Citigroup send this table out to clients today:
And for those who prefer a 75-year time horizon, there is this chart from the Kleiner Perkins USA Inc. report:
Citi’s bottom line:
When actual austerity is demanded by savers funding budget deficits, the consequences are never pretty. Amid powerful rallies in U.S. bonds in recent years, it may be forgotten that a three percentage point rise in long-term U.S. rates took no longer than six months in 1981. While driven significantly by a policy decision from the Federal Reserve at the time, such a selloff did not take significantly longer than the periods seen in Italy or Spain recently. Such a future selloff may not be an internal policy decision led by the Fed.
Quite simply, if Medicare as we know it and social security are to remain, the taxes collected to finance these programs are woefully short. Social Security already runs an operating deficit. Its assets are U.S. Treasury securities that have not been issued to the public, but will be matched with marketed securities when payments come due, as the public was subtly reminded as the debt ceiling was hit in August.
As figures 1 illustrates, the 6.2% payroll tax, prior to its “one year” cut in 2011, covers roughly one fourth of the present value of total future Medicare and Social Security obligations as extrapolated by Federal actuaries. The unfunded portion of these programs is now valued at $78 trillion through the future. Fully funding these entitlements will require huge program reforms or sharply higher taxes.