And Why YOU Should Be Concerned…
Despite the fact that it’s misleading, a headline from the Associated Press article caught my eye last night…
The fear-mongering title? “Millions face shrinking Social Security payments.” The harsh reality? This is exactly the prescription that America needs right now to restore long-run government fiscal prudence.
Of course, “shrinking payments” isn’t really what the Associated Press meant…
The article goes on to explain, payments are only shrinking because the actuaries of the program estimate that there won’t be a cost of living adjustment (COLA) for the next two years.
Why? Deflation, of course!
If only the Associated Press had hired an economist – lord knows there should be plenty mulling about after the epic job losses in the financial services sector – they would know that deflation actually means an increase in purchasing power…
And since the Consumer Price Index – which is used to determine COLA – is down 2.1% year over year, Social Security recipients actually are enjoying a windfall gain: their checks can buy 2.1% more goods and services than they could last year, despite containing the same dollar amount.
Add in all the companies going out of business and offering products at record lows, and it’s a pretty good time to be on fixed income…for now. Only a central banker lacks the common sense and basic knowledge of economics necessary to understand that deflation isn’t some evil thing.
So payments aren’t really shrinking. In fact, they’re increasing, as they always have and always will.
Furthermore, Getting rid of COLA altogether would go a long way to ensuring the future solvency of Social Security.
In fact, since Social Security has been running at a deficit since March – ten years before the actuaries expected – it’s an idea that should be implemented immediately, and permanently.
Of course, that’s not the kind of position that’ll get a politician re-elected.
Nope, the policies of creating inflation, then adding in COLA to entitlement programs will continue, increasing the burden on Social Security — which already faces (with sister program Medicare) over $50 trillion in unfunded liabilities (promises made to retirees, particularly Baby Boomers, which it doesn’t yet have the money to pay out).
And since politicians keep those liabilities off the government’s books, it looks like we have a much more “responsible” Federal debt of only $11.7 trillion dollars.
Try doing some creative accounting like that at a company and see how long you can keep out of prison.
The last person to invest in a Ponzi scheme is the person that loses the most – 100% of their “investment” – and they lose it the fastest.
There’s no real solution to this destruction of your wealth – other than to provide for your own retirement and preserve as much of it as you can offshore. After all, as these programs face greater problems, there’s no telling when or how politicians may come back for more.
Stay Sovereign,
Andrew Packer, Managing Editor of The Sovereign Individual
Article Source: Sovereign Society