Tipping Point for SS and Healthcare?
Board: Macro Economics
A common theme of posts over the past 2-3 weeks involves the changing tax based to support current government programs and the macro impact of continued crushing debt loads imposed by continuing those programs.
It really is worthwhile to step back and carefully review the differences between the mental shorthand we use in our head for terms like "unfunded liabilities" and what the law and politics (lower case "p" -- no partisan point being made here) actually require.
Are the "unfunded future liabilities of Social Security" a threat to financial growth? They are if one assumes that the fact your parents may have retired at age X and collected Y years of payments based upon Z years of "contributions" creates an actual LEGAL obligation for future generations to do the same when YOU retire.
If people wake up and realize any one of the following changes could be made to drastically alter the funding / drain balance of the program,
* eliminate yearly SS tax cap on income above $106,800
* limit payment eligibility to whatever yearly tax cap is used (if you aren't taxed for income above $106,800 then your benefits should be calculated with yearly incomes no higher than $106,800)
* means testing payments for wealthy elderly
Then the future burden on the overall economy as the demographics shift would look NOTHING like it does from extrapolating current behavior. If one assumes elderly voting blocks would never allow such changes at the polls, one has to hope that the 18-35 generation doesn't suddenly realize they better get their butts to the polls to represent THEIR generational interests. That might not happen in a booming economy where every 20-something has enough money to hit the clubs every night instead of paying attention to politics and economic trends. It DEFINITELY might happen when an entire generation of 20-somethings is living in their parent's home working at minimum wage and realize their primary political choice is to alter social security eligibility rules so money can go directly to their generation or continue having it flow through their parents while they live in the basement.
Will spiraling Medicare costs pose an equally existential risk to future economic growth and prosperity? They certainly will if millions of families learn NOTHING from watching "heroic" medical efforts burn through a lifetime of savings in a few short months while adding nothing to the quality of life.
Is that likely?
I'm not sure but I would lean towards many people learning the difference between quantity and quality of life and updating their own directives to avoid some of the more extreme scenarios that cost so much money.
Will spiraling healthcare costs for the rest of us continue to weigh down the economy? They could if one assumes healthcare and pharmaceutical companies have our government in a headlock to prevent changes to the insurance models in place and the actual delivery practices in place for healthcare. It certainly SEEMS like they do have our government in a headlock but there's a catch.
That headlock can only last as those firms stay in business. They're a business just like anyone else and their primary customers are businesses -- our employers. If our employers are crippled by higher healthcare costs and cut staff or go out of business entirely, guess what? Those insurance companies, pharma companies and hospitals lose customers as well. Lose enough and they're no longer enough of a lobbying threat to a politician to block changes that tip the balance back towards individuals.
There ARE such things as points of economic discontinuity -- points where one or two inputs to a larger set of macro decisions reach values that trigger huge changes in MANY other decision variables, not just incremental changes in one or two. We may be very near one or more of those points right now. Extrapolating beyond those points using current behavior is almost pointless to the point of comedy.