ECONOMIC REALITY CHECK

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A Macro Economic View of Our Nation’s Financial Situation and Social Programs ECONOMIC REALITY CHECK ECONOMIC REALITY CHECK

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A Macro Economic View of Our Nation’s Financial Situation and Social Programs. ECONOMIC REALITY CHECK. WE WILL DISCUSS:. United States national debt crisis Changing demographics Programs at risk -- Social Security, Medicare, Medicaid Shift from government to personal responsibility. - PowerPoint PPT Presentation

Transcript of ECONOMIC REALITY CHECK

Page 1: ECONOMIC REALITY CHECK

A Macro Economic View of Our Nation’s Financial Situation and

Social Programs

A Macro Economic View of Our Nation’s Financial Situation and

Social Programs

ECONOMIC REALITY CHECKECONOMIC REALITY CHECKECONOMIC REALITY CHECKECONOMIC REALITY CHECK

Page 2: ECONOMIC REALITY CHECK

WE WILL DISCUSS:WE WILL DISCUSS:

• United States national debt crisis

• Changing demographics

• Programs at risk -- Social Security, Medicare, Medicaid

• Shift from government to personal responsibility

• United States national debt crisis

• Changing demographics

• Programs at risk -- Social Security, Medicare, Medicaid

• Shift from government to personal responsibility

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UNITED STATES DEBT:UNITED STATES DEBT:

• $13.3 trillion U.S. national debt

• Projected to be $25 trillion by 2020

• $120,000 of debt per taxpayer

• $43,000 of debt per citizen

• $13.3 trillion U.S. national debt

• Projected to be $25 trillion by 2020

• $120,000 of debt per taxpayer

• $43,000 of debt per citizen

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HOW BIG ARE OUR DEFICIT NUMBERS?

HOW BIG ARE OUR DEFICIT NUMBERS?

1 MILLION seconds = 11.1 days1 BILLION seconds = 32 years1 TRILLION seconds = 32,000 years

We have become so immune to large deficit numbers that our ability to comprehend how damaging they are has been tainted

1 MILLION seconds = 11.1 days1 BILLION seconds = 32 years1 TRILLION seconds = 32,000 years

We have become so immune to large deficit numbers that our ability to comprehend how damaging they are has been tainted

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JUST FOR FUNJUST FOR FUN

• Go to www.usdebtclock.org

• You’ll see our U.S. debt in all areas, in real-time, along with states and their debt situations

• Don’t be neutral – be proactive!

• Go to www.usdebtclock.org

• You’ll see our U.S. debt in all areas, in real-time, along with states and their debt situations

• Don’t be neutral – be proactive!

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WHAT THE C.B.O. SAYS ABOUT OUR DEBT

PROJECTIONS:

WHAT THE C.B.O. SAYS ABOUT OUR DEBT

PROJECTIONS:

• JULY 27, 2010 SUMMARY REPORT • Prepared by Jonathan Huntley of

CBO’s Macroeconomic Analysis Division

• Available at www.cbo.gov• Published by Douglas W. Elmendorf,

Director of the Congressional Budget Office

• JULY 27, 2010 SUMMARY REPORT • Prepared by Jonathan Huntley of

CBO’s Macroeconomic Analysis Division

• Available at www.cbo.gov• Published by Douglas W. Elmendorf,

Director of the Congressional Budget Office

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C.B.O. REPORTC.B.O. REPORTC.B.O. REPORTC.B.O. REPORT Two Forecasting Methods to Predict

Debt Increases: 1. “The extended-baseline scenario”

2. “Alternative fiscal scenario” if the “Bush tax cut” were extended

GDP: Gross Domestic Product. The total market values of goods and services produced by workers and capital within a nation's borders during a given period (usually 1 year).

Two Forecasting Methods to Predict Debt Increases:

1. “The extended-baseline scenario”2. “Alternative fiscal scenario” if the “Bush tax cut” were extended

GDP: Gross Domestic Product. The total market values of goods and services produced by workers and capital within a nation's borders during a given period (usually 1 year).

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C.B.O. REPORT PROJECTS TWO SCENARIOS:

C.B.O. REPORT PROJECTS TWO SCENARIOS:

• 1st scenario -- The debt by 2035 would be equal to 80% of GDP

• 2nd scenario -- The debt by 2025 would be equal to 110% of GDP and by 2035 it would be 180% of GDP

• Either scenario poses serious financial consequences for the United States

• 1st scenario -- The debt by 2035 would be equal to 80% of GDP

• 2nd scenario -- The debt by 2025 would be equal to 110% of GDP and by 2035 it would be 180% of GDP

• Either scenario poses serious financial consequences for the United States

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DEMOGRAPHICSDEMOGRAPHICS• 81 million “Baby Boomers” (1946-64)• 38 million Americans already retired• Fastest growing population in the

U.S. is people over age 80• People are living longer• Our birthrate is the lowest it’s ever

been – ONLY 4 million babies born last year

• 81 million “Baby Boomers” (1946-64)• 38 million Americans already retired• Fastest growing population in the

U.S. is people over age 80• People are living longer• Our birthrate is the lowest it’s ever

been – ONLY 4 million babies born last year

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NOT GOING IN THE RIGHT DIRECTION

NOT GOING IN THE RIGHT DIRECTION

• Currently 3 workers support 1 retiree for S.S. and Medicare benefits

• By 2020-2025 there will be 2 workers for every retiree

• Your grandchildren will not only have to support their family but also 1-2 retirees during their working years

• Currently 3 workers support 1 retiree for S.S. and Medicare benefits

• By 2020-2025 there will be 2 workers for every retiree

• Your grandchildren will not only have to support their family but also 1-2 retirees during their working years

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SOCIAL SECURITYSOCIAL SECURITY

What do you look at when you get your annual social security statement?

… Me too!Next time, read the first page on the right

hand side … “By 2016 S.S. will pay out more in

benefits than it collects in taxes…by 2037 the S.S. trust fund will be exhausted.”

What do you look at when you get your annual social security statement?

… Me too!Next time, read the first page on the right

hand side … “By 2016 S.S. will pay out more in

benefits than it collects in taxes…by 2037 the S.S. trust fund will be exhausted.”

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SOCIAL SECURITYSOCIAL SECURITY• The first “Boomer” turned 62 in 2008

and took her early S.S. retirement

• In January of 2012 the first Boomer will turn 66 and collect full benefits

• 2011 marks the 1st year of Medicare eligibility … with 81 million Boomers coming through the system!

• The first “Boomer” turned 62 in 2008 and took her early S.S. retirement

• In January of 2012 the first Boomer will turn 66 and collect full benefits

• 2011 marks the 1st year of Medicare eligibility … with 81 million Boomers coming through the system!

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MEDICAREMEDICARE

• Health insurance system for people age 65 and older in our country

• The unfunded liability for Medicare is six times that of Social Security

• It has a projected unfunded liability of $89 TRILLION.

• Health insurance system for people age 65 and older in our country

• The unfunded liability for Medicare is six times that of Social Security

• It has a projected unfunded liability of $89 TRILLION.

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MEDICARE, cont.MEDICARE, cont.• How many Baby Boomers are

currently on the Medicare system?

• Anyone have a Medigap policy? What has happened to your premiums recently?

• Notice any changes in approved medications or costly prescriptions?

• How many Baby Boomers are currently on the Medicare system?

• Anyone have a Medigap policy? What has happened to your premiums recently?

• Notice any changes in approved medications or costly prescriptions?

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MEDICAIDMEDICAID• Medicaid is the health insurance system

for the poor, blind, disabled and those with special needs

• Current income qualifications are $16,000 a year

• New health insurance legislation changes the threshold income from $16,000 to $30,000 a year

• Medicaid is the health insurance system for the poor, blind, disabled and those with special needs

• Current income qualifications are $16,000 a year

• New health insurance legislation changes the threshold income from $16,000 to $30,000 a year

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MEDICAID, cont.MEDICAID, cont.

• That legislation brings the total amount of Americans covered by Medicaid to over 40% of the U.S.

• This makes Medicaid the fastest growing social program, and it will eventually be the largest social program in our country

• That legislation brings the total amount of Americans covered by Medicaid to over 40% of the U.S.

• This makes Medicaid the fastest growing social program, and it will eventually be the largest social program in our country

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CURRENT ECONOMIC CONDITIONS

CURRENT ECONOMIC CONDITIONS

• FDIC finds 829 U.S. Banks at risk

• 114 Banks have been taken over by the FDIC this year so far (September 1, 2010)

• Harrisburg, PA skipped a $3.29 million municipal bond payment to it’s bondholders, most of whom were individual investors (WSJ 9/1/2010)

• FDIC finds 829 U.S. Banks at risk

• 114 Banks have been taken over by the FDIC this year so far (September 1, 2010)

• Harrisburg, PA skipped a $3.29 million municipal bond payment to it’s bondholders, most of whom were individual investors (WSJ 9/1/2010)

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CURRENT ECONOMIC TRENDS

CURRENT ECONOMIC TRENDS

• States, counties and municipalities are broke

• California has paid “IOU’s” to it’s citizens for tax refunds

• By 2018 67% of Americans will be financially dependent on the Federal Government for support

• The other 1/3 will pay mightily to support the other 2/3.

• States, counties and municipalities are broke

• California has paid “IOU’s” to it’s citizens for tax refunds

• By 2018 67% of Americans will be financially dependent on the Federal Government for support

• The other 1/3 will pay mightily to support the other 2/3.

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UNEMPLOYMENTUNEMPLOYMENT

They tell us it’s about 10% but in reality it’s more like 25% when you consider those who:

1.Have given up looking for work2.Retired early3.Taken a part time or marginal

job

They tell us it’s about 10% but in reality it’s more like 25% when you consider those who:

1.Have given up looking for work2.Retired early3.Taken a part time or marginal

job

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THREE MAJORPARADIGM SHIFTS GOING ON

TODAY

THREE MAJORPARADIGM SHIFTS GOING ON

TODAY

#1 Governments won’t be able to take care of our elderly anymore

#2 People are living longer than they ever have before

#3 Continual transition from an Industrial Age to an Information Knowledge Age

#1 Governments won’t be able to take care of our elderly anymore

#2 People are living longer than they ever have before

#3 Continual transition from an Industrial Age to an Information Knowledge Age

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#1. Government won’t be able to take care of our elderly

anymore…

#1. Government won’t be able to take care of our elderly

anymore…

• Why? Demographics!

• Add 80+ million Baby Boomers to the 35 million Silent Generation

• 115 million people receiving SS and Medicare

• Why? Demographics!

• Add 80+ million Baby Boomers to the 35 million Silent Generation

• 115 million people receiving SS and Medicare

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DemographicsDemographics

•Gen X (1965-81) = 50 million

•Gen Y (1982-2002) = 80 million

•130 million people, even if all were working, can’t take care of 115 million people in retirement

•Gen X (1965-81) = 50 million

•Gen Y (1982-2002) = 80 million

•130 million people, even if all were working, can’t take care of 115 million people in retirement

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#2. People are living longer#2. People are living longer

• Average man aged 65 is expected to live to age 81 (70% of US population make it to age 65)

• If a woman lives to 53 cancer and heart disease free she is expected to live to age 91

• By 2040 there will be ONE MILLION people over 100

• You must plan on 1 spouse living to age 100

• Average man aged 65 is expected to live to age 81 (70% of US population make it to age 65)

• If a woman lives to 53 cancer and heart disease free she is expected to live to age 91

• By 2040 there will be ONE MILLION people over 100

• You must plan on 1 spouse living to age 100

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SHIFT #3 SHIFT #3 • Transition from an Industrial Age --

which requires mass human labor to produce goods and services -- to an Information Knowledge Age which does not.

• US Steel had 120,000 workers at one time – now they have 20,000 and produce 20 times the amount at a fraction of the cost

• Transition from an Industrial Age --which requires mass human labor to produce goods and services -- to an Information Knowledge Age which does not.

• US Steel had 120,000 workers at one time – now they have 20,000 and produce 20 times the amount at a fraction of the cost

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Common Sense QuotesCommon Sense Quotes

“I’m more concerned about the return OF my money than the return ON my money.”

“A lot of people are going to be long on life but short on cash.”

“I’m more concerned about the return OF my money than the return ON my money.”

“A lot of people are going to be long on life but short on cash.”

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HOW WILL THIS INFORMATION AFFECT YOU?

HOW WILL THIS INFORMATION AFFECT YOU?

Possible issues for you: 1. Your taxes will go up 2. Your benefits will go down 3. Your out of pocket health care

costs will go up 4. You and/or your spouse will need

to continue working longer

Possible issues for you: 1. Your taxes will go up 2. Your benefits will go down 3. Your out of pocket health care

costs will go up 4. You and/or your spouse will need

to continue working longer

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WHAT CAN YOU DO?WHAT CAN YOU DO?

#1 Do nothing (and this is a choice most Americans will make)

#2 Be proactive

#1 Do nothing (and this is a choice most Americans will make)

#2 Be proactive

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DEVELOP A STRATEGY:DEVELOP A STRATEGY:

1. MAKE YOURSELF SAFE (Would you rather be rich or guarantee that you’ll never be poor?)

2. Put yourself in a position to benefit from a market crash or inflation

3. Send money tax-free into the future to help those you love: spouse, children, grandchildren

4. Create guaranteed income streams

1. MAKE YOURSELF SAFE (Would you rather be rich or guarantee that you’ll never be poor?)

2. Put yourself in a position to benefit from a market crash or inflation

3. Send money tax-free into the future to help those you love: spouse, children, grandchildren

4. Create guaranteed income streams

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KNIGHTS OF COLUMBUS FINANCIALS

KNIGHTS OF COLUMBUS FINANCIALS

• 1983 -- 500 companies out of 2000 with all the top financial ratings

• 2010 -- only two (2) companies out of 1700 with the top ratings from:

Standard and Poor’s A.M. Best and Company I.M.S.A. certification for customer

satisfaction• The other company lost $400 million last

year

• 1983 -- 500 companies out of 2000 with all the top financial ratings

• 2010 -- only two (2) companies out of 1700 with the top ratings from:

Standard and Poor’s A.M. Best and Company I.M.S.A. certification for customer

satisfaction• The other company lost $400 million last

year

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IS THERE A PERFECT SOLUTION FOR YOU?

IS THERE A PERFECT SOLUTION FOR YOU?

Nothing is perfect -- but the Knights of Columbus have developed key strategies to help the young, middle aged and retired Brother Knight and his wife anticipate and plan for the upcoming economic impact of the aforementioned issues.

THANK YOU FOR YOUR TIME TONIGHT!!

Nothing is perfect -- but the Knights of Columbus have developed key strategies to help the young, middle aged and retired Brother Knight and his wife anticipate and plan for the upcoming economic impact of the aforementioned issues.

THANK YOU FOR YOUR TIME TONIGHT!!