Social Security will run out of money sooner because high oil prices are here to stay. So the Social Security trustees are coming around to my point of view. Ah, that sense of satisfaction. But they still have a way to go. When world oil production starts declining the big entitlements programs will run out of money much sooner than the trustees expect.
The trustees of Social Security reported this week that absent reforms, the system will be able to pay full benefits until 2033 — versus 2036 in last year’s report — and three-fourths of benefits after that. One of the reasons for the grim new projection is the increase in oil prices, which the trustees assumed are here to stay and will exert a drag on the economy and worker pay for decades to come. Less pay means less tax revenue for the system.
The editorial writers of the NY Times think smaller tweaks can avert the day of reckoning. But they are still thinking with outmoded assumptions about the potential for economic growth. Innovations are not happening fast enough. Plus, we've got demographic problems. Pew's look at household wealth by race provides evidence for another reason why America is going to become a poorer place: the growing ethnic groups are poorer. So average household wealth is likely to go down along with tax revenues. The demographics of Texas and California show us where the nation is going. We will be poorer.
So I repeat what has become my standard advice: Get ready for harder times. Develop more skills. Spend less. Save more. Buy stuff that lasts longer. Consider moving to an area with more opportunities for advancement.
|Share |||By Randall Parker at 2012 April 29 09:12 AM Economics Entitlements|