply too uncertain, depending on requirements of care, available technology, population predictions, statutory changes, etc., etc.

Sometimes when I hear my older relatives talking about changes to their Social Security incomes and pension plans, I really feel the generation gap. I've been hearing about the instability of unfunded mandates for so long that I no longer have any trust in those system for the future. "Pensions"? "Social security"? Those are 20th-century concepts.

How can these problems be fixed? Is the system unfixably broken? I don't know.

An interesting though: each unfunded mandate like this is actually an investment by the powers-that-be in the status quo. The more that people rely on such systems, have no idea how to fix them, and are afraid of not having them, the less likely they are to embrace radical change.

My current solution? On a personal scope only: don't rely on such 'entitlements', and try to rationally invest in goods of tangible value, as possible.

one question comes to mind...why does health care have to be a profit making corporate enterprise? when the government finally comes to it's senses, there will be no problem.