grow as a thinker

Before working on this blog, i was an ignorant future economics major student shocked by the huge number of this year's budget deficit as everybody else. I could only see the number on the surface but didn't know why. It was definitely not something good but I didn't know the effects on our life and I could not see the future. However, after looking into the problem, I think I found the biggest threat to the future of budget deficit-Social Security and Medicare program costs. Crisis will have an end; the expense on Iraq war can be cut gradually with the withdraw of our troops; homeland security is a long run investment; but Social Security and Medicare expenditures are pure consumption and have no chance to shrink in at least a decade.

At first, I didn't really know the system and the way social insurance program is funded, I thought we would encounter this problem in 2009 fiscal year since the baby boom generation were turning 62 and eligible to social security benefits. However, my born optimism got the upper hand later. After studying the social insurance issue, I noticed that the problem will not hit us until at least three years later. My optimism comes from the faith in America financial crisis management capability and the surpluses in Social Security tax income over expenditures we should should have accumulated these few decades when baby boomers are working hard for their retirements. It turned out to be my wishful thinking. I failed to notice some concrete data and foresee the burden on our generation. Besides searching news, I went for budget office documents and the dry data report. A record of surpluses doesn't necessarily mean sustainable funds. Data shows expenditures grow faster than tax income does, surpluses shrinks over years, and in 2011 due to retirement population the sudden soar in costs would drag surpluses in to deficits. Social Security funds not only would lose the ability of leading money to other government programs which was the case for quite many years, but also lose capability of supporting itself. Government has used the surpluses elsewhere so we actually cannot count on previous accumulation.

Indeed, it's easy to say then to do. After Iraq, we still have Afghanistan. In fact, the more I look into the issue, the more I found myself naive. There are so many factors which can exert influence on the budget office that I cannot think of a well-rounded plan. Maybe after election, decision makers will have time to really think about how to reset financing arrangement.