Sunday, April 16, 2017
Crisis in 2029
I believe that the United States will have a fiscal crisis in the Year 2029 which will lead to a breakdown and financial collapse. We need to wake up and prepare for this so we can prevent it from happening if possible. I now think that this crisis will not be based on excessive debt, but on a default on an implied social contract, and the rebellion of the underclass who will not accept the default.
The above chart comes from the Congressional Budget Office, and shows that benefits will not longer be paid as promised at some point about 2029. Social Security is the most stable of the social benefits with its own dedicated trust fund which is supposed to be rock solid. If SS will not be fully paid, then neither will Medicaid, Medicare, food stamps and any number of other benefits.
What is the big deal, you say, it only means that benefits will be cut about 20% or so. True, but you can't explain that to someone who is brainwashed into believing that they were "promised" benefits, and who will throw a temper tantrum if they don't get what they were "promised".
We need to start a national conversation about this NOW. We either need to increase social security taxes, decrease benefits, or be honest with people about the ponzi scheme that Social Security is. You could "fix" social security by diverting money from the general funds, but this is only a temporary fix and will lead to SS and Medicaid swallowing the entire budget.
Note: I started this blog believing that the US would have a crisis in 2022. I have changed this year various times as I do new projections. The last projection I made was that the system would last until 2039,
The numbers on this seem kind of vague. The CBO report referenced above just gives numbers as a percent of GDP. I tried to do my own calculation and I think the SS Trust Fund could possibly last until 2031. (I think the exact year isn't important, so I will leave it at 2029 until the CBO re-evaluates it again). The question is what happens when it is exhausted. There will be a $500 billion per year hole.
Choices are: 1) default. Even if people don't riot, this will decrease GDP by about 1.5-2.0% per year which could cause a recession. 2) Pay it out of the general funds. This will cause the deficit to increase by $500+ billion per year about the year 2030, speeding up whatever fiscal crisis will occur. None of the long-term projections I have seen, including those I have done before, take into account this jump in the deficit.
So in conclusion: I still agree that this problem needs to be addressed.
Posted by Nathan Vanderhoofven at 6:26:00 AM