“Governments will impose a loss on some of their stakeholders,” reads a new report from Morgan Stanley on sovereign debt. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.”
Of course, we’re talking only about “other” countries like Greece and Ireland, right?
The report points out a little-noted statistic: Government debt as a percentage of annual tax revenue. With debt soaring and the revenue tanking, the United States now has one of the highest in the world at 358%. (Compare that to Italy — one of those pesky “other” countries with baby boomers poised to overwhelm the system — with a figure of 188%.)
But we’re the world’s reserve currency, right? We can’t default. And if we ever run the risk, we’ll just print our way out of it. Right?
Uncle Sam has defaulted in the past, or as the Morgan Stanley report put it, “imposed a loss on some of his stakeholders.” When Social Security was “reformed” in 1983, following the advice of the Greenspan Commission, anyone born after 1937 had to work at least a little past age 65 to collect full benefits. If you were born after 1960, the retirement age was bumped up another two years.
That’s one promise reneged upon. We have no doubt another is on the way.
“Social Security needs to be tweaked,” declared Brad Woodhouse, communications director for the Democratic National Committee this week. True, he said that to differentiate his party from Republicans who want the system “torn apart from its very foundations.” But the very party who claims Social Security as integral to its heritage knows the game is up. The No. 2 Democrat in the House, Maryland’s Steny Hoyer, is already proposing another increase to the retirement age.
It helps to keep a sense of humor about all this. Which clearly some people don’t when it comes to the cantankerous old coot Alan Simpson, the retired Wyoming senator who’s now the Republican co-chair of President Obama’s deficit commission.
Earlier this week the head of OWL, a group describing itself as “the voice of midlife and older women,” sent him a letter insisting Social Security “doesn’t contribute” to the national debt. (Ah, Social Security denialism.)
Simpson’s reply ended with the following: “Yes, I’ve made some plenty smart cracks about people on Social Security who milk it to the last degree. You know ‘em too. It’s the same with any system in America. We’ve reached a point now where it’s like a milk cow with 310 million tits! Call when you get honest work!”
I said what? No, I’m pretty sure I meant, “teats”
We could hear people whining all over the capital from here in Baltimore. More than one sourpuss asked for Simpson’s resignation from the commission. That doesn’t appear to be forthcoming, but Washington propriety being what it is these days, he did issue an apology: “I can see that my remarks have caused you anguish, and that was not my intention.”
That’s Washington for you: Silly cable news distractions while Social Security is just 35 days away from officially slipping $28 billion into the red.
“What does that mean?” our dividend hound Jim Nelson asks rhetorically. “Either they hike up your payroll taxes now… slash your retirement payouts later… or both. Payouts shrink. No matter what, it means you come out of this with less.”