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Social Security Reform Thursday: Fifty-Three -- Chinese Pay-As-You-Go Failure.

Thursdays are good days for reform, because they fall between Wednesdays and Fridays. Just because the status quo'ers got their way in 2005 does not mean the problem has gone away. Indeed, it's getting worse with each passing day. Thus, Reform Thursday continues.

That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform.

This week's topic:

China's Demographic Crisis.

This week in the U.S., the CDC's National Center for Health Statistics released data showing that the annual number of American deaths dropped by nearly 50,000 in 2004— the sharpest decline in nearly 70 years:

Meanwhile, life expectancy crept upward yet again:

Awesome news.

It's a testament to science, medicine, and technology. The 25 year trend is also a testament to economic progress.

This is also terrible news for the long-term solvency of Social Security and other unreformed entitlement programs.

Pay-as-you-go funding systems, the pyramid schemes that they are, are doomed to fail. Everywhere. Always.

Unless you can somehow guarantee a combination of immigration, birthrates, and economic growth that indefinitely outpace medicine's ability to keep us alive longer, pay-as-you-go systems will fail. Period.

As The Economist points out, even China is learning this fact:

Over the next 10-15 years, the rapid ageing of the population will increasingly make itself felt. As the labour force begins to shrink, the current pay-as-you-go pension system will become unsustainable. Life expectancy in China is high by the standards of developing countries and is likely to go on rising…

The government has been trying to develop a new pension system, including elements of both pay-as-you-go and funding, whereby it invests on behalf of workers and then pays them pensions from their individual accounts. But it will be many years before China has a sufficiently mature bond and equity market to make this workable… With no expansion of pension coverage, liabilities for future pension payments could amount to 70% of current GDP.

China is particularly hard hit because of its "one child" policy:

Increasing numbers of retirees, plus decreasing numbers of young workers, equals major problems.

Sound familiar?

That's because pay-as-you-go funding systems are not sustainable over the long run. Anywhere. Ever.

It's time for reform.

The clock is ticking:

Previous Reform Thursday graphics can be seen here:

-Week One (Costs Exceed Revenues).
-Week Two (Social Security Can't Pay Promised Benefits).
-Week Three (Americans Getting Older).
-Week Three, bonus (The Templeton Curve).
-Week Four (Fewer Workers, More Retirees).
-Week Five (History of Payroll Tax Base Increases).
-Week Six (Seniors Living Longer).
-Week Six, bonus (Less Workers, More Beneficiaries).
-Week Seven (History of Payroll Tax Increases).
-Week Seven, bonus (Personal Accounts Do Achieve Solvency).
-Week Eight (Forty Year Trend Of Increasing Mandatory Spending).
-Week Nine (Diminishing Benefits Sans Reform).
-Week Ten (Elderly Dependence On Social Security).
-Week Eleven (Entitlement Spending Eating The Budget).
-Week Twelve (Benefit Comparison, Bush's Plan versus No Plan).
-Week Thirteen (Younger Americans and Lifecycle Funds).
-Week Fourteen (The Thrift Savings Plan).
-Week Fifteen (Understanding Progressive Indexing).
-Week Sixteen (The Graying of America).
-Week Seventeen (Debunking Myths).
-Week Eighteen (Debunking Myths).
-Week Nineteen (Reform Needed Sooner Rather Than Later).
-Week Twenty (Global Success With Personal Accounts).
-Week Twenty-One (GROW Accounts: Stopping The Raid).
-Week Twenty-Two (Millions of Lockboxes).
-Week Twenty-Three (Support for Ryan-DeMint).
-Week Twenty-Four (KidSave Accounts).
-Week Twenty-Five (Latinos and Social Security).
-Week Twenty-Six (AmeriSave).
-Week Twenty-Seven (Cost Of Doing Nothing).
-Week Twenty-Eight (Chile).
-Week Twenty-Nine (Entitlement Spending Out Of Control).
-Week Thirty (Reform Better Deal Than Status Quo).
-Week Thirty-One (Social Security As A Labor Cost).
-Week Thirty-Two (Social Security And Dependence On Government).
-Week Thirty-Three (Social Security, Currently A Bad Deal For African-Americans).
-Week Thirty-Four (Longer Life Expectancies Straining Social Security).
-Week Thirty-Five (Howard Dean & Salami).
-Week Thirty-Six (Growing Numbers of Beneficiaries Draining Social Security).
-Week Thirty-Seven (The Crisis Is Now).
-Week Thirty-Eight (Disability Benefits).
-Week Thirty-Nine (Broken Benefit Calculation Formula).
-Week Forty (German Social Security Disaster).
-Week Forty-One (Crumbling Pyramid Scheme).
-Week Forty-Two (Overpromising, Globally).
-Week Forty-Three (Demographic Wave).
-Week Forty-Four (The Jerk Store).
-Week Forty-Five (Defined Benefit Plans).
-Week Forty-Six (Even The Empty Promises Are A Bad Deal).
-Week Forty-Seven (Our Aging Population).
-Week Forty-Eight (The Tax Increases Required To Cover Social Security's Costs).
-Week Forty-Nine (Much Longer To Get Your Money Back From Social Security).
-Week Fifty (A Vote, At Last).
-Week Fifty-One (We Can Do Better).
-Week Fifty-Two (Socialist Security).

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

Posted by Will Franklin · 20 April 2006 02:24 PM

Comments

Posted by: JohnJ at April 20, 2006 11:14 PM

Posted by: JohnJ at April 20, 2006 11:33 PM

Posted by: fantasy fan at April 21, 2006 02:46 PM