Who’s going to pay for all this?


by Dan Lucas

When we talk of the national debt or Oregon’s debt, we’re talking about money our government has already spent that will need to be paid for in the future. When we talk about Social Security, Medicare and PERS unfunded liabilities, we’re talking about money our government has already committed to spend, and that will also need to be paid for in the future.

Our national debt is almost $17 trillion, and Oregon’s long-term debt is $13 billion. The unfunded liability of Social Security is $21 trillion. The Medicare unfunded liability (including prescription drugs) is $105 trillion. Here in Oregon, the PERS unfunded liability is around $14 billion to $16 billion.

For most of us, those are just Monopoly money numbers — it’s hard to grasp what they mean. For younger Oregonians, though, it means that over the years they’ll either be paying a lot more in taxes or getting a lot less in government services, or both.

A 2013 report by the Cato Institute finds that current U.S. fiscal policy “is placing an enormous financial burden on today’s children and on future generations in order to deliver government benefits to current middle-aged workers and their elders.” It goes on to note that these “intergenerational resource transfers” are going to grow. The Hill reported in February that “The number of seniors receiving Social Security and Medicare benefits will rise by 40% over the next decade.”

Younger Americans aren’t going to get the same deal their grandparents and parents got. By the time people born in 1987 turn 50, Social Security benefits will be reduced by about 25%, according to the Congressional Budget Office. Additionally, since Social Security is now running deficits, it will increasingly take more income tax dollars on top of the FICA withholdings from paychecks. That means that today’s young people are going to be paying more and getting less.

click to enlarge

In Oregon, a swelling elderly population as the baby boomers retire is going to place a greater tax burden on younger workers and it’s going to aggravate problems like PERS. In 2001, there were 1.9 PERS members working for every PERS retiree. Ten years later, that ratio had dropped to 1.4 PERS members working for every PERS retiree.

Oregon’s aging population reflects a growing trend in the U.S. — a declining fertility rate that will initially see our elderly population swell, followed by a shrinking population. A recent Wall Street Journal article notes that one of the problems with countries with declining fertility rates is that “They cannot sustain social-security programs because they don’t have enough workers to pay for the retirees.”

The Wall Street Journal article is based on Jonathan Last’s book “What To Expect When No One’s Expecting,” and reports that this same trend is happening in continental Europe, and that it’s even more pronounced in Japan. The article notes “Japan’s population peaked in 2008; it has already shrunk by a million since then,” and that “Last year, for the first time, the Japanese bought more adult diapers than diapers for babies,” and further notes that in 90 years, “Japan’s population will be less than half what it is now.”

The population situation in the U.S. and Oregon isn’t as dire as Japan’s yet, but our aging and then shrinking population are going to put significant stresses on programs like PERS and Social Security.

Policy makers have been very fortunate thus far that younger Americans and younger Oregonians haven’t really grasped who it is that will be paying for all this. Obviously it isn’t right or moral to stick them with the bill, but it’s happening nonetheless, and the question now becomes how soon will they catch on and what will they do about it.

UPDATE: good related article in the Huffington Post on 3/27/2013 – Why Is Generation Y So Easy to Bamboozle?
“Man, are we good at suckering the young into impoverishing themselves to pay for our folly.”

Post to Twitter Post to Facebook Post to LinkedIn Post to Reddit

Posted by at 05:00 | Posted in Federal Budget, PERS, Social Security, State Budget | 27 Comments |Email This Post Email This Post |Print This Post Print This Post
  • http://www.facebook.com/people/Larry-Sparks/100000792793213 Larry Sparks

    Does anybody understand why the Democrats just do not grasp basic economics? At some point, the Democrats think the tax rates will go up to the 70% level to support all these social and retirement programs.

    • Dem = parasite

      1. Most are financially illiterate due to stupidity or willful ignorance.
      2. Most are social parasites dependent on government handouts.

  • Ballistic45

    Well first off, if Democrats and Johnson would have left the Social Security fund alone, it would be there today along with the premiums paid by people who died late in life and before retirement actually boiling down to more people paying premiums than will collect benefits.. BUT we know Democrats and RINOs just couldn’t stand all that money settin there without getting their hands on it… And Vets have paid their dues for their benefits so let us look at groups who are REALLY on the Government Dole like welfare, illegal immigrants, incarcerated Prisoners, government lackeys, useless agencies, outlandish Government retirement systems.. How about cutting the Dollar for Dollar retirement of Congressmen and Senators along with their Public paid for Healthcare both of which are for life… It is telling that Democrats see the Constitution as a living Document to be changed whenever it doesn’t fit their agenda but Union Contracts are written in stone…

  • Moe

    Rates will go to 70. Dems are in control. Firmly. And they will make it happen. Thanks!

  • DavidAppell

    Sorry, but we won’t be paying back most of this debt. Like past debt, most of it will get inflated away. The rest will get carried at not too much expense as long as GDP growth stays above debt growth. If worst comes to worst, there will be haircuts all around.

    We didn’t pay off much debt after WWII. We won’t be paying it off after the financial crisis passes, either.

    • Appell Sauce

      No haircut for you, the “disability” checks will just keep coming.

  • Pingback: prediksi bola hari ini()

  • Pingback: http://www.youtube.com/watch?v=iFj84RERMLY()

  • Pingback: Blue Coaster()

  • Pingback: underground music()

  • Pingback: water ionizer()

  • Pingback: serrurier deauville()

  • Pingback: fue()

  • Pingback: stop parking()

  • Pingback: stop parking()

  • Pingback: laan penge()

  • Pingback: water ionizer()

  • Pingback: click this link now()

  • Pingback: house blue()

  • Pingback: part p electrician course()

  • Pingback: alkaline water brands()

  • Pingback: pay per day loans plan()

  • Pingback: water ionizer payment plan()

  • Pingback: alkaline water()

  • Pingback: alkaline water()

  • Pingback: here()

  • Pingback: ccn2785xdnwdc5bwedsj4wsndb()

Stay Tuned...

Stay up to date with the latest political news and commentary from Oregon Catalyst through daily email updates:

Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.

Twitter Facebook

No Thanks (close this box)