With all this new money being Spent / Printed impact SS and Medicare in the future?

[ShokWaveRider]

I was thinking, (That is what all the noise was) as we (The USA) are already in debt, how will this additional debt affect our beloved SS and Medicare programs. Do you think they will get tapped to help. I am not sure I have an answer to this, maybe nothing at all.

 

[braumeister]

Dreaming up new imaginary problems doesn't seem to be a good use of your time.

 

[ShokWaveRider]

Dreaming up new imaginary problems doesn't seem to be a good use of your time.

The money has to come from somewhere. Just looking for opinions to pass that time.

 

[MichaelB]

The money has to come from somewhere. Just looking for opinions to pass that time.

You’re bored so you started a thread on debt, SS and Medicare, but have no opinion yourself?

Edit - These are policy matters so the thread was relocated.

 

[ejman]

I was thinking, (That is what all the noise was) as we (The USA) are already in debt, how will this additional debt affect our beloved SS and Medicare programs. Do you think they will get tapped to help.

No. The money being spent by the Federal Gummint is being magically created in unlimited amounts so no need to hijack SS or Medicare funds for that. As Vice President Cheney famously said "deficits don't matter". The only tiny possible downside is massive inflation but that would be down the line so current politicians in power couldn't care less about that and anyway inflation is good for real estate operators so who cares?

 

[REWahoo]

Just looking for opinions to pass that time.

I have an opinion and posted it below.

The govt will pay for it like it pays for everything else that exceeds income - by borrowing/printing money.

There, did that help keep you occupied for a few seconds?

 

[Helen]

I too have been pondering how all the extra debt is going to impact the economy in the long run. At some point the interest on the debt is going to hit a tipping point where we will have to somehow address it. Whether it is a cut in benefits or a hike in taxes, it will impact the economy.

I guess spreading investments around different asset classes is the best defensive measure with so many unknowns going forward.

 

[ShokWaveRider]

You’re bored so you started a thread on debt, SS and Medicare, but have no opinion yourself?

Edit - These are policy matters so the thread was relocated.

Respectfully that is a unreasonable assumption. Our 3D Printers are working overtime and my DW is making masks for local public health personnel.

A couple of folks have actually commented and shared. Isn't the object of a forum to stimulate discussion?

 

[MichaelB]

A couple of folks have actually commented and shared. Isn't the object of a forum to stimulate discussion?

Indeed, the objective of this forum is to discuss early retirement. You know well that debt and entitlements can be divisive topics, and when you throw them together with no structure or direction, it has a high probability of ending badly.

 

[MichaelB]

I too have been pondering how all the extra debt is going to impact the economy in the long run. At some point the interest on the debt is going to hit a tipping point where we will have to somehow address it. Whether it is a cut in benefits or a hike in taxes, it will impact the economy.

This is a reasonable concern. The increasing debt is a sign of an economy that is weak and inefficient, and it can go on for a long while. One tipping point is when new debt just covers the debt servicing - hence the importance of low interest rates.

The most likely outcome is everyone loses from inflation. The real value of entitlement benefits declines and at the same time the real return to the bondholders goes negative. Because inflation is a silent snake in the weeds, not easily seen, people don't see this loss of value.

 

[REWahoo]

Because inflation is a silent snake in the weeds, not easily seen, people don't see this loss of value.

At least not until milk is $25/gallon and bread is $20/loaf.

 

[pb4uski]

I too have been pondering how all the extra debt is going to impact the economy in the long run. At some point the interest on the debt is going to hit a tipping point where we will have to somehow address it. Whether it is a cut in benefits or a hike in taxes, it will impact the economy.

I guess spreading investments around different asset classes is the best defensive measure with so many unknowns going forward.

A lot of that debt will be issued at very low interest rates... so the impact on the federal budget deficit should be negligible... $2T @ 1% would only be $20 billion a year.

 

[RobbieB]

If they issue at negative interest we'll even make money on the deficit!

 

[oldtrig]

I had a very wise and rich man tell me something following the 1987 stock crash. He said if I attended a top ten college football game and the stadium was half full two weeks in a row then it might be time to worry. I should have asked him what if nobody attended and the game was played. Could very well happen with Pro Baseball this year. These are times we have never seen before so there is nothing to compare with. I could guess what might happen but probably be wrong. For now I am staying home and trying to stay healthy

 

[Rosedala]

Respectfully that is a unreasonable assumption. Our 3D Printers are working overtime and my DW is making masks for local public health personnel.

A couple of folks have actually commented and shared. Isn't the object of a forum to stimulate discussion?

I agree with you, ShokWaveRider and you don't have to explain to anybody why you wrote your post. I was disappointed to read those unnecessary and unsolicited answers. I liked your reply very much sans your explanation that you owe no one.

 

[target2019]

I was thinking, (That is what all the noise was) as we (The USA) are already in debt, how will this additional debt affect our beloved SS and Medicare programs. Do you think they will get tapped to help. I am not sure I have an answer to this, maybe nothing at all.

SWR,
What will happen in the future is that Congress and Presidents will re-apportion spending in a way that the public will say, "Yes, we are doing a fine job with spending and debt will be reduced." However, the measurement of success will be grey enough that you or I will not know anything.

There will never be a single poke at one Ox. Rather all Oxen will be gored but not to the point of putting us to death.

 

[skipro33]

I was thinking, (That is what all the noise was) as we (The USA) are already in debt, how will this additional debt affect our beloved SS and Medicare programs. Do you think they will get tapped to help. I am not sure I have an answer to this, maybe nothing at all.

I found this article that addresses this concern. I found it very interesting how SS plays into the US National debt. Hope it helps answer your question;

https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124#the-bottom-line


It opens with,

The U.S. debt was $26 trillion as of June 10, 2020. Most headlines focus on how much the United States owes China, one of the largest foreign owners. What many people don’t know is that the Social Security Trust Fund, also known as your retirement money, owns most of the national debt. How does that work and what does it mean?

 

[harley]

At least not until milk is $25/gallon and bread is $20/loaf.

Too late - The Five Most Expensive Types of Bread Money Can Buy.

 

[LitGal]

This is a reasonable concern. The increasing debt is a sign of an economy that is weak and inefficient, and it can go on for a long while. One tipping point is when new debt just covers the debt servicing - hence the importance of low interest rates.

The most likely outcome is everyone loses from inflation. The real value of entitlement benefits declines and at the same time the real return to the bondholders goes negative. Because inflation is a silent snake in the weeds, not easily seen, people don't see this loss of value.

+1

 

[Independent]

I found this article that addresses this concern. I found it very interesting how SS plays into the US National debt. Hope it helps answer your question;

https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124#the-bottom-line


It opens with,

The U.S. debt was $26 trillion as of June 10, 2020. Most headlines focus on how much the United States owes China, one of the largest foreign owners. What many people don’t know is that the Social Security Trust Fund, also known as your retirement money, owns most of the national debt. How does that work and what does it mean?

And then, the article immediately contradicts the paragraph you quote.

US debt was $26 trillion. All intergovernment debt was $5.9 trillion or 26% of the total. The Social Security Trust Fund portion of that was $2.9 trillion, or about 11% of total reported debt.

 

[Independent]

Has anybody here read "This Time Is Different: Eight Centuries of Financial Folly"? by Reinhart and Rogoff ? Sovereign defaults are the rule, not the exception, if you look across long periods.

What I remember from the book was that borrowing is easy. Investors believe a gov't will always repay its debt. Interest rates are low. The gov't can fund things the gov't (or the citizens) want to do without raising taxes. That's always popular.

The debt builds, but confidence doesn't lag. Investors figure they are smart enough that, if things look bad, they will notice and get out before others catch on.

Then something happens and everyone rushes for the door at the same time. Interest rates spike, the gov't can't refund debt except at punishing rates, and it ends up defaulting. This causes great pain to the populace, especially people who had been expecting something from the gov't, like a pension with purchasing power.

The US wouldn't need to stop repaying loans. It can "just" print money to cover them. But, with $26 trillion in debt and maybe $2 trillion in circulation, the amount impact on prices is huge.

I'm thinking I'll be dead before that happens in the US (I'm 73). I don't have any good advice for my kids.

 

[Mark1]

Has anybody here read "This Time Is Different: Eight Centuries of Financial Folly"? by Reinhart and Rogoff ? Sovereign defaults are the rule, not the exception, if you look across long periods.

What I remember from the book was that borrowing is easy. Investors believe a gov't will always repay its debt. Interest rates are low. The gov't can fund things the gov't (or the citizens) want to do without raising taxes. That's always popular.

The debt builds, but confidence doesn't lag. Investors figure they are smart enough that, if things look bad, they will notice and get out before others catch on.

Then something happens and everyone rushes for the door at the same time. Interest rates spike, the gov't can't refund debt except at punishing rates, and it ends up defaulting. This causes great pain to the populace, especially people who had been expecting something from the gov't, like a pension with purchasing power.

The US wouldn't need to stop repaying loans. It can "just" print money to cover them. But, with $26 trillion in debt and maybe $2 trillion in circulation, the amount impact on prices is huge.

I'm thinking I'll be dead before that happens in the US (I'm 73). I don't have any good advice for my kids.

I use to think I would be dead too. Not so sure now. (I'm 58).

 

[Fermion]

So once every 200 to 500 years, the gold people will be correct?

 

[sergio]

A lot of that debt will be issued at very low interest rates... so the impact on the federal budget deficit should be negligible... $2T @ 1% would only be $20 billion a year.

The problem is repaying the principal. As long as they can keep borrowing to repay existing debts at very low interest rates, that's fine. What if demand drops off? Either the federal reserve steps in (read: inflation) or interest rates need to rise.

 

[RandomPJ]

I was panicked about inflation too but then I read an analyst's opinion that printing money only to "fill up the hole" will not wreck the economy, but if they keep doing it after they fill the hole...look out.


But yes, all nations go broke at some point. They recover too.