We have less than six years before Social Security is insolvent. That’s less than one senatorial term. One tragic consequence will be the impact on roughly 50% of married and 75% of unmarried retirees who depend on it for the bulk of their income. Additionally, the stress placed on our federal budget due to unfunded mandates including Social Security, Medicare, Medicaid, Affordable Care and interest will have a dire effect on the future of America. The immediate cost to retirees under current law will be a 22% reduction in Social Security benefits. The impact of all unfunded mandates on the budget is even more draconian. Total annual federal revenue is roughly equal to our annual mandated expenditures. That means that most or all other government expenditures, including defense, education, transportation, health, Homeland Security, courts, FBI, agriculture, public lands, monuments and national parks must be funded through borrowing, resulting in ever-increasing and unsustainable debt. Another consequence of this insolvency will be a downgrading of our national credit rating, which will further raise our interest costs, exacerbating the situation. Some corporations already have higher credit ratings than the U.S. government. What is the reaction to these twin catastrophes? Virtually nothing. The editorial pages and nightly news are nearly silent, and current office holders and candidates are not addressing these issues. We the people are not holding our leaders’ feet to the fire. Shame on all of us. It has been about 16 years since President George W. Bush made the last significant, but unsuccessful initiative to reform the system. Time is of the essence, yet we continue to squander that time, while corrections to the system could move it toward sustainability. Many have thrown their hands in the air in surrender even though there are a number of reforms that could make the system sustainable over the next 75 years and perhaps even over the more distant horizon — two key time frames used to measure sustainability. The Social Security actuaries have judged these and other combinations capable of this result. Structural problems: “Pay-as-you-go,” coupled with a declining ratio of workers to retirees, creates a Ponzi scheme. Longevity increases are resulting in larger outflows than anticipated. Initial benefit levels are rising faster than revenues and inflation. Cost of living adjustments are rising faster than real inflation. Investable “surpluses” are declining. These will ultimately disappear as well as the earnings on these investments. Note: Raising taxes 20-plus times has not solved the structural problems. Suggested solutions: Index retirement benefits to longevity. Calculate initial benefit levels using the Consumer Price Index rather than wage increase. Calculate cost of living adjustments based on the more accurate inflation index, Chained Consumer Price Index, rather than traditional Consumer Price Index. Move away from “pay-as-you-go” toward a system that funds each retiree’s benefits from his own contributions. One way to do this is through a contributory add-on system of personal savings accounts. Additional investable surplus must be created, probably by liberalizing investment choices in a manner like your 401(k) option. Jeffry Gundlach, the “Bond King,” pointed out in a TV interview that we used to worry about our grandchildren, but now must worry about ourselves. And because unfunded mandates are growing, they are gradually squeezing out other government expenditures. As a result, some have described our government as becoming an insurance company with an army. Our current national debt plus unfunded mandates over the 75-year period amounts to $1.3 million per 2025 taxpayer. That is my definition of draconian. By electing officials who looked primarily at short-term, easier and partisan issues, we got what we voted for — bad governance of mandates. If this is to change, we must demand candidates and officials who will also solve major, long-term problems like Social Security. That is our challenge and responsibility if we are to avoid the pending national disaster. Scot Wallace, an Oakley resident, graduated from Cal Poly San Luis Obispo with a degree in ag economics. He had a long business career in agribusiness, was a vice president/general manager, board member and entrepreneur. He is a former Republican Party precinct chair, legislative chair, regional chair, county and state delegate, and a three-time campaign manager for a past state legislator. The post Too quietly, the clock ticks down on Social Security’s solvency appeared first on Park Record. ...read more read less