I think it will be only seven or eight years before annual SS ben payments exceed the total of SS taxes plus interest on the trust fund, so at that point the slow draw down of trust fund assets will start. The US will simply sell more bonds to other investors, over a long and gradual time period. The deficit and SS scolds have made it sound like Armageddon is coming, when in fact the impact will be slow to occur. There will be plenty of advance warnings from financial markets of future potential problems - Treasury bond sales will become more difficult, bond rates will start to increase. And before those public warnings occur, there will be plenty of private warnings from WS (not the from scolds, but the financial professionals.) We still have plenty of time to fix the looming Medicare problem, which I agree must be addressed.
The biggest potential problem of the ones you raised is demographics. If we don't allow sufficient immigration to keep the work force young and to do the work that most US workers will not do, we could fall into the abyss that Italy, Japan and other countries with strict immigration limits are finding themselves in. The reason why the UK and Germany have fairly liberal immigration policies is because their politicians understand that despite the resulting nationalistic backlash they are being forced to work through, immigration is needed to fix the problem caused by their low internal birth rates.
Consider 19th century US for a moment - a period of fairly high immigration helped fuel the US economy and ultimately made the US the preeminent global economic and political power that it still is more than 100 years later. Immigrants did the crap work of that century - mining, railroad building, logging, etc. Work with low pay, and high rates of mortality that no one else would do. The Irish, eastern Europeans and Asians who came to do the work were not welcomed by many, and faced lots of discrimination. Its ironic that many of decedents of these 19th century immigrants are front and center in trying to close up our borders today.
The biggest problem you did not mention is what would happen if the populist wing of the Rep party continues to drive their bus. If they succeed in mindlessly balancing the budget despite the economic results (particularly during the next recession) and shutting down our borders, our economy will shrink. It will become impossible to roll over US debt, and we will be forced into national bankruptcy - a self fulfilling prophecy of the worst kind. |
