Friday, November 18, 2005
Bemused Rage And All That
Suffice to say that I have now given up on my futile and foolhardy quest to receive any kind of service from you. I suggest that you do likewise, and cease any potential future attempts to extort payment from me for the services which you have so pointedly and catastrophically failed to deliver - any such activity will be greeted initially with hilarity and disbelief - although these feelings will quickly be replaced by derision, and even perhaps a small measure of bemused rage.There's more over at Howard's, plus the link to the whole two-page letter. It is a classic. You know, letter-writing is an art form that should be revived!
Okay, enough digressions. I was over there because I thought Howard's post about interest rates was important and I wanted everyone to read it. Complete with charts like this:
Go read the post. When short term interest rates are higher than long term interest rates, it indicates something's wrong with the economy. I agree totally with Howard's remarks about the Fed having mismanaged this situation. Inflation is being caused by high oil prices, not by low interest rates. They created this bubble and now they are popping it quite recklessly. As always, it is the little guys who get worked over.
I also suggest you spend some time reading Mover Mike this weekend. Start with this post, in which he lists the budget excluding Social Security (right now SS is running a cash flow surplus, which is spent every year). We are on a tragically unsustainable path, and the tipping point doesn't come in 2040. It comes before 2020. Medicare is already running a deficit - more is being spent than is being taken in. This will continue to get worse every year. Sometime between 2015 and 2017 we will start paying out more in checks for Social Security than we take in from tax receipts.
But because Social Security taxes have been used as if it were an income tax, the effect on the budget will be quite significant by 2010 or so. Look at it this way. If we got in a 75 million dollar surplus, and then that switches to a 75 million dollar deficit, the net effect on the budget is to produce a 150 million dollar cash shortfall.
Congress has known about this forever. For example, look at page 7 of the 1998 Trustee's Summary:
What Are Key Dates in Long-Range OASI and DI Financing?It is this - Medicare being negative and Social Security going negative - that dooms the budget and makes drastic change necessary. Anyone who has been deluded into believing that we do not need to change is due for a rough ride.
For the next 15 years (through 2012) annual income to the OASI and DI Trust
Funds is projected, under the intermediate assumptions, to exceed outgo.
As the “baby-boom” generation reaches retirement age over the period
from 2010 to 2030, several important points will occur, as shown below.
• 2013 - First year OASDI outgo exceeds tax income
• 2019 - Year DI trust fund assets are exhausted
• 2021 - First year OASDI outgo exceeds tax plus interest income
• 2032 - Year combined OASDI trust funds’ assets are exhausted
• 2034 - Year OASI trust fund assets are exhausted
These key dates are 1 to 4 years later than those shown in the 1997 report,
due in large part to better actual and expected economic performance.
Actually, the SS debacle scares me the most. There is just now way out without radical changes. That failure (inevitable) will see exponential growth with each passing month. That will put an even bigger burden on Medicare (no one ever talks about that) as less money is put into healthcare and there is greater reliance on Medicare.
The sooner we act to deal with this, the better off we will be. This is just running straight into a brick wall.
I'm a big supporter of personal accounts, because Congress can't be trusted. What they are doing is just deferring debt. If we started putting money into private accounts now, we would be actually saving money. That is why the big spenders don't want to do it. They would have to give up some of their treasured spending. However, we would be reducing our future debt load.
Politicians and demagogues are lying their heads off about the federal budget. This has to end.
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