Update on our Government’s Deteriorating Solvency

Summary:    Here are some ugly numbers for August from the Chief Actuary of the Social Security system.  This is a follow-up to Beginning of the end of the Republic’s solvency. Soon come the first steps to a reformed regime – or a new regime. (14 August 2009).

Contents

  1. Monthly cash flow in 2009 for the US Social Security Administration
  2. FM recommendations
  3. Other recent articles about this slowly developing crisis
  4. How does the US health care system compare to that of other nations? (update)
  5. Afterword and For More Information on the FM site

(1)  Monthly cash flow of the US Social Security Administration

Month Cash in Outgo  Surplus/Deficit YoY $ YoY %
Jan-09 $71,854 $55,290 $16,564 -$2,906 -15%
Feb-09 $54,413 $55,760 -$1,347 -$3,863 -154%
Mar-09 $58,669 $56,135 $2,534 -$4,935 -66%
Apr-09 $77,081 $56,596 $20,485 -$3,827 -16%
May-09 $54,408 $56,330 -$1,922 -$5,068 -161%
Jun-09 $61,156 $61,383 -$227 -$6,553 -104%
Jul-09 $56,345 $56,890 -$545 -$4,207 -115%
Aug-09 $50,657 $56,490 -$5,833 -$5,642 -2954%

Notes:

  • In millions of dollars.  Big money — aprox 5% of US GDP.
  • YoY means Year-over-Year (e.g, August vs. August).
  • This does not include the Medicare Trust Fund, for which I see only annual data. It contributions probably show the same trend.
  • Quarterly contributions arrive in March, June, etc.  April, of course, is a big month for contributions. 
  • Does not include “interest” paid by the government to itself, which is just another journal on the the government’s books. 
  • For more information see the source.

See the trend!  The year-over-year change in the surplus was -$15.3B in the first four months of 2009, and -$21.5B in the second four months.  Cash in was down 15%; cash out was up 3%.  The latest forecasts were for the system to go cash-flow negative in 2016 (Medicare went into the red in 2004).  August looks esp ugly, as Bruce Krasting warned us at his blog on 8 September 2009.

This does not mean that social security will go broke.  Social security contributions are just taxes.  Social security benefits are promises by the US government, and can be changed at will.  Instead this marks an inflection point for the government’s solvency.  For decades the taxes for Medicare and social security exceeded expenditures on those programs.  The government spent this money.

This is the end of an era.  As the boomers retire, expenditures for our social retirement programs begin their inexorable rise.  Instead of  funding the rest of the government, these programs become burdens.    For the next few decades the government will find the deficit growing each year (all other things being equal).  For more on this see “The biggest bailout yet“, Fortune, 17 August 2009).  The coming wave of deficits are too large for any feasible tax increases to cover it.  For more on the effects of various proposals, see these reports by the Chief Actuary.

(2)  FM recommendations

  • Taxes increase
  • Social security and Medicare benefits get taxes and means-tested
  • Other government programs get cut (e.g., our imperial but costly military)

Some combination of these three measures will do the job.  The two maintain social peace  by sharing the burden, and distributing scarce funds where most needed.  The third represents inevitable belt-tightening, pruning now unaffordable luxuries.

It will be a new world, not the end of the world.  Unless we cannot take these simple measures, and allow events to overwhelm us.

(3)  Other recent articles about this slowly developing crisis

(4)  How does the US health care system compare to that of other nations?

This subject has been intensively studied for decades.  These are a few sources, to help anyone interested get started.

(a) Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care“, Commonwealth Fund, 15 May 2007 — Abstract:

Despite having the most costly health system in the world, the United States consistently underperforms on most dimensions of performance, relative to other countries. This report—an update to two earlier editions—includes data from surveys of patients, as well as information from primary care physicians about their medical practices and views of their countries’ health systems. Compared with five other nations—Australia, Canada, Germany, New Zealand, the United Kingdom—the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives. The U.S. is the only country in the study without universal health insurance coverage, partly accounting for its poor performance on access, equity, and health outcomes. The inclusion of physician survey data also shows the U.S. lagging in adoption of information technology and use of nurses to improve care coordination for the chronically ill.

(b) The OECD has a large body of research comparing national health care systems by a wide range of metrics. See their Health Care page here. Esp note the following:


Originally published at Fabius Maximus and reproduced here with the author’s permission.