George Rebane
This used to be the bawdy definition of ‘divorce’, but now, alas, it will have to do double duty for Social Security as well. For those of you not yet retired or close to retirement and paying in to Social Security, be prepared for (drum roll please) The Entitlements Meltdown. TEM is a certainty since to maintain promised payout levels we would all have to be taxed at rates between 50% to 80% according to Boston University economist Laurence Kotlikoff.
If you consider this to be a slim chance, then Plan B is for the US Government to say ‘just kidding’ to you younger workers by citing the 1960 Fleming v. Nestor decision of the Supreme Court, to wit – the government has no legal obligation to pay the worker because the worker has no legal right to Social Security – entitlements are not a contractual obligation like other government securities.
Add to all this the fact that, as David Brooks of the NYT recently reported, “the U.S. government has $43 trillion in unfunded liabilities, or $350,000 for every taxpayer. Standard & Poor’s projects that in 2012, the U.S. will lose its AAA bond rating.” , then you begin to get the right perspective here.
I say ‘begin’ because the unfunded liabilities story doesn’t end there. States have an additional layer of unfunded liabilities waiting for future taxpayers, and then we have your local county and city. Our Nevada County governments currently have visible unfunded liabilities in the order of $50M for just government worker pension benefits. (For an up-to-date report on this visit SESF.) Other layers are waiting to be added.
Recall that the federal government gets money only through taxation, borrowing, and printing the stuff (called fiat currency) – the latter two go to make up the ‘invisible tax’of inflation. From here on out your dollars are going to be protected only to the degree that they are backed by a healthy and growing economy abetted by a fiscal (taxing and spending) policy that keeps investors investing. When investment stops, then look out below because Santa Claus resigned some time ago.
Comments