The Writing on the Wall - Don't Count on Social Security?
With the return of trillion-dollar deficits, the question becomes what are the consequences? Probably not much in the short term, possibly an overheated economy from spending, but higher interest rates (another outcome) will probably fix that. Certainly, the will to cut costs on either the left or right doesn’t seem to be there. In a world that seems to in some ways be becoming more dangerous than that of the cold war it’s hard to do anything but increases defense spending and with an aging population due to our declining birth rate it doesn’t look like entitlements will get cut back in the short run.
However, 15 years from now, when the national debt has moved from a measly 20 trillion to 40, 50, or even 60 trillion dollars it’s hard to imagine anything less than massive cutbacks in programs like social security. At best we may have a system that pays the lowest amount possible and only to those who truly have no other source of income. Added to that is the likely possibility of massive inflation if the debt has to be “printed away” as interest rates become too high for continued borrowing.
This, of course, means that tomorrow’s “retirees” will need much bigger pensions and investments then they have today. Between inflation and the likely higher taxes of tomorrow investors have but one choice, save a lot more for those coming expenses. Hopefully, the financial industry will get this message out in time – save and save more.