Social Security, Medicare deficits portend inflation

From Statesman.com

How bad will future inflation be? I don't know. Neither does anyone else. It could be a "normal" inflation of 3 to 4 percent a year. It could also be a banana republic's 10 percent a month.

What we know is that all governments make promises they can't fulfill. Our government certainly has. Under both political parties, it has taken promise-making to a high art. This is not hyperbole. The figures can be found in regularly published government reports.

The figures exist, but they are ignored. News reports regularly inform us of the growing federal deficit, projected at

$1.8 trillion for fiscal 2009 and $1.17 trillion for 2010. But regularly reported, less visible government obligations have been growing much faster.

In the four years between January 2003 and December 2007, Medicare trustees reported that the unfunded liabilities of Social Security and Medicare grew by a stunning $10.4 trillion. The average annual growth was $2.8 trillion.

That's well over the expected formal deficit of $1.75 trillion this year.

In the 2008 trustees' report, the unfunded liabilities of Social Security and Medicare — promises of future retirement and health care benefits — total $42.9 trillion. In a few days, we should be able to read the 2009 report. It's a good bet that the unfunded liabilities will increase by $3 trillion in the new report.