A "Silver Tsunami"

It appears that the first baby boomer recently applied for social security retirement benefits. Ms. Casey-Kirschling is the first of 80 million such individuals, and thanks to them, social security will pay more in benefits than in receives in taxes by 2017, and it will exhaust the trust fund by 2041. However, according to Social Security Commissioner Michael Astrue, "there is no reason to have any immediate panic" because "I and most people who are really familiar with the situation are confident that . . . Social Security will be there for future generations." Bush's privatization plan is currently buried in the same vicinity as Jimmy Hoffa, but Commissioner Astrue is confident that something will be done. I know I feel better.

Where the Reuters article is mostly sunshine and rainbows, this one is a bit more sobering. That "trust fund" supposedly created when Congress spent all the surplus on other things? Just a pile of IOUs. Actually, it's not even a collection of IOUs since one's IOU to one's self is actually a reminder. It gets better, too. The U.S. currently has 3.3 workers paying into social security for each retiree drawing benefits, but it's expected to drop to 2 workers per retiree around 2030. And let's not forget Medicare, which is expected to start running a deficit in 2010 and exhaust its "trust fund" by 2018, and whose financial liability is six (6) times greater than social security.

Of course, there's an easy solution: cut benefits. Let's see a show of hands, who believes that the Me Generation will vote for politicians who promise to cut benefits? Yeah. So, if benefits are kept at their current level, Congress has three options to raise that money: raise taxes, print money, or borrow from foreign creditors. Of course, the second option doesn't really work since social security benefits are tied to inflation, so running the printing presses overtime is treading water, at best (nevermind the effect of inflation on the rest of the economy). The third option isn't going to cover all the shortfall for two reasons. First, many Americans are already upset about the amount owed to foreign creditors, so any politician seeking to increase that amount is going to have a rough time of it. Two, foreign creditors have to be willing to buy, and given the amount of debt the U.S. already has and some of the frightening long-term economic predictions, it's far from guaranteed that any wish to buy more U.S. debt. Therefore, the choice is obvious: raise taxes.

Raised taxes will hurt the victims of this Ponzi scheme Generation X and those that follow in two ways. First, they will never see a dime of money from social security, so they will have to build their retirement funds on their own. Second, all that money flowing to the baby boomers will reduce the amount they can save for their own retirement. They will have a great deal of money taken from them (won't it be fun when the $1050 a month to a retiree is shouldered by two workers!), they won't get a return, and it will be difficult to save for retirement. A silver tsunami? To Generation X, Y, and beyond, it will be a never-ending golden shower.