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M odern P atriot C hronicles
An Eleventh Commandment Free Zone
Vol. 5, Issue 8
May 1, 2006
By Craig Dawkins

Denise Bode Punts on Social Security and Medicare

Copyright@2006, All Rights Reserved
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POLLS! POLLS! POLLS! POLLS!

How should the U.S. government solve the financial problems facing Social Security and Medicare?

Reduce benefits - Increase taxes - A combination of increasing taxes/decreasing benefits - Eliminate both programs - Do nothing

Go to www.ModernPatriot.net and vote today!!!
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Denise Bode Punts on Social Security and Medicare

It has always been my opinion that Denise Bode knows oil. She can recite policy initiatives that revolve around oil at the drop of a hat. That makes her a good candidate for Oklahoma Corporation Commission. While Bode knows oil, I thought I would explore her knowledge in the number one fiscal policy challenge of the 21st century. Social Security and Medicare. While Social Security and Medicare are two programs that draw sleepy yawns from the fiscally disengaged, it is the most difficult challenge facing policy makers serving in Congress today and in the future.

The Federal Reserve just completed a study of this ominous problem and has determined that the present value of the 75 year short-fall in both Social Security and Medicare combined is $35.6 trillion. Present value, in this example, means putting enough money into an interest bearing instrument and letting it grow to meet obligations for the next 75 years. ( )

To give this some perspective, our total gross domestic product (GDP) is $13 trillion (less than half the current shortfall). Of the total $13 trillion GDP, the federal government consumes $2.4 trillion. (Now remember we have a present value shortfall of $35.6 trillion.). If we go back in time to 1930 (75 years ago) and look at the CPI and compare it to today, we can see that it costs basically $2 for what cost just .17 cents. The cost of goods and services (which includes healthcare) has increased 12 times (.0167 x 12 = 2.004). So what does this mean if the next 75 years acts as the last 75 years in terms of inflation and economic growth?
Currently the federal government makes up 18.5% of total U.S. GDP. Of the total 18.5%, Social Security and Medicare combined are responsible for 1/3rd of the federal budget or 6% of total GDP. What percent of total U.S. GDP will it be by 2080? According to the Federal Reserve study, it will be 20% of GDP! So here are the numbers.

Assuming that the U.S. federal government maintains a 12.5% share of GDP, the total tax burden to U.S. taxpayers will grow to 1/3rd of the U.S. GDP. And this doesn't even include local or state governments. This is a major problem.

Category 2005 GDP 2080 GDP @ +4.5%/yr
Total U.S. GDP $13 trillion $353 trillion
Fed Budget without Social 12.5% of GDP 12.5% of GDP
Security & Medicare
Social Security/Medicare 6.0% of GDP 20.0% of GDP
Federal Government Total 18.5% of GDP 32.5% of GDP

When I asked Denise Bode what she was going to do to address this problem, she answered that her solution was to "cut the size of the federal government."

As you can see from the table above, even if Bode was successful in eliminating the entire federal government, she would still encounter the ugly truth that Social Security and Medicare combined would still require gargantuan levels of taxation. Social Security and Medicare alone will require federal taxation that is roughly 8% higher than today. Including the federal government into these expenditures means that taxes must increase another 77.3% above today's total tax burden.

Bode's response on this issue indicates to me that she hasn't even given the problem a serious thought. She doesn't have a grasp on the issue at all. And it's the most important fiscal challenge on we face today. If Bode wants to go back to Washington D.C. as a congressional representative, she needs to get beyond simple-minded sound bites and feel good mantra.

We need congressional members that have a grasp on difficult issues. While oil is an important issue to voters today, it will continue to be less significant over time as alternative fuels and transportation modes start to take over larger and larger shares of the transportation and energy markets. Very few of the major issues facing the federal government involve the kind of fiscally catastrophic potential as the combined problem of Social Security and Medicare.

Perhaps a fall back plan for those not wanting to be serious about solving this very real problem would be to depend on the Bird Flu or some other health catastrophe that would wipe out a large percentage of America's growing elderly population. But that's not a responsible or ethical position.

Having a handle on oil issues might be fine for oil contributors piling money into Bode's congressional campaign. But we need serious people in Congress willing to take on the difficult problems facing our future. Is there a candidate running for Congress willing to take them on?

I think Denise Bode is perfect for the Corporation Commission.