The elephant in the room

Social security is a "bigger" problem than 9 unfunded years of  war in Afghanistan and Iraq!  An entitlement in the form of no bid contracts to multinational corporations’ and major arms manufactures.     

Social security is a much "bigger problem" than the largest tax breaks in the history of this country, FOR the ULTRA WEALTHY, during two wars...   

This entire graph shows we have a massive aging population, which is not unique to the US.  Russia, Japan, China, India and Europe face similar age demographic challenges.  

It is truly a multi-faceted problem. There is no silver bullet. While it is sensible and doable, it is also utopian in scope. In our society, the prism it must go through is money; who gets what, who spends what, and what for. The U S spends entirely too much on munitions; from the "must have" individual firearms, to the munitions smuggled to Mexico, to the unneeded hi-tech equipment, to the futile wars; individual health responsibility, proper eating and exercise (and yes, taxing the bad and tax right offs for the good - a fierce political battle), collaboratively reforming the health care industry, including hospitals, doctors, drugs, etc. (we really know the needed drill); reform pensions, yet increase taxes on the rich (spread the sacrifice); increase spending on productivel education, but not on "bridges to nowhere ", spend money on transportation and energy, wisely. All in all, spend sensibly in the short term and long term as investments. Together, this is UTOPIAN. Not to do it, however, is inevitable disaster for the US, and for the world.

The last 8 years have included 4 of the 5 years with the lowest tax revenue since 1960. Balancing the budget needs to include higher taxes and less deductions.

Letting Bush's tax cuts expire is a good start. Collecting social security on all income balances SS.

Limiting the value of tax deductions to 28% of the value of what's deducted increases revenue by $291 billion.

Putting an inheritance tax in place to pay off the nations debts that were incurred by citizens whose taxes were lower than their spending will save on interest. The list goes on...

Maybe charge corporate income tax at the location of the sale instead of the location of production. Better than todays corporate income tax because it encourages domestic production. Better than a VAT because it taxes highly profitable companies more than their competitors, spurring competition and thereby splitting the tax between the investors and the consumers.

There is and has been for decades a dearth of leadership in this country. American politrix is a game of cynicism. It is a widely held postulation that the spoiled brat "Baby Boomers" will riot in the streets if they perceive that "Uncle Sugar" is in any way reneging on their perception of Social Security "benefits". "Baby Boomers" are a significant so-called "independent" voting bloc, one that neither Mr. Obama nor the Republican oposition (both elected and hopeful) are even slightly willing to upset, much less deliberately antagonize. As a result, neither side wants to be the first to broach any serious reform to the "entitlements". Each side is waiting for the other to make a move toward "reform", at which point the other side will launch a terrific campaign of demogogue rhetoric scurrilously denouncing the "mover" as "heartless politicians" in an effort to retain (or regain) political control of the country. I fear that this situation will prevail until the dollar is no longer the reserve currency, the US "Long Bond" is a worthless bit of paper, the poorest third of Americans are not just homeless but starving, and a strong, charismatic military leader steps forward to restore "law and order".

Higher education in california is NOT an untouchable.University of California must consolidate so that faculty and senior management costs don't default to the highest salary (UC Berkeley Chancellor Birgeneau $500,000 salary) and benefit structures. We must have just the opposite - faculty and senior managementcost and faculty, staff and management practices that reduce the operating costs of the University of california and especially UCOP. We need more cost efficiency not less oversight by outside agencies and California Legislative committees.
University of California is NOT untouchable during the greatest recession in modern times.
And we need it everywhere from rank-and file workers, faculty, Academic Senate (Faculty union) and senior campus management.

I agree with K Wilson, social security is easy to fix. Raising the salary cap on contributions so the wealthy pay their fare share, will solve most of it. The real killer is our healthcare cost impacting not only Medicare and Medicad but the whole US economy. Our healthcare costs, as compared with essentially all OECD countries are, in effect, a $1.1 TRILLION annual tax on our economy and increasing at an accelerated rate!

The future belongs to the elderly. I strongly suggest cutting from education and adding to the entitlements. I'm sure we are talking about billions more in this matter.

Government (federal, state and local) has increased its share of purse from 10% of GDP in 1929 to 40% now. It's been a long and very profitable run for government and its dependents. (See http://www.mygovspending.com/gearbox/History).

However, it is not clear that politicians have handled the money well.

So how have taxpayers done for all the money burned?

Well, retirements are grossly under-funded (Social Security can take the blame on several fronts), education combines high costs and low quality, and the health care system overcharges by a factor of two - thanks to both the private and public portions being socialized - if one looks at insurance as a pool of socialized risks as I do.

In defense, wild cost overruns are normal. And unacceptable.

These three programs are half of an unfocused, inefficient, patronage-ridden government.

It's time for a complete re-think of everything government does. Let's get started.

From your chart America's fiscal profile will be on Greece'd skids in only a few years.

America's had budget deficits throughout it's existence...no problem...the problems have come when America ran budget surpluses sucking money out of the private sector, what followed sure as night follows day was DEPRESSION...how any self respecting right wing government, whether Democrat or Republican, is beyond me...running surpluses is how COMMUNISM broke the kulaks for pete's sake!

America's real problem isn't the budget, it's the Depression and it's real effects in the real economy, that's the jobs/deman famine aka mass unemployment, particularly long term unemployment.

Most people are quite happy with public spending at it's current level, or a bit higher if public health care is extended to the whole population. The real problem is that taxes are too high, cut sales taxes, cut Jobs Taxes such as Earned Income and social security.

Well it looks to me from this chart that the US is safe from having to tackle this issue for at LEAST another 9 years or so. And even then, the leaders will be able to 'address' it for another few years before ultimately dithering and doing nothing useful. Maybe a band-aid solution to get them to the next election. Business as usual.

The idea that any politician would take action to effect something with an eye to long-term and not the next 6 years is, frankly, ludicrous.

I'm glad to see that in the ten years since the last CBO estimate, we've lost 35 years' worth of solvency. At this rate, we'll be insolvent before the next estimate.

The entitlements are unsustainable. As has been said elsewhere, by opting to preserve them at the expense of education, infrastructure improvements, etc., we have chosen consumption for today rather than investment for tomorrow.

Yes, the poor and elderly will get hurt. But if the government goes bankrupt, their checks will be the first to be cut, anyway.

It is misleading to include Social Security as a serious entitlement problem. The so-called Social Security problem is easily solved by simply turning off the cap on the payroll tax. There is no reason why the tax should apply only to the first $104,000 of income, it is a boon to the well off and a regressive tax on low income people. The basic problem in the US is that too many see this kind of entitlement as a return on investment rather than a social obligation to the elderly.

The problem with Medicare is rising health costs. And those will continue to rise whether the money to pay for it comes from taxes or
from private income. Therefore unless something is done about the rising costs US citizens will be unable to pay for health care, never mind how those payments are done. The Federal government may chose to
spend less but that only shifts the burden.

I'm ashamed of myself. I don't saw it.

Careful about what you want...

The scary part of this graph is that we are enjoying extremely low interest rates right now. Imagine what would happen should interest rates jump up like they did during the Carter years!

We should get an accounting of our financial situation using the same accounting standards that companies have to comply with. We have been hiding from the truth by putting more and more spending "off the books". Clearly we will have to change the amount the government spends on debt and health care. Just as clearly that will not be an easy task - and likely not possible until the public understands the seriousness of our situation. From the preceding comments I don't think the public understands yet. Unfortunately, the longer we wait to act the more painful it will become.

To those who claim social security is adequately funded or would be if we removed the cap - you should know that previous politicians already have spent your money. It isn't there. The only thing that is there is an IOU promising that some future politician will tax some future voters in order to pay you those benefits. Things have to change (for example increasing the retirement age to 68) or it will all collapse.

How about the logical inconsistency of proclaiming worry about the dependency ratio in the future when we've allowed mass unemployment currently really in the 15% era...talk about worsening the dependency ratio throughout the neo-liberal era of mass unemployment.

That's before we get onto the hypocrisy of allowing mass youth unemployment of 20-40% and slashing investment in education and training, permanently reducing income/output for yet another generation...and to think the Egyptians etc are at 25% in their failed state, what about our chronically dysfunctional state of the last 36 odd years?

Check out intergenerational nonsense on MMT, billy blog, pragmatic capitalist etc.

Why is it that whenever the US fiscal situation is mentioned by politicians or on forums such as the Economist, the world TAXES is not even mentioned? Read the article again and try to find even a hint of that word. Debating about the possibility of raising taxes ever so lightly is completely forbidden it appears. The debate is always about how to reduce spending and which group of low income individuals should suffer the consequences, never about which group of wealthy, high income individuals might be called upon to support society by paying somewhat higher taxes. Without an adult conversation about ALL aspects of the fiscal problem, it is highly unlikley that a solution will ever be found. Reagan's "trickle down theory" promoting the beneficial results from tax reductions have been thoroughly discredited but even now after three decades all people, even the Economist, can talk about is how to reduce taxes, never how to set taxes levels that are needed to support a healthy society.

Lars Jorgensen how about Volcker/Reagans stratospheric interest rates...that sure helped industrial growth and bloodletting of the dependency ratio via mass unemployment.

Check out Warren Mosler's site, by worrying that the US sovereign in it's own currency will end up like Greece, ignoring the fact that the latter's hamstrung by the Euro lunatic straitjacket, the US will end up like Japan. Zero is the natural interest rate ZIRP will be the new norm...look it up! ;)

Cutting support for the elderly, the poor, and for education is the wrong focus.
Simply increasing the taxes of the ultra wealthy just 3% will cover more than these costs. Unfortunately with the last Supreme Court decision we are having the best government that big money can buy. No more complaints against the "liberal" media. It too has been bought out, so that the American public is hearing only one point of view. We are like a court deciding after hearing only the prosecution. Our media and soon government will be completely controlled by the rich oligarchy who prefer to stay behind the scenes, like Dick Chaney pulling the strings and running the government.