Oct. SSTF Report - We Are Now Living Off Of The Interest
The Social Security Trust Fund wracked up another monthly deficit for
October. The shortfall was $4.2 billion. This is the 5th consecutive
month of red ink for the Fund. The total for the period comes to
$15bil. Blame the economy and the boomers for this problem. Some basic
measures of the Fund's performance are rapidly deteriorating.
A
critical measure is the ratio of Payroll Tax receipts to Benefits paid.
The following chart looks at that ratio over time. That ratio will fall
below 1.0 for the full year 2009. As of today we are living off of the interest. 
In
November the SSTF will pay out $56.9 billion. They will be lucky to
take in $47 billion in tax income. The deficit will be near to $10
billion. Interest income, and other income add another $140b annually
to the Fund’s top line. But with monthly deficits of $10b on an
operating basis, the Fund is running very close to break even for 2010.
That possibility is not on anyone’s radar screen.
My estimate
for benefits in 2010 is $756 b. If we assume total GDP growth of 2% the
resulting ratio is 5.75%. That is up from 4% just a few years ago. It
is rising fast. The following is from a CBO report on the Fund from August 2009. These guys think it going to 6% in 2030? This train will arrive 18 years early.
“Both CBOE and SSTF project that Social Security’s outlays will rise from 4.8 percent of gross domestic product (GDP) this year to about 6 percent in 2030 and will stabilize thereafter.”
The
US is struggling with health care legislation. Inside of this debate is
a cost of about $1 Trillion. We can’t agree on this because of the
question, “Who will pay?”
Health care is small beer compared to
SS. My estimate on the current imbalance of the fund is close to $7
trillion on a NPV basis. We are on a ship traveling at high speed
toward a rocky shoal. And it is foggy and no one has a clue.
SS
is too hot a potato to come up for a resolution prior to next year’s
elections. That would imply it comes up for discussion sometime in
2011. The Fund can’t wait that long. I just keep wondering when the MSM
will wake up to this.
(5 votes)
on Wed, 11/18/2009 - 10:41
#134470
It's ok. The interest is all spent on the likes of Haliburton and Lockheed. I'm sure they'll pay it back in 7inch rockets or 30mm rounds or something.
on Wed, 11/18/2009 - 13:48
#134773
Everything here makes perfect sense except the idea we're living off some interest. There is no interest. The baby boomers created a surplus in SS receipts and like any smart generation we put that into treasury bonds, right? That's the interest you're talking about, I think.
Unfortunately, Ronald Regan liked to spend money so he just spent the SSTF, which we've contniued doing ever since. Essentially the government made an interest free loan to itself out of the SSTF. So now that there is a shortfall, it comes out of tax receipts, or gets piled onto the deficit. No savings account, no interest no nothing.
When you add this to the staggering amount of other stuff going on the government's Visa card, you have to ask how can we avoid defaulting on this?
on Wed, 11/18/2009 - 17:03
#135070
The Fund owns Treasury IOUs. As far as I can determine those IOUs are as good as the publicly issued debt. They own $2.5 Trillion of these IOU's. They are the biggest holders of the total debt. So the are very far from BK.
The Fund does earn interest. About $125 billion for 2009. Big bucks. That interest is paid every June 30th. I expect that it will paid for a long time to come.
What I am concerned with is that the 08 recession has seriously weakend the Fund. The current thinking is that this is a 2025 problem. It is not. It is as soon as 2011 in my opinion.
The problem is being ignored. Shelved. It has taken a back seat to all the other urgent problems we face. In my opinion this is the biggest economic issue we face. Bigger than unemployment, CRE,RE,the banks, the Fed, the Agencies.....This one could truly eat our lunch.
The Fund produces a ton of info:
http://www.ssa.gov/OACT/ProgData/fundFAQ.html
on Fri, 11/20/2009 - 10:53
#137291
That's dumb. I can see why you are anonymous. The whole surplus spending started with LBJ when he created the "unitary budget" so he could use the Social Security surplus to hide the deficits of his "guns and butter" spending.
Rick
on Wed, 11/18/2009 - 14:26
#134833
Nice try but not quite. If you want to try to match Robo's dramatic use of graphics and maintain the distress at sea motif, I suggest Jean Louis André Théodore Géricault. The Raft of the "Medusa".
http://www.abcgallery.com/D/david/gericault4.html
on Wed, 11/18/2009 - 14:59
#134903
Bruce, we literally have the insane running the asylum. You and I have been around awhile. We have never seen such underlying stupidity and ignorance by an administration, or a group of leaders. Maybe the only way to cease this idiocy is to step aside (Atlas Shrugged) and let it self implode, only to step back in and reassemble the picces.
on Wed, 11/18/2009 - 15:13
#134930
It's all gone.
So are the private and public pensions. They all got spent to improve the "bottom line." We got 100,000 new cops to write traffic tickets and seize property out of it. New prisons, new roads to new strip malls. Etc.
It's gone, the money is flat fucking gone. Medicare is already in deficit, SS going there now means that fiscal collapse is imminent.
on Wed, 11/18/2009 - 15:22
#134948
Looks like their headin' for the Prechter coast. Many a good ship 'n crew has been lost there.
on Wed, 11/18/2009 - 15:25
#134953
All paper will burn...
on Wed, 11/18/2009 - 15:47
#134987
SS beneficiaries are going to get a nasty haircut. Its really that simple. No boomer will do anything or will be able to do anything about it either. The gov will say "sorry, were broke, you should have saved more". Classic bait and switch gov style as they were telling boomers to "spend spend spend" because it was the patriotic thing to do. Boomers should have seen this coming.
on Fri, 11/20/2009 - 12:33
#137466
I agree.....except that, like boiling a frog, they'll turn up the heat slowly. Permanent zero percent COLA . Then stepped up taxes on bennie amounts over $ 1,000/mo. Include also the end to that silly top end cap on wages exceeding $ 104k (or whatever it is now).
on Fri, 11/20/2009 - 10:06
#137233
Seems to me the greatest threat comes from rising inflation rates as the real value of most of the interest income will be diminished and the deficit worsens...
on Fri, 11/20/2009 - 11:56
#137410
Our beloved most revered Chairman and MBA better have his trigger finger hovering over the "email $500B" keypad. Not that its ever far away.
on Fri, 11/20/2009 - 12:16
#137438
Bruce,
Pick on someone your own size...
Like The Pentagon.... seen their budget? What are they living off of?
Or, are you too scared, in your red, white and blue briefs.
Love conservatives. Knock you down, then kick you while you are there.
on Fri, 11/20/2009 - 12:48
#137491
Rick nailed it. LBJ started spending the SSTF when he and the Congressional Dems combined it with general fund revenue in 1965. The guy who thinks it started with Reagan has to be a 20 or 30-something mush-for-brains who thinks history started in the '70s.
on Fri, 11/20/2009 - 15:23
#137739
vietnam war
on Fri, 11/20/2009 - 13:34
#137578
There is $20 trillion dollars sitting in private 401(k) plans, pensions, Roth IRAs, Keogh's, etc. If you are so deluded as to believe for one minute that this Socialist Marxist Nimrod regime in Washington does not fully and willfully intend to confiscate every last stinkin' penny to right the SS wrongs then you are sailing on the wrong ship. What makes you so secure in your blind belief your money or your property belong to you? That wad of paper in your hand? When the time comes...and it's coming like the waves of Medusa's raft they are going to seize your assets, your property and anything else they stake their claim to because if you haven't learned by now they do not believe, care for, respect, acknowledge or understand your rights to your property, your rights to your pursuit of happiness or your rights to your life. What did that wad of paper do in Stalin's day? Mao's? Che? Castro?
Read We the Living again and get a glimpse of your future.
on Fri, 11/20/2009 - 14:01
#137620
Info from Bruce Krasting is new. I did not know about the interest payments from Treasury to SSTF. However, they spent all the money, so the interest payments don't come from any kind of investment, they come out of taxes or add to deficits. So calling it interest is a bit disingenuous. Also when the SSTF is paid back, the benefits still have to be paid out.
I would be curious to know if the $125B is included in the "income" of SS, and if they are in deficit even with that. The pay as you go system was never going to work when the boomers retired. SS is broke, and getting "broker".
BTW: Boomers were always skeptical of SS. So we went and got a 401k and bought a house. That will probably turn into 101k and a foreclosure. But hey I still have the Jet Ski I bought on the HELOC!
on Fri, 11/20/2009 - 15:52
#137789
The fund has irregular cash flows on a month to month basis. They have run a cash deficit for the past five months but they will still have a full year surplus. 2010 will be about breakenve and 2011 will be a full year deficit.
I not believe that the economy will generate the new jobs that are necessary for the fund to dig itself out of this hole.
Yes, the interest income is accounted for as "income".
.
on Fri, 11/20/2009 - 15:36
#137762
Funny, some of us trusted the Government to do the right thing.
I have always loved the humor, in calling the SS Fund an Entitlement.
As in, it's a gift?.
If so, what happened to the several hundred thousand I,and my Employers paid in for My Golden Years.
As as supplement of course.
But, never the less, how about SENDING US all the monies we were forced (garnished) to pay, back to us as a Stimulus.
Ever other major thief on the planet has gotten something for nothing from the Gv't.
So,I really don't think it's too much to ask for at least the part WE have paid in.
Then we'll call it even.
Sound like a plan?.
They make Bernie look like a Choir Boy.
on Fri, 11/20/2009 - 19:21
#137989
The depth of ignorance on SS from the comments I just read are appalling.
FDR from the beginning designed this to be a general fund tax. Few were
supposed to live long enough to recieve it. The SS funds from the BEGINNING
went into the general fund.
on Fri, 11/20/2009 - 21:55
#138067
As payouts exceed intake, SS benefits will be euphemistically adjusted, and SS taxes will be increased in accordance with progressively declining definitions of "the rich" in order to keep the game going for as long as possible.
The government knows it can do whatever it wants with SS funds. No portions of SS contributions or interest paid thereon are contractually due to any private individuals. Even the SSA's own website admits this in its section on Fleming v. Nestor; see the last sentence in the "Background on the Case" at
http://tinyurl.com/yd5xwm3
and you'll note that the U.S. Supreme Court "established the principle that entitlement to Social Security benefits is not contractual right."
Too bad, at least for US suckerzens.
Welcome to the fact that government is a giant skimming operation: a) skim from the "right," b) skim from the "left," c) skim in the name of fairness and compassion, while d) lining one's own pockets.
In the not too distant future, those counting on the government to "do the right thing" will be given yet another lesson about the realities of political power. Too bad they're likely not to learn anything from the lesson.
As those in power understand, if God had not wanted the sheepTards to be shorn, he would not have made them sheepTards.
Post new comment