In my previous posts I laid out the risks to the U.S. Dollar from the Federal Budget Deficit and the Trade Deficit. - “Twin Deficits”. We might have to change the name to “The Triplets”. You see, there is another government debt lurking out there – and it is growing every day. As of today, it is estimated at $2 trillion dollars, and by some estimates, it is growing at about 7% per year. That means it will be up to $4 trillion in the middle of the next decade.
The Great American Ponzi Scheme
In order to avoid China’s 4-2-1 problem – 4 grandparents and 2 parents supported by 1 worker – the U.S. immigration policy, the “Great American Ponzi Scheme”, has imported enough young people to continue to fund the Social Security and Medicare trust funds. For a number of reasons, that is coming to a close in the near future.
Had we not had the benefit of these immigrants over the past 20 years (legal or otherwise) the Social Security and Medicare trust funds would now be in default. Still, we grow our entitlement programs at an exponential rate – but future immigration will not be there to hold up its end of the Ponzi Scheme.
A “pay as you go” system means that today’s young workers pay for today’s retirees. What happens when you have too many retirees and not enough young workers? Nothing good