Thursday, April 14, 2011

Here's a good question

With the President being utterly clueless about the implications of the current welfare state--more or less that even if you taxed "the rich" (really, again, the currently prosperous) at 100%, there still wouldn't be enough to cover even our current deficit, let alone the tens of trillions of dollars in unfunded liabilities of Medicare and Social Security--we are left with what ought to be a terrifying question to anyone who reads and comprehends the actuarial reports of any welfare state:

What will happen when the welfare state is dismantled--either when it collapses of its own weight (my guess about the more likely scenario), or when politicians actually heed the warnings of the actuaries and scale it back?

Samuel Gregg gives  a stab at it, and by and large, I think he gets it right, and we'd better take it seriously.  More or less, at least half the nation has not figured out that there is no tax that can rescue programs whose unfunded liabilities exceed the entire wealth of the nation.  Barring mass repentance on their part leading to huge reforms in Medicare, Medicaid, welfare programs, and Social Security, the nation is headed for a financial collapse in the next few decades.  Actuarially, the question is when, not if.


Obed said...

That being the same actuarial profession that was reporting huge surpluses in the 1990's, and recommended enhanced benefits and contribution holidays.

Then just a handful of years later recommended closing all those schemes due to unfunded liabilities.

Used car salemen have more cred.

Bike Bubba said...

Actually, I believe the group you're referring to was "politicians," not "actuaries." Honest actuaries were noting that the system was bankrupt at that point as well, and if you look up GAO reports, you'll see that.

Bike Bubba said...

...and those "huge surpluses" in the 1990s were by government accounting, not honest (GAAP) accounting. It counted income minus payments, but did not account for the liabilities being accrued.

Obed said...

Actually ... I was referring to the credibility of the profession as a whole based exclusively on my experience with them in the private sector.

I would not expect their involvement in government accounting to be any more down-to-earth, practical or realistic. Either in the 1990's or now.

Any knave can forecast a current trend to continue. That's what they have done in boom times, and in recession times. Neither is realistic over the long term.

Bike Bubba said...

Well, the GAO actuaries have been pointing out the coming debacle in Medicare since the 1980s. Unless those trends are altered radically--and the past century of history does not give us much hope of this being corrected.

Keep in mind as well that at times, actuaries only get to work the numbers they're given. If you feed them garbage assumptions, you get garbage numbers.