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I will go look for a job when they stop taking SS out of paychecks. I don't want anything from the government, figuring what I paid in is already a total loss and why I went into private business in 1998 and stopped paying SS completely and entirely at that time (very creative accounting).
I'm 56 and have friends who are roughly my age thinking their pensions (teachers and such) and SS are safe. I find it hard to decide whether to laugh at them or cry for them.
They're screwed. Me? I'm screwed too, but at least I know it and have been preparing for it. (greasing my anus as I type - not an easy trick)
The trust fund does not increase the government's ability to pay SS benefits.
Treasury securities will have to be redeemed, which means either higher taxes, lower spending, or borrowing from the public.
Option 3 is the most likely, so that intragovernmental debt (the loan between the Treasury and the Social Security trust fund) transforms into debt held by the public.
Interestingly, total debt does not change.
But instead of the loan interest being paid by issuing more debt, interest on debt held by the public must be paid in cash - a current budget expense.
The trust fund simply is an accounting function, which provides the total "draw" eligible to pay beneficiaries from the Treasury.
Paying from the SS trust fund is no different than any other entitlement program, such as food stamps.
Benefits are paid either by general revenues in the case of food stamps, or redeeming Treasury securities, which are paid by borrowing from the public.
Both entitlements involve taxpayer expense.
It makes little difference whether Treasury securities are redeemed or general revenues are spent.
You're absolutely right. Social Security is a pay as you go system, which never in fact saved anything for all those decades it was running surpluses.
When Social Security collects its trust fund interest in cash, as it's now doing in part, that just means the Federal Government has to raise that money by borrowing it from somebody else. It adds to the consolidated deficit.
That's why the only true measure of Social Security's financial position is its income *excluding trust fund interest* minus outlays. Those numbers aren't published monthly, only annually. The trust fund accounting function happens to be the best evidence published on a monthly basis for estimating Social Security's true financial position.
It is simple, when the gubimint can't pay the full amount of benefits anymore, they will cut benefits. It will be a kind of default. This article points out that is most likely just a couple of years away.
You can roughly gauge how Social Security finances are doing month to month by looking at the Treasury MTS statements, Table 6, schedule D. These tell you the amount of Treasuries purchased by the individual off-budget funds, in comparison to the same period of the previous year. Through August, the first 11 months of FY10, the Social Security trust fund bought $41b fewer Treasuries than in the same period of FY09. The Federal Disability trust fund bought $11b fewer Treasuries. Add those, multiply by 12/11 and you get a rough deterioration of $57 billion in FY10 vs FY09, when the combined funds ran a surplus of $3.5 billion.
So we should expect a combined deficit for Social Security and Disability in the $50b-$55b range in FY10. That compares to a forecast deficit of $41b and a "high cost scenario" $46b deficit. Those are deficits in terms of income excluding trust fund interest minus outlays.
That's a pretty big miss, but not as big of a miss as 2009, when the forecast called for a $19b surplus.
All of that income going to the top earners in this country has ZERO social security deductions being withheld. A hedge fund manager making a $1 billion per year pays the SAME amount as a guy making $106,000. (Of course we also let the hedge fund manager pay a rediculously low income tax as well!)
We may not be able to quickly turn around the employment picture, but we could quickly raise the income cap and keep SS in black.
But our government will not do this. It's not what the rich folk want, and it's not what they pay politicians to do.
Yep, would instantly solve the funding issue. Conceptually I'm actually fine with the social safety net in general as long as it is funded appropriately. I think the issue is mainly in the delivery of the services, needs to be more end-user driven as far as the decisions with what to do with that safety net. This isn't politically feasible though due to the entrenched sausage-making.
"Conceptually I'm actually fine with the social safety net in general as long as it is funded appropriately." Me too. But what our bankster friend Mr. Krasting fails to point out is that his class sytematically robbed Social Security over the years to fund tax cuts, wars, and rich guy giveaway programs for years. Now that the bill has come due, heaven forbid that the banksters pay their fair share. I'd have much less of a quibble with Medicare, which is in far, far worse shape. But bankster scum like Mr. Krasting are constantly on the lookout to screw over the middle class yet again. I'm sure he was 1st in line to suggest privatizing SS would be fantastic. I'm too lazy to do a Google search. Maybe someone else will Google Krasting/privatize Social Security.
I am a retired bankster. I did everything I could to beat the crap out my competition. But I never took nickles from small guys. Retail was not my thing.
As for screwing the middle class read this:
My proposal was to sock the rich so your middle class would not be hit. Read the last line. If this was a reality it would have come out of my pocket.
Go google that. Loser.
This plan cannot work at all because of one rather obvious oversight. People with incomes greater than $384,000/yr are already not receiving any SS payments. In fact if my father earns more than about $14,000 per year, then it starts reducing his SS payments.
Perhaps you meant more than $384,000 in net worth or in liquid assets.
Why? Why would we even bother to do this. It's just more kicking the can down the road, and only to benefit seniors now. It fucks the rest of us who still have to work for a living at jobs those "rich folk" help create.
Somebody is going to get hosed. My age group is already getting shafted no matter what... we're not going to stand for more shafting to save the boomers from getting any shafting at all.
Lots of unemployed old guys going down to file ASAP instead of working a few more years and taking the "bigger" payout. So there is a double whammy causing that 2010 reversal. You got baby boomers standing in line to sign up for SSC because there isn't enough infrastructure to handle them. At the same time many in the line wouldn't have been there if there was a job.
This. Everyone I know in that age range in throwing in for anything they can get their hands on ... pensions, SS, anything. They're deathly afraid that they'll get nothing.
You nailed it, bugs. Just another form of UI for those 62 or better and jobless. Age discrimination is ubiquitous and blatant.
Great article Bruce - one slight correction, the Amish can opt out - http://dailyreckoning.com/opt-out-of-social-security/
Just like they can opt out of Obama(non)Care - http://www.watertowndailytimes.com/article/20100109/NEWS02/301099964#
Thank God we have a magic printing press
Logan's Run, bitchez!
As long as we get the wrecked congress as well. It would be worth it.
Well done, Bruce. The delta tells it all. Negative cash flow is a bitch with bells on, and none of the projections shows any improvement. A return to normal interest rates increases payments dramaticly. How much interest does the bogus trust fund actually earn? Uh, that would be zero.
Actually it is a boatload. $120b this year alone. But it is never really "paid for". We just issue more bonds to cover the interest.
Think of this as using a HELOC to pay interest on a house with total debt 40% higher than asset value. We know what happened to that story. You can buy all the HELOCs you want at 3 cents on the dollar........
I've never been impressed with the left pocket/right pocket nature of government accounting.
Let's see now. I could loan myself $100 million, and charge myself 6% interest. That means my interest income is $6 million/year. But for individuals and corporations, that would be fraud. Why is Uncle Sugar different?
When the trust fund is actually invested in stocks and private sector bonds, the cash flow will be real, but then again, when hell freezes over...
Social Security is a Ponzi scheme. The government takes social security taxes from us workers and then gives some of our money to people over 65 and spends the rest. The day the government stopped taking money from workers for social security would be the same day that senior citizens stopped receiving social security. Therefore, social security is a Ponzi scheme.
So what happened to all that money the government took from those workers over their entire careers before they retired? Well, I just explained that. It’s gone. The government already spent it. Social Security is a Ponzi scheme.
Instead of paying social security from all that money the government took from those workers over their entire careers before they retired, it just spends their money and then pays them with money it takes from future workers. Like I said, social security is a Ponzi scheme.
Some apologists for the government quibble that the government doesn’t take our money from the social security “trust fund” and spend it but that it actually borrows the money from the social security trust fund and spends it. The social security trust fund thus invested that money by loaning it to the government, like buying government bonds, which is literally true, but do you see the lie? Suppose the government ever decided at some time in the future to pay back any of that SS money it collected and spent years before. Where would the government get that money from? FROM FUTURE TAX PAYERS! Like I said, social security is a Ponzi scheme.
Obviously, and for all practical purposes, there is no social security trust fund, and those politicians who refer to a social security “trust fund” are either ignorant or lying.
Social security is not just a Ponzi scheme because the government took all those SS taxes over the entire careers of all those workers, spent it, and then paid them SS from taxes taken from future workers. Social Security is a Ponzi scheme for so many more reasons.
Workers and their employers each paid half of a 2% SS tax in 1937; whereas, in 1990 workers and their employers each paid half of an SS tax of 15.3%!
In 1937, only the first $3,000 of a worker's income would be taxed by by the SS, but in 1990, the SS would tax the first $51,300! (Today it is $106,800!)
People started paying SS in January 1937 and started receiving government checks not 40 years later, not 20 years later, but only 3 years later!
Likewise, workers today can start receiving SS checks at 65 as long as their entire career consisted of at least 2 years! Ida May Fuller, the recipient of the first SS check, worked a total of two years, paid a total of $24.75 in SS taxes, and collected $22,888.92!
Life expectancy for men was 58 in 1937 and 71.8 in 1990; whereas, workers started receiving government checks at 65, and in 1990, that age was – still 65!
Since 1990, the SS tax hasn’t increased and is still 15.3% ... so ... what happened after 1990 that could explain politicians’ reluctance to expand this Ponzi scheme?
Today, if the government tried to raise this tax, everyone would know about it before it happened, and not only would all of those politicians lose their prospects for reelection – some (perhaps many) would lose their lives!
This year the SS administration did not publish its annual report on April 1st because it suddenly has a deficit and it is at least 41 billion dollars. Of course, the media barely covered this story because it might have lead to questions like this one, “Why can’t the government just get the 41 billion from the trillions of dollars in the SS trust fund?” Yoda would say, “Mmmm. How embarrassing! Master Obama lost a whole 8 trillion dollars.”
Social security is not just a Ponzi scheme. Social security is also fascist, which is not too surprising considering that fascism was the dominant philosophy in every industrialized country back in the 30’s. Consider that no one is allowed to opt out. That’s fascist. Consider that the government had no Constitutional authority to implement social security in the first place. That’s fascist.
Fascism is the opposite of freedom (individualism), and now that we know the reality of social security, we are closer to having freedom again some day.
Freedom is the promise of reality.
"People started paying SS in January 1937 and started receiving government checks not 40 years later, not 20 years later, but only 3 years later!"
Correct me if I am wrong but isn't the electoral cycle 4 years?
They couldn't wait 10 electoral cycles to get the votes of appreciation they wanted... Nothing changed there in 70 years.
The neat trick is Social Security takes in cash, your tax dollars, and the treasury deposits UST bonds (IOU's) into the SS fund. While the cash goes into the general spending pot.
Happy talky talk-en happy talk, Talk about all the things you do.
Gotta have a dream, if you don't have a dream, how oh how can that dream come true--.
Lyrics of a broadway tune from a can't remember Broadway musical of the late 50's early 60's.
Damn the torpedo's-full steam ahead!! Milestones
Flower Drum Song... and yeh, we'll be owned by the Chinks, too!
90 billion dollar deficit in 2016--why that's more than Bill Gates' net worth. I can see why it's a crisis.
$90bn might not be very much once Bernanke's finished with the Dollar...
PS: How much will Washington collect in taxes over that same period; and, what portion of those gross taxes will actually be paid to provide negligible support for your grandparents, your parents, and yourself?
You would have to deduct the value of the seignorage on all the "world reserve currency" dollars that the US printed during this period. Pax Americana was partially financed by this seignorage.
Yes, at all costs we must make sure everyone works until the day they drop dead on the job.
Can you do the same exercise for our commitment to defending South Korea since 1950? I would like to know how much we received in tax receipts from the people of South Korea, Europe, Japan, etc. versus how much we paid out on defending them.
Exactly. All us working stiffs who've contributed for years can go FO, but we'd better satisfy our Chinese bondholder overlords.
I just want what I have paid in since 1973 back at 8% interest. And I want it now, like yesterday. Am I being unreasonable here?
I hate to say it, but... maybe, considering that the money you paid was essentially already spent on something else.
Come on, everyone knew what the real deal was, or at least figured it out at some point. It's been known since well before I was even born - and what did anyone do about it?
You expect an 8% annual rate of return? You sound like the economists who run most pension funds. The main reason SS is in trouble is because people in aggregate are receiving benefits over their retirement lifetime that far exceed the amount that they paid in. The "fix" to SS would be to make it a pay-as-you-go program where benefits would adjust every year to match the amount of money coming in.
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