This page has been archived and commenting is disabled.
Social Security hits 60
Social Security had its 75th birthday last year. A more important event
will take place in April of 2011. That will be the first month that
Social Security benefit payments hit $60 billion. Think of that.
$60b a month is one hell of a lot of money. This payout (annualized) is
approximately equal to the entire GDP of the Netherlands, Turkey or
Indonesia. It is 50% higher than the entire economy of Switzerland.
SS first hit the $50 billion mark in December of 2007. It took 42 months
to add another $10b to the monthly payout. The next ten billion will
come more quickly. The “base case” assumption by the Social Security
Trust Fund puts that at October of 2013 (31 months). Their more
pessimistic or “high cost” estimate suggests we could hit the $70b mark
as early as March of 2012 (23 months).
Of course this never stops rising. The SSTF expects that the $100
billion a month level will be reached in 2019 (base case) and as early
as 2017 should the ‘high cost’ scenario play out.
Things really look bad for SS when you consider the revenue numbers from
payroll taxes. This chart tracks past and projected pay roll tax
revenue versus benefits (based on the Trust Fund's Base Case)
The High Cost analysis is even worse. For what it is worth, I see almost
no chance that the ‘high cost’ will be achieved. It’s going to be even
worse than this:
The 2011 - 2019 projected cumulative shortfalls between payroll taxes and benefits are as follows:
Base Case Deficit…..411 billion
High Cost Deficit…..972 billion
There is a pretty serious debate going on in Washington about what to do with SS. At 6% of GDP and 20% of the budget SS has to come on the table. There are many in this discussion that hold to the belief that SS can’t be touched.
If the budget deficit
outside of SS was at 3% and the medium-term outlook was for sold GDP
growth (with low inflation) the USA could possibly afford the economic
cost that SS is about the bring to bear. But sadly, that is not the situation we are looking at. Outside of SS, the country will produce deficits of 10% of GDP and will require Trillions of new debt annually.
It is important to remember that every dollar of deficits at SS requires
a dollar of additional debt to be held by the public. The defenders of
SS keep looking at something called a Trust Fund that was supposed to
“pay” for all of the SS red ink. But the defenders fail to understand
that drawing down the Trust Fund just means that we go deeper in the
hole on Debt Held by Public.
The Paul Krugmans and Dean Bakers of this debate have held to the
position that the amount of debt the country issues on an annual basis
is not a metric to seriously consider. They think that the funding
deficit resulting from the real economy and at Social Security doesn’t matter.
I think they are wrong. If we wait 2 or 3 more years to wake up to the realities of funding SS, the cost of addressing the problem will be significantly higher. Failure
to take this beast on today will probably result in substantial cuts in
payouts for all beneficiaries in the not too distant future. That would be the worst possible outcome for the Krugmans and Bakers. For the life of me I can’t understand why these guys don’t see what's coming. The history books may well say that the staunchest defenders of SS were responsible for it’s demise.
»
- advertisements -
These comments are dominated by the Bike repair guy. I think he follows me and when I post on SS he comes out of the woodwork with an endless series of threats and garbage.
I'm happy to have dissenting views in the comments. That's what this is about. But the number and tenor of these responses is over the top.
There is nothing in the picture today that can't be changed. There is nothing that should be excluded as an option. Nothing is off the table. Especially entitlements.
Sorry bike boy, SS has to change. Just like everything else. Get with the program.
Is it possible for a poster who hits more than 50 junks through out the thread be deleted? While I came to this thread late in the day, it was one of the most tiresome series of comments I've read in a while. It was like listening to an argument with a 4 year old. Doesn't matter what the parent says, kid will argue because...
Made it to the end of the thread out of morbid fascination with what Bycicle Repairman might pull out of his rear next. Wow, a real tour de force in unimaginative juvenile wishfull ranting. Please, if a poster hits 50 junks in a thread, PULL THE PLUG!!!
Socialist Insecurity?
While the SS situation is worth thinking about, I for one think that SS is not so bad in its present condition. It is the main government program in which government (tax) money actually goes to normal people, instead of being embezzled by the military-industrial complex, the medical-industrial complex, the education-industrial complex, the bankster-industrial complex, the public employee unions, and all the other scams. Maybe we should consider that the reason SS is under fire today is partially because all the other scams WANT THAT MONEY instead of grandma down the street getting her $14,000/year check.
Medicare and other healthcare is the entitlement that needs to be dealt with. Plus the military, bankster theft, and all the rest.
You hit the nail on the head. The very idea of money going to ordinary people is getting to be anathama in this country. They are just sheep to be fleeced.
Caution! Republican Workzone
"Social Security Turns 60" .....should have had a colonoscopy 10 years ago....now it's too late..."no shit"..."it will all work itself out in the end." I hope everything "comes out, allright." Oh what a "pain in the ass." This isn't going to "end" well,..."butt" maybe congress can squeeze some savings out the back end! (pundit ended)!
That's right, I'm here all week folks...two drink minimum, don't forget to tip your waitress....
Yep, just get rid of all ss pay outs right away, Granny can suck on a gas pipe and be done with, the 14% ss payroll tax still be taken from your paycheck our military still got some countries to bomb.
Since many people believe that the accounting standards that the Banking industry follows are a complete fraud, why don't we just make the US government comply with the much stricter (yet still full of crap) private sector standards? Then we at least have a common baseline from which to gauge the theft across the board.
Pretty sure anyone who wants to can withdraw from SS. If youre young, it would be the smart choice. The Amish withdraw. Just fill out the forms.
Correction...you might haveto convert or start your own...In 1961, the United States Internal Revenue Service announced that since the Amish refuse Social Security benefits and have a religious objection to insurance, they need not pay these taxes. In 1965, this policy was codified into law. As a result of many Amish not paying Social Security taxes, people often falsely believe Amish don't pay any taxes. In general, Amish pay all applicable taxes.
One of the arguments used against government run Social Security is that it's a Ponzi scheme. This is often the case made by banker funded hit men such as those from the Peterson Foundation. However, the same hit men wholeheartedly support the idea of "investing for retirement" by means of Wall Street institutions as if fee and asset bubble generating private investment is not a Ponzi scheme?
All forms of investments are Ponzi schemes: fund distributions have to come from future investors. If advocates of gutting Social Security insist that the fund is nothing more than a Ponzi scheme, all Wall Street activity needs to stop because it is nothing but fraud.
I'm at the tail end of the Boomers. What I and my siblings have paid into Social Security has already been paid out to our parents and grandparents. I never really thought there would be anything for me to "collect". But I also never thought my 401k would be gutted in 2008...give generously to the old bag lady on the street. That most likely will be me.
It seems pointless to argue whether or not SS, pensions or any "entitlement" or other promise to pay is honored. When the only way the .gov can "honor" it is with ever more worthless FRNs.
Hell, they can even give the blue hairs a COLA, but when the $ is being devalued faster than official inflation, they're still losing.
But as an old lady used to always say to me when I was a kid, "Such is life."
SS is not an entitlement. You can stick that meme where the sun don't shine.
Just because you keep repeating this doesn't make it true.
The Supreme Court unequivocally established in Flemming v. Nestor the principle that entitlement to Social Security benefits is not a contractual right.
Social Security is a government program like any other.
It can be taken from you at the whim of the politicians.
And don't follow by saying, "What politician would ever do that?" They won't pull benefits for everyone. They'll pull benefits for people who hold ideas that the majority finds unpopular. They'll be called "enemies of the people" or "domestic terrorists".
People will cheer for it to be done.
"People will cheer for it to be done."
We'll just have to wait and see. But understand the media has filled your head with the idea that this will be a walk over without serious repercussions. They know better and in time, so will you.
AS I SEE IT WELL PARTNER
.
the boomers let the .gov sell them gift certifiates at the US Treasury... so on the basis of those certificates they are owned... but being as they have run the damn world for 30yrs i dont think they should be using the likes of obamacare to tax TODAYS 14YROLDS fees these financial BONERS never dreamed THEY would be responcible for
.
if you want your medicare and SS and you are owed-great just dont sell your grandkids out... see they are now ALIVE IN THIS WORLD its not some 'future generation' thats going to pay off your debt for medicare... the government allowed itself to owe the elderly SS bonds and medicare for votes
.
PAY or everyone might realize the .gov is a buncha' overpaperd thieving liars... mite even start the healing process, undermine the globalists, get us weend off wars for oil, and allow the kids to have some fucking dignity
Walter Williams recently offered to forego his claim to collect Social Security in exchange for 100 acres of public land...
I'll take 40 acres and a mule. Plus the interest I'm owed since the "war between the states".
But seriously, you make a great point. A sale of federal assets. Not to the oligarchs, like they are trying to arrange in Wisconsin, but to the people. Give me a piece of a toll road, and we're square. Let's do this IMF-style. I'm sure the boys in DC know how that works.
My solution is that the federal government totals up all of the contributions plus interest, pays out and closes SS.
Payment to be made in fiat, gold or silver. The recipient choses.
Gold for me, thanks.
Just to put into perspective how important SS is for the U.S.: Nearly 30% of American's aged 55 to 65 have no formal retirement savings (i.e. no 401(k), no IRAs, no defined benefit plans, etc), and 50% of this same cohort have less than 1 year of earnings saved for retirement (Fed data). Their other savings (a.k.a., the equity in there home) has likely been wiped out or seriously impaired, and continues to fall. All these people have is SS.
Someone needs to think past the next election and comeup with a sustainable solution to support SS, or phase it out. As it currently stands, anyone born in the 70's or later (+/- 10 years) shouldn't expect to recieve any substantial benefit from SS (but should expect to pay into the "pot" there whole working life).
My guess is, until SS becomes a "crisis", nobody will touch it.
A lot of the boomers (me too) will live to see it die.
Your private pension and insurance or annuity will
die FIRST.
These things already died. I hope you are aware of that. The FED has them on life support. The prognosis is very unclear.
Keep thinking like that and you'll let them kill it.
Thanks Bruce - what is the relative additional impact of federal pensions that is impacted by the rapidly increases federal payroll costs? I believe this money trough is another nail in the coffin. Really appreciate your posts.
I focus on SS because it is the biggest and they publish a ton of information that nuts like me can look at.
There is very limited information on FERS. They have an annual report, but it does not have the detail that SS has.
I wrote about FERS last year. It's another disaster. It is running right down the same track as SS. They have a Trust Fund and Special Issue Treasury securities. And they run a deficit. The link to the article:
http://brucekrasting.blogspot.com/2010/10/in-your-face-entitlement-fers....
Thanks Bruce - I do remember that. It is smaller, but definitely another problem - more promises that can't be kept.
It's going to be hard to reform SS and not touch Federal or State pensions, both which are in as bad of shape as SS.
I'm afraid the ideologically driven Republicans are going to waste valuable political capital trying to destroy SS while achieving nothing and will end up alienating their voter base.
I'm for reform-maybe taxing SS and/or means testing. The SS system needs to adjusted, not be scrapped. Increasing the retirement age past 67 will be fruitless. No company wants employees past 60.
On a personal level, I’m much more worried about another unregulated, international financial blowout taking down the US sovereign long before SS collapses. Banksters are a bigger worry than boomers.
Congratulations. You beat me to the punch on this one. Government pensions are never part of this discussion. Not that they should be cut, either.
So the Argument lately is: Is this (A) an "insurance plan" that we all have to pay into and may not need to collect from
or (B) as sold to me, "You are too irresponsible to save for your own retirement, so we'll do it for you." I've been getting statements for years telling me what my benefits will be.
Any takers on this?
For the baby boomers the insurance plan is the option. If you're 30 something it is idiotic to pay into this knowing you're going to get screwed. It won't work.
But if the cuts hit the boomers, those that are 30 could contribute knowing that the demographics (post the boomers) actually work.
It's the boomers that done this. It's their job to fix.
I am a boomer. I hate to see this fuck up. I would give up my benefits (means test) to see that the next generation or two does not get screwed (again).
Rely on a bankrupt insurance company, sure.
As a boomer too (55) I would have gladly given up my benefits, option out (until I hit 50), as long as I would not have to pay in any more. I think that can still be a part of the solution for some age groups. However, once they have screwed me out of nearly 40 years of taxes I no longer give them that option. I earned it and then some now!
You should get back the fair actuarial value of your contributions (including reasonable interest) but no more than this. SS Beneficiaries are akin to pensioners, taking out in benefits several times what they have contributed. It's not just.
As long as the payment is in gold or silver, DONE!
And then you can close SS down, since it is obvious that our government is completely corrupt and no one knows what a social contract is.
Have you seen any of the reports issued by the SS actuary? The retirement fund is expected to be OK. Yes, there are other scenarios. Then after the baby boomers downsize into coffins, shortly thereafter things are definitely OK again.
And the boomers did not wreck anything. Who do you think paid for the trust fund build up? Who do you think paid the property taxes that provided a gilt-edged (relative to the boomers) pubic education experience for the "Reagan babies"? Do you think that the boomers did that out of the goodness their hearts? The point was to get the "Reagan babies" ready to earn and contribute.
I don't have the slighest intention of giving up any of my benefits. Any politician implementing a means test will be recalled. They know that.
The boomers' failed to reign in congressional spending and raiding of the SS trust fund. It's their fault and they should be the ones to pay the price, not the Gen X and Gen Y-ers.
You might consider improving your command of the english language - one 'reins' in a horse while riding to the castle over which the King 'reigns'.
Education first, cognizant post second.
Idiot.
LOL. You really must be joking. The biggest deficits are being incurred right now. Are you of voting age? Maybe you have a strategy for cutting spending right now. Let's hear it.
It is an insurance plan. The only reason you won't collect is if you die. Otherwise the full benefit is yours as a result of premiums paid.
Think of it as a hedge. You saved, but the stock market screwed you. Or interest rates were kept too low for too long. Or you were banking on the value of your house, but its value got cut in half. Never fear, you've got old age insurance that you've paid for.
Read your SS Statement:
An insurance policy is a binding, written, contractual agreement between two parties, entered into voluntarily .
SS is nothing of the sort.
Contracts are binding, yes.
When the insurance co. goes bust, try
collecting.
PRIVATE ANNUITY anyone? FORGET IT !
It is has been sold an insurance program. Check all of the literature. I understand that congress does reserve the right to make changes. Name me the congressman who will implement the changes. If you think this can be settled politically, you haven't been watching the goings on in Wisconsin. As I said before, old people vote and have plenty of time to agitate. In order to end SS, you'll have to end the republic.
You forgot to mention that even a binding contract written by an insurance company is subject to the condition that it is solvent when you make your claim. If the premiums are too low, and the company didn't collect enough to make the payout, you don't get the full payout. Capisce?
+1. It worked okay for AIG because the FED paid the bills. Who will pay the Treasury's bills? The FED or Santa Claus? It is popular to believe the FED as santa, but there is no such thing! The FEDs interests are different than the treasury, though sometimes they align. I dont expect the FEDs interest will align with the treasury when they are asking for >$1T.
I have an idea. Why doesn't the Treasury just issue special purpose SS bonds which the Fed can simply buy. In the same manner that they spend $1.5 trillion buying 'valuable' MBS paper from the banks during QEI to save bankers from living in the poor house during their retirement.
Precisely this idea has been raised. Let the Fed buy the Special issue bonds and just print the money to cash the monthly benefit checks.
The lights would go out in less than two years. You are talking 800b of QE a year (and rising) every year. An egg would cost $50, a loaf of bread $100. the average electric bill $2000 a month.
Those that were on SS when this happens would just curl up and die.
It is the nuclear option however......
Take the $Trillions from the old and disabled.
Or take the $Trillions away from the PENTAGON
and OLIGARCHS.
If BUSH II could not kill SSA, BUSH III (OBAMA)
will not kill SSA.