For years, analysts have given sober warnings about the looming debt crisis. Spending on social security is far higher than funds raised—it will soon be unable to pay full benefits. Spending on social programs like Medicaid and Medicare continues to increase, straining state and federal budgets. The budget deficit and national debt increase, and many states have unfunded pensions that will squeeze out other spending. The numbers are so big that people don’t know what it all means. Plus, it’s much easier for politicians if they fan outrage over the controversy of the day, instead of making hard decisions now to save programs that only have years before they are irrevocably damaged. To get past this tendency, it is vital to put away complex terms and look at the practical reality of what will happen when the crises can’t be ignored.
An author at the Hoover Institute wrote about social security: “Closing Social Security’s shortfall over the next 75 years (far less than a permanent fix) would require savings equal to 17 percent of its scheduled expenditures if enacted today. Obviously, lawmakers have never and will never indiscriminately cut benefits 17 percent across the board, which would hit today’s poor 90-year-old widow as hard as someone who won’t retire for 40 years. Assuming instead that lawmakers only change benefits for those yet to retire, the size of the required cuts rises to 21%. But again, that severely understates the adjustments required, for we are not about to cut benefits 21% for everyone, rich and poor, who retires next year. Changes would undoubtedly be phased in more gradually, and thus would need to hit future retirees far harder.
“If this doesn’t sound difficult enough, consider what happens if we wait until 2034, the projected depletion date for the combined Social Security trust funds. By that point, even total elimination of all benefits for the newly-retiring would be insufficient to maintain solvency. For all practical intents and purposes, the shortfall by then will have grown too large to correct [emphasis added].”
Read the highlighted part over again: even total elimination of all benefits would be insufficient, which means that social security won’t just go bankrupt—it will cease to exist a mere 15 years from now. Millions of people who depend on those checks for food and rent will begin intense suffering. Many won’t have social and cultural support systems in place and will simply die.
In the case of a debt default, the consequences are even greater. The 2008 meltdown was simply a mild version of what could come. The U.S. could enter a depression and the stock market could lose 80 percent of its value. Home lending and home buying would dry up, people would begin to lose their houses, entire 401(k) retirements would be wiped out. This is especially painful because social security would likely be ineffectual by then. In 2008, unemployment rates went from 5 percent to 10 percent and in some places, it spiked into the teens. In some groups, such as certain minorities, it went even higher.
The dollar would lose its value, making purchases from gas to groceries more expensive. As Venezuelans can tell you, a million dollars of currency might not be enough to buy a loaf of bread. Like Las Vegas, places that are particularly susceptible to tourism dollars will be especially hard-hit. The banks that have many of their assets in the form of government-backed debt might be forced out of business. Millions of Americans would lose the money they have in savings. At the same time, their investments will lose money, and their interest rates on their homes will skyrocket.
At least half of the politicians haven’t met a problem that can’t be solved with more taxes, and the Simpson Bowles commission argued that at least part of the solution to the coming debt crisis would be more taxes. European governments facing austerity have relied on more taxes and cuts in benefits. This means the government would likely have to raise taxes to meets its obligations.
The country will get more violent. When Argentina hit its crisis, crime went up 142 percent and there were gangs of kids looting supermarkets. In Venezuela, gangs of children fight for control over the best dumpsters in town— searching for the ones with the most food.
Hyperinflation and depression in 1920s Germany resulted in chaos. According to pbs.org: “The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items — bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren’t safe. Gasoline was siphoned from cars. People bought things they didn’t need and used them to barter — a pair of shoes for a shirt, some crockery for coffee. Berlin had a ‘witches’ Sabbath’ atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug.”
When the pension crisis hits, local governments won’t be able to help or even provide basic services. Trash will pile up on the streets; parks will likely become unkempt homeless camps. Police and ambulances will take longer and longer to arrive. But ambulances will have longer return trips and fewer places to transport patients, as the hospitals go bankrupt. Jails will be at half capacity because of a lack of guards. Schools and foster care workers will hemorrhage personnel. When a crisis like a Hurricane Florence hits, local responders won’t have the gas for rescue vehicles, which will be increasingly outdated and dilapidated.
Caring for our seniors on a fixed income and providing a safety net for the poor is important, as are government services provided to every taxpayer. But when the debt crisis hits, it won’t be a discussion about billions and trillions. It will usher in a catastrophic and apocalyptic drop in the standard of living of every American and affect every facet of our daily lives. The politicians are going to do what gets them elected, so it’s up to the people of this country to demand fiscal responsibility before it’s too late.