Are we going to reform Medicare before 2012? No, unfortunately the Democrats have decided that using Medicare as an election issue is more important than actually doing the right thing for the country. So, they're going to lie and tell every senior in America that the GOP is going to take their Medicare away. Then the mainstream media will echo their charges without pointing out that the Ryan plan won't affect "anyone now 55 or older." Their strategy may even work and if so, Republicans will probably be terrified to touch Medicare again until the program completely collapses -- which incidentally, is exactly what we're headed towards. Let's talk about that.
1) Medicare and Social Security cannot survive "as is" over the long-term. Our country has 100 trillion dollars in Social Security and Medicare liabilities. Put another way, as the programs are currently structured, we will have to pay out 100 trillion dollars more money than people are going to pay into the programs.
Just to give you some perspective, this year the government is going to take in roughly 2.57 trillion dollars in tax revenue while our national debt, like our gross domestic product, is a little over 14 trillion dollars. There is a gulf as wide as the ocean between what we're promising retirees and what we can actually deliver.
2) We cannot make up the shortfall with taxes alone. The standard response to every revenue shortfall these days is, "Tax the rich." However, that's not going to work this time.
The total present value of payments expected under Social Security and Medicare beyond what is expected to be collected under current tax laws is about $100 trillion. One way to put that amount of money in context is to note that it is about twice the amount of all the net private assets that exist in America today....the best back-of-envelope estimate is that meeting this unfunded portion of our Social Security and Medicare commitments would require roughly an immediate 80 percent increase in federal income taxes, sustained forever.