Patrick Schwerdtfeger is a motivational speaker who can speak about entitlement reform and social security in particular at your next business event. Contact us to check availability. The full transcript of the above video is included below.
Full Video Transcript:
Hi, and welcome to another edition of Strategic Business Insights. Today we’re going to talk about entitlement spending – entitlement spending here in the United States. Look, here’s the situation. We’ve got huge deficits. Huge deficits.
Now, just a quick definition here. Deficit is the annual shortfall. The debt is the accumulation of all of the deficits that have happened in years past. In other words, how much debt do we actually have? How much money do we actually owe? The deficit is how much more we spent than we made just this year, and we have deficits that are over a trillion dollars in the United States. It is absolutely unsustainable, and if you’re curious what this is going to look like in the years to come, all we need to do is look at Europe, and Greece in particular or Ireland or Portugal or Spain or any of those countries. And in fact, in the years to come, you just wait – Japan is going to be in the same boat. That’s like a bug just looking for a windshield.
Bottom line is those deficits are not sustainable and sooner or later the bond markets are going to force us to pay higher interest rates, which is not just going to affect the money we borrow today but it’s going to affect all the money we borrowed in years past. That is scalably horrible. In other words, the difficulty, the financial strain that that’s going to put our country under, will scale up in the negative direction. In other words, it’s going to get bad a lot quicker.
We have to roll over our debt. We’re selling 10-year bonds, so we’re constantly rolling over debt. We’re retiring old bonds by issuing new bonds. So if the old bonds were issued at 2% and we have to sell more bonds that are paying 4 or 5%, it’s like we just doubled our debt. The debt didn’t double but the interest payment did. So entitlement spending is the problem. We need to reform entitlements, just like they’ve done across Europe, not in all cases but they’re doing it right now. Even Canada, which is where I grew up, Canada has raised their retirement age.
And that’s what we’re going to talk about here – Social Security. People say, is Social Security really the problem? In other words, is the money coming in sufficient to cover the money going out? Well, today it actually is, believe it or not. The amount of money coming in through Social Security is actually more than we’re paying out. So that’s not technically the source of the deficits. The sources of the deficits are things like Medicare or Medicaid. Those are the big ones. But they’re more difficult to solve. It’s a more complex problem.
Bottom line is the government needs revenue. We need revenue to pay for these expenses. Either that or we have to reduce the expenses. So it’s the balance of money coming in and money going out, and I think Social Security is the number one place where we can make some really important transformations and improvements in our economy.
So here’s the deal. When Social Security was first introduced, it was 1935 – August 15th, 1935. And by the way, this is when the retirement age was defined as 65. People are to retire at 65. Do you know what the life expectancy was in 1935? It was 62. The life expectancy was 62. The average person was dead by the time they hit retirement age. So very few—not very few, but the majority of people never got to retirement.
What’s the life expectancy in the United States today between the two sexes, male and female? Seventy-eight. So the life expectancy has gone up by 16 years from 62 to 78, because people are living longer. Meanwhile, the retirement age has stayed the same at 65. That’s the problem.
That’s the problem. It’s ridiculous. Before, people were expected to work until they were basically done. Now, I’m not suggesting that we need to raise the retirement age to 78. I’m not suggesting that that’s the case. But we should raise it to 70. And I’m not saying you can’t do it in one year. You have to scale it—not scale it, but you have to adjust it up over a period of time, so over a period of time the retirement age would rise.
But the bottom line is people are working longer already because we’re still healthy at 70. A lot of people are still healthy and very functional at 70. So should Social Security kick in at 65? No. We have to adjust this stuff, and if we did it would solve the problem.
And again, I’m not saying that Social Security is the problem, but it’s the easiest one to change. Medicare is more complicated. It’s more difficult. There are all sorts of issues that come in with healthcare costs and who’s affected. But retirement age should be a function of old we’re actually living, and to let the life expectancy go up by 16 and keeping retirement age stagnant at 65 is absurd and it’s delusional, and it’s the source of our problem.
So my vote is to increase the retirement age from 65 to 70 over a period of years, and that is going to change the expense part of our annual national budget dramatically. That’s my opinion. You can have whatever opinion you want.
Thank you very much for watching this video. My name is Patrick, encouraging you to think bigger about your business, think bigger about your life.
Patrick Schwerdtfeger is a keynote speaker who has spoken at business conferences in North America, South America, Europe, Africa, the Middle East and Asia.