Here we go dammit...

Here is how Democrats got us into this mess (I'll pick on the Republicans in a bit)

The Social Security Act was the cornerstone of President Roosevelt's 'New Deal' back in the 1935. The eleven titles of the act authorized the federal government to disburse social welfare assistance to a wide variety of needy people: unemployed workers, fatherless and disabled children, and destitute old people. It relieved the suffering of millions because it sent immediate, targeted relief to Americans who had nowhere else to turn.

As great as that was at the time, that triumph contained a couple of vulnerabilities that would grow into major forces behind uncontrollable benefit growth and fiscal imbalance decades later.

One of these was the notion that government can and should "insure" citizens against life's risks. This raised questions like: Every citizen? Any risk? No matter how small? No matter how foreseeable? No matter how avoidable? Now this federal benefit system has grown to be 50% larger the the entire federal government was back in the 1930's. Why? Because we have qualified practically everyone to receive some kind of benefit handout; from veterans "disabled" by smoking at age thirty to healthy workers choosing to retire at age 62.

Another was the notion that government can pay for these benefits through "trust funds" that would not actually "save" the money from "contributors" but rather through promises to tax the next generation for today's benefits. The adoption of this Ponzi-like financing method didn't happen overnight. FICA-funded retirement actually remained a rather tiny part of federal benefit spending until the 1950's. Then in the 1970's "pay-as-you-go" accounting was adopted for Social Security and Medicare.

Benefit expansion became a popular venture for Democrats. The ultimate impact on federal spending came with the founding of Medicare. When President Johnson signed the Medicare act in 1965, he reassure voters that $500 million of new spending would pose no problem. Today Medicare spends $294 billion per year, and that's more than 500 times the original estimate.

In case you don't know the numbers, federal benefit spending amounted to $1.349 trillion in fiscal year 2003, 12.5% of GDP. The defense budget that year was only $0.376 trillion.

Here's how the Republicans got us much deeper.

By President Reagan's signing of the Emergency Recovery Tax Act in the 1980's this created new breed of American Republican-the tax cut conservative. Since then Republican administrations have looked for all the tax cuts they could find, but at the same time failing to cut government spending to balance out the equation.

So let's bring all this together with another element attributed to the Social Security and Medicare financial concern: the aging of America.

For nearly all of human history, until the industrial revolution, people aged 65 or older never amounted to more than 2 or 3 percent of the population. In America today they amount to 12 percent. As recently as 1940 college-age youths (18-21) outnumbered the elderly in the US by 9.6 to 9 million. Yet by 2040 the Census Bureau projects the number of college-age youths will grow to only 20.3 million while the number of elderly will swell to 77.2 million. This explosion in the number of elderly Americans will place an unprecedented economic burden on working-age adults. In 1960 there were approximately 5.1 taxpaying workers for every Social Security beneficiary. This ratio, now 3.3, is officially projected to fall to 2.2 by 2030. By then each two-earner working-age couple will have to support at least one anonymous retiree.

Extra mutipliers include longer lifespans and low fertility rates.

Nearly everyone agrees that lower mortality rates are a blessing and living longer, healthier lives is probably the greatest personal advantages we moderns get to enjoy over our ancestors. Even so, this "aging of the aged" adds an extra multiplier to the economic burden of aging, since virtually every measure of disability, dependence, and health care expense rises with increasing age, even among the elderly themselves. Total per capita health spending on the "old-old" (85+) is 3 times as much as that on the "young-old" (65-74).

It's easy to understand how longer life spans can raise a society's average age. But this is only part of the story. As recently as the early 1960's most demographers assumed that the US fertility rate would continue indefinitely at somewhere around three. Then came a behavioral revolution that took the experts by surprise. It was driven by affluence, feminism, rising female participation in the workforce, growing acceptance of new birth control technologies, and legalized abortion. The result was a precipitous fertility-rate decline. Today the US fertility rate stands at 2.0, just under the so-called 2.1 replacement rate required to maintain a stable population with no immigration.

So, while rising life spans increase the relative number of old, falling fertility decreases the relative number of young. Together, these forces are driving down the ratio of taxpaying workers to retired beneficiaries--and driving up the burden of old-age benefit programs on public budgets. At the same time, they threaten to heap vast new costs on the American family.

So with regards to Social Security and Medicare, what could the fiscal projections look like if we were a little less optimistic in our demographic outlook? As it turns out , the SSA (Social Security Administration) calculates a scenario in which longevity rises at its historical pace and fertility falls to 1.7, closer to (but still significantly above) the developed-country average. Under this scenario, Social Security outlays rise from 11.1% of worker payroll today to 21.3% by 2040. Medicare outlays rise from 5.6% to 35.4%. Just to pay for these two programs we would have to tax away 56.7% of workers' taxable payroll.

So, the bottom line remains: given current policies, faster economic growth cannot overcome the resource challenge of an aging society. *catches breath* h: