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November 28, 2017 at 06:05 AM
In one of my previous articles, I discussed the mathematical improbability of pensions being provided for state, county, city, municipality, town, fire, police, teacher, and government workers.
The under-funding of these pensions is astronomical, with unfunded liabilities in the trillions of dollars. Many of these pensions are so under-funded that they will actually run out of money in the near term. Some will run out of money as soon as six years from now.
Exacerbating this problem, Social Security and Medicare are also being underfunded by trillions of dollars.
(Related: Why Most US Pension Plans Will Shaft Their Participants)
It can be difficult to have a rational discussion about these two programs because people have strong emotional feelings about Social Security and Medicare. But we must discuss this with every American receiving or expecting to receive these benefits or they are at risk of disappointment.
Did you know that social Security and Medicare are not entitlements? In fact, they are not even guaranteed by our government. In 1937, in Helvering v. Davis, the Supreme Court ruled that Social Security is not a contributory insurance program. Instead, FICA taxes will be paid to the U.S. Treasury like any other revenue and will not be earmarked in any way. It is completely legal for our representatives to use FICA taxes in any manner they choose. When you think about it, doesn’t that make the FICA tax into a payroll tax and not a pension contribution? Doesn’t that make Social Security a welfare benefit?
In August, the Social Security and Medicare Trustees released their annual report. Here are some numbers from the report that you will find startling. 171 million Americans paid into the Social Security program in 2016, and there were 61 million people receiving benefits. That means there are fewer than three people paying for every one person who is receiving benefits. According to the U.S. Bureau of Labor Statistics, we will have between 80 and 100 million people receiving Social Security by 2030. That means we will near two taxpayers paying for every recipient of benefits. This is simply not sustainable.
Medicare will also create staggering financial challenges for our country. According to the report there are 57 million beneficiaries of Medicare. But remember, the majority of Baby Boomers will retire between 2022 and 2029. By 2030, at least 80 million people will have Medicare. That is two taxpayers for every one recipient. Again, that is simply not sustainable
