Social Security and Medicare

If you are under the age of 50, you are going to get the shaft. If you are over 50, it is not quite as clear, but you will probably get the shaft too. There are estimates that the unfunded liabilities of the U.S. government (primarily Medicare and Social Security) are over $100 trillion. That is over 6 times the annual GDP. The number is staggering. While it is important, you may as well ignore it. The government can't make good on it. It can't even make good on half of it. There will be changes down the road. The only question is when and what those changes will be.

There will be "benefit" cuts. This could come in various forms. One way is to raise the retirement age. This is likely. Another way is to decrease benefits (less Medicare coverage, higher deductibles, and smaller checks from Social Security). Still another way is through inflation. This will be like decreasing benefits, but in a more devious way. But if the problem is "resolved" through inflation, then the government will have to change how it calculates its cost of living increases or it will have to lie about inflation by understating the CPI. Both are possible.

Perhaps it will be a combination of all of these things. But for senior citizens already collecting Social Security, you should worry about inflation more than anything. If you are a senior citizen, you should be advocating for the Fed to raise rates and put on the monetary brakes. If you are a senior, you want deflation. Deflation means that prices will go down and you will be able to buy more with the money you have. You would rather have a deflationary depression than inflation.

The same goes for younger people, but to a lesser extent. One way or another, we will eventually get a depression to cleanse out all of the malinvestment that the government has caused. It is better to do it now than do more damage still. But for a younger person, if we have a period of high price inflation, at least the younger person can eventually recover by earning more money. It is much harder for someone in retirement on a fixed income.

If you are younger than 50 (maybe this should even be 60), then don't plan on getting anything out of Social Security. If you are over 60, pray for a depression quickly. Better now than later when your money is nearly worthless.