Why you should care about your governments long term liabilities for Medicare

Defense, foreign aid, a bloated bureaucracy don’t matter at all.

The reality is that while we hear lots of rhetoric about debt and deficits, what really matters is long term liabilities. If you don’t believe me consider what happened with General Motors and it’s liabilities to retirees mostly with regard to health benefits. The latest example is Kodak filing bankruptcy during which the promise of retiree health benefits is likely to disappear along with some pension promises for higher paid workers who are affected by income limits on pension funding. Losing a substantial portion of your pension after you have already retired sounds like more than ones fair share to me ( and we are not talking about CEOs).

If you want more examples of this liability thing causing trouble just look to the various states that have agreed to unrealistic pension and health benefit commitments to state workers. And then you look at the results of all this. In Wisconsin the unions have gotten 1,000,000 signatures to force a recall election of the governor who did the right, albeit painful, thing to correct the State’s problems.

What is the most significant problem affecting the U.S., it is the same as I have just described above; long term liabilities for health care first and pensions second. That means Medicare, Medicaid and Social Security, but mostly Medicare.

So now the question is what will you do for the politician who tells you the truth (assuming you can find one)? Chances are you won’t vote for him because it is far easier to ignore a long term problem than deal with it. It is more abstract to believe foreign aid is the culprit than something that affects you directly. It is less stressful to agree with a politician who claims to have a solution while leaving Medicare and Social Security untouched.

The difficult part is accepting the truth. The U.S. has made open ended, demographic based commitments that it can’t control and can’t pay for. Twenty to thirty years from now there will be hell to pay. The longer it takes to implement corrective action the worse it will be… and that’s the truth like it or not


One comment

  1. The possible loss of health & pension benefits appears to be a golden opportunity for the insurance industry. The Pension Guarantee Corporation – that was supposed to be there in cases of pension defaults – is being hit hard lately but what about those who loose health care.


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