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Monday, November 03, 2008

Two paragraphs that should scare anyone under 45 years old

From This CRS report concerning the Federal Debt:

Increases in gross debt as a percentage of GDP as a result of intragovernmental debt are a significant concern over the long run. In their 2008 report, the Social Security trustees projected that in 2017 the Trust Fund will begin to owe more benefits than what it collects in payroll taxes.33 As the Trust Fund begins to redeem its Treasury securities in order to pay benefits to retirees, additional strains on the budget and debt levels will be created as large amounts of money from general revenues are needed to fund these Social Security benefits. In addition, the funds from the surplus currently being used by the government to fund other programs will no longer be available, putting strain on the funding for these programs.

Further, the liabilities to future generations of elderly from scheduled Social Security benefits do not show up in the debt. Funding the promises of the entitlement programs are difficult to fully measure. CBO calculates a fiscal gap measure which quantifies the reductions in spending and revenues necessary to generate fiscal stability over a given period. They project that a permanent and immediate combination of spending cuts and revenue increases amounting to 5.2% of GDP will be necessary in order to maintain the present level of debt (as a percentage of GDP) 50 years from now.34 This amount is significant because outlays and revenues have each historically amounted to about 20% of GDP. Enacting this change amounts to a one-quarter cut in spending or a one-quarter increase in revenue collection or some combination of the two at a time when the country is facing a retiring Baby Boom generation. Standard economic analysis predicts that this could reduce domestic investment, worker productivity, and real wages further affecting the economy in the short run

How about this graph:

Boys and Girls, the green line and the blue line are heading in the wrong directions.

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