People (myself included) have made decisions in the course of their lives, based on the situation they expected to prevail at retirement time. For those of us who foolishly trusted the government to handle their contributions in such a way as to make sure these promises were kept, it is going to be a problem. A decrease or delay in those benefits (for which we have spent a life time paying) is going to directly affect the quality of life in that stage of our lives. This is the focus of most of the attention on this subject.
However, that may not be the major problem.
The government will be adjusting things like retirement age, etcetera, in order to extend the life of Social security and related services. This will extend the life of the system, at a cost to the beneficiaries, but will not solve the problem in the long term. When these services eventually go broke, not only will all those retirees not have the resources to live on that they expected to have; all of the businesses that directly and indirectly make their living off the expenditures of retirees are going to take a hit, too.
A big hit. Very possibly worse than the current housing bubble. The entire U.S. economy will be directly impacted. This aspect of the entitlement mess is one I had not previously considered. From the article:
When those [benefits] disappear, a lot of consumption is going to have to be forgone — and a lot of capital dedicated to producing those goods and services for consumption will be massively devalued. Businesses will have to retrench, probably in a way that is more disruptive and more expensive than the housing-bubble recession necessitated.