Sometime in the near future, America will go over the entitlement cliff. That is the argument of Dr. Merrill Matthews, co-author of the book, On the Edge: America Faces the Entitlement Cliff. He was on the Point of View radio talk show recently to discuss the problem and possible solutions.
The first part of his book explains why entitlement programs fail. To put it simply, they are not actuarially sound. But the problem is even greater than that. He also shows how the cost of entitlement programs ALWAYS exceeds projections. He details the expansion of Social Security, Medicare, and Medicaid.
The second section projects how America will fall off the entitlement cliff. Not only does he provide projections for Social Security, but also for the impending pension crisis, the welfare debacle, and the health care debacle. This is true of both private sector pensions as well as for public sector pensions.
He also includes sections on “stepping back from the cliff.” He deals with the fact that we have different types of safety nets in society that result in different outcomes. We do have examples (in other countries) of how to construct a sustainable safety net. I wish some members of Congress would read the sections on “principles of a sustainable safety net” and “embracing actuarial principles.”
There are solutions to the financial challenges we face with entitlements, but we need to elect to Congress politicians who actually want to solve some of the problems created decades ago with these government programs. So far most members of Congress want to ignore the fact that sometime in the future we may go over the entitlement cliff.