Does everyone in your household have a spare $102,000 lying around? Because that's what it will take to clear our federal debt: $102,000 from every woman, man and child in the United States.
The debt currently stands at $34 trillion, is rising by a trillion dollars every 100 days or so and projected to reach $54 trillion by 2034. The debt is currently 96% of our gross domestic product. Just the interest paid on the debt – projected to total $870 billion for fiscal year 2024 by the Congressional Budget Office – exceeds the budget's largest discretionary line item, the defense budget.
There are only two mechanisms to address the debt: increasing revenues (raising taxes) and decreasing spending. As we all know, the major parties tend to subscribe to all-or-nothing proposals with the Democrats wanting to raise taxes and increase spending and Republicans wanting to cut taxes and decrease (sort of) spending.
The true but highly unpopular answer at this point in the game is the United States will likely have to exercise both mechanisms to keep Medicare and Social Security from going broke in the next decade. These two programs make up the largest part of the nation's budget by far, and the aging of the baby boomer population is stretching them to the breaking point without enough new revenue coming in.
Even Warren Buffet, the everyman economic sage of our era has weighed in this last weekend on the debt, predicting a tax hike at Berkshire Hathaway's annual shareholder meeting.
"I think higher taxes are likely," Buffett said. "They (Congress) may decide that some day they don't want the fiscal deficit to be this large because that has some important consequences. So they may not want to decrease spending and they may decide they'll take a larger percentage of what we own, and we'll pay it."
Buffett did offer some hopeful news about the stability of our debt globally, however, even though $27 trillion in U.S. Treasurys are currently being traded. "My best speculation is that U.S. debt will be acceptable for a very long time because there's not much alternative," he observed.
The worst idea to address the debt I have seen was in an opinion piece published recently in The Hill suggesting a generational tax on baby boomers via estate taxes. The whole point of reducing the debt is to ensure financial stability for future generations. Stripping cash value from inherited assets sets millennials even further back than they are now. Younger generations need a boost, not a penalty.
Non-discretionary spending is by far the largest portion of the federal budget, more than 60% of spending. Of that, 75% is for Medicare and Social Security, with Medicare costs rising faster than Social Security. More than 10% of the budget goes to interest, and the remainder is what Congress can allocate to discretionary spending, with a little less than half going to defense.
With less than 30% of the budget on the table for serious cuts, it's clear that Congress can only do so much without changing the revenue formula and also addressing entitlements, i.e., non-discretionary spending.
The minimum age to receive full Social Security benefits has already gone up for younger baby boomers and successive generations from 65 to 67. I expect this may be the tip of the iceberg as healthcare costs continue to go up.
And there is a reason for this. Medicare is slowly, quietly becoming privatized. More than half of American seniors now participate in Medicare Advantage programs, which are Medicare-like programs offered by private insurers who are in turn reimbursed by the government.
Enrollees feel there is less bureaucracy with an Advantage plan, which saves the hassle of having to enroll in Medicare Parts A, B and D to get outpatient, inpatient and prescription coverage. And monthly premiums are lower.
But there are problems with Advantage. The most obvious is provider choice. Regular Medicare patients can go to any provider that accepts Medicare (which is almost any provider). Advantage patients are restricted to the network that accepts their private insurer's program).
Then there is cost. According to MedPac, the independent committee created by Congress to oversee Medicare, the Advantage patients cost more to the government than traditional Medicare patients.
Our country faces some tough decisions, and fast. None of these decisions will be popular: reducing or curtailing benefits and raising taxes for some are almost certainly on the horizon in the next four years, regardless of who is in the White House. It's time to be candid with voters and offer real solutions.
Put another way, if reducing or curtailing benefits and raising taxes for some is not on the agenda in the next four years, the pain as soon as 2028 by those on Medicare and 2034 for those on Social Security, will be acute. And those people will vote.
Merritt Hamilton Allen is a PR executive and former Navy officer. She appeared regularly as a panelist on NM PBS and is a frequent guest on News Radio KKOB. A Republican, she lives amicably with her Democratic husband north of I-40 where they run one head of dog, and two of cat. She can be reached at news.ind.merritt@gmail.com .