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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.
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Did you like your "free" k-12 education? Any idea who paid for it and why? I leave it to you to fill in the dots.
The payees have every right to expect pay back.
They can expect what they want to, but the Supreme Court has been pretty clear that FICA is a tax, and is unrelated to the future payback. You have no entitlement to any SS payment. You get what the Congress choses to give you. (Nestor 1960)
Still waiting for a congressman to step up to the plate. I believe congressmen can be recalled. You're outnumbered, and thus don't expect a political solution to this.
Borrow me a billion, I'll promise to pay it back. You can even garnish my paycheck for the next 50 million years if I don't.
A billion? They're borrowing trillions right now to pay for lots of things. They're going to try and juice you as much as possible.
Bruce, I have to admire your guarded optimism that an acceptable solution can be worked out to provide a minimal pension to those most in need.
I have to note (less optimistically) that I see the problem your pointing at - when the ponzi pension scheme reaches ~ 7% of (nominal 2010) GDP in 2017.
Although I have never had faith in the SS system to provide much more that a utility bill when I "retire", having been self-employed most of my working life I am much less wiling to take a hair cut on my benefit payout and it pisses me off that the money has been part of the general fund spending. The idea that [any] government can say that it is/can/will be responsible for the american working person's retirement and then being so irresponsible as to spend it all is the ultimate indictment of the folly of collectivist b.s.
We should bring back the early definition of liberal - where a liberal believed in maximum liberty and minimal government.
I say again that the funds are flowing in every day. They are clearly earmarked and not mixed up into some general tax slush fund.
You can't possibly be that naive, Bicycle Repairman. What in God's name do you mean by "clearly earmarked"? They take your tax money, they spend it, they replace it with an IOU in some fictitious "lock box". Geez, do you give money to the son of the President of Nigeria too?
BR is a total rabble rouser. Court precedent clearly stated that fica payments were just another tax, not a contribution to any type of insurance or retirement fund. Stop believing the language of insurance or retirement and look at the governments lawyers approach to what the "contributions" really were, nothing more than another tax.
Spent, gone, no more, empty trust fund. Seeya.
Bikeman, Yes the money comes in as you describe. From 1983-2009 there were surpluses. So the money went right back out the door to the general treasury, where it was spent. All of it. Every penny. Not a cent left. A few trillion of "savings" was spent. Not some rounding error. Can we afford to pay this back to the Trust Fund given everything else that is going on today? I don't think so.
Did it go into a slush fund? It was a funding source for the deficits of the past 25 years or so. Does that constitute a slush fund? Maybe.
Hey wait a minute, I distinctly remember Al Gore on Tv. showing us a lock box with IOU's worth billions. I'm sure we can just take them out of the box and spend them now on SS as we need them, right?
As good as gold, backed by the full faith.
What is going on today is bombs, bombs, bombs.
"Can we afford to pay this back to the Trust Fund given everything else that is going on today?"
We're going to do a lot less of those things.
As far as the funds being spent goes, treasuries get issued and the money gets spent. The US is still on the hook for those. It comes out of future earnings. Same thing here. Don't bother mentioning that the SS IOUs are not marketable. A promise to pay is a promise to pay.
Tricycle repair --- Since you clearly believe this drivel - you are a tool. Or a govt stooge. Wake up and smell the coffee.
I'm neither. I suppose you're a product of the American school system?
"A promise to pay is a promise to pay."
You're kidding, right?
Nope. If you want to renege, I may have you talk to the IRS. How's that sound?
It's not me you should worry about, it's the intermediary in this transaction.
No, it's not coming out of future earnings. It's going to be defaulted on, because the amount promised exceeds future earnings. A promise to pay is NOT a promise to pay. My promise to pay is credible. Wimpy's promise to pay you Tuesday is not.
Keeping promises is a cornerstone of civilization. Want your children educated? You'll still need my help. I'd like to stop paying property taxes right now.
Deal?
You really are an idiot. I can promise to pay you $1 billion, but that doesn't mean anything if I don't have $1 billion. But according to you, if I promise to pay you $1 billion, then by golly I've just got to keep that promise.
Whoever said any kind of Government was civilized?
Do not confuse morality with reality. You will always be disappointed.
I'm not confused and this has nothing to do with government, per se. It's about keeping promises. Cultures that do succeed. Those that don't, don't.
America is in deep trouble.
Two words: Death Panels!
Undoubtedy this is a policy cornerstone.
"There is a pretty serious debate going on in Washington about what to do with SS."
All the government has to do is pay back (with interest) what was put in. Need cuts? Everything else comes first. Simple, no?
I'm going to puke if I hear "Entitlement Program" again. Give me the damn money I put in with interest and then write my name off the damn list.
Fat chance.
BTFD
That's the spirit. SS is not an "entitlement program". It is an old age insurance program and you can look that up. 15% of your pay has been deducted since your very first job. The government wants to renege? I don't think so.
It became an entitlement program the moment the idiotic citizens opted to KEEP the politicians in after they turned it into a ponzi scheme.
As far as I am concerned, those who put money in and kept the status quo deserve to lose their $$ for not thinking or caring about the situation.
Hell, I would give up all claims to my SSA if I could stop funding it with my hard earned money starting today. They can keep what I put in, just stop deducting $$ from my checks and we'll call it even.
Really wish you fool's would actually look up the differences of the programs. SSI is the welfare program. SSDI is the one for people that become disabled while working. SSA is the actual retirement program.
Who is the trifling, anal fool here?
That's a good one!
A serious debate in Washington?!? Stop! You're killing me.
These are the same clowns terrified to deal with reality if it means being the messenger of bad news who are arguing about whether to cut 1% or 2% or our massive, unsustainable deficit spending.
They're pathetic jokes with very few exceptions.
SSI???
I'll never see a nickle of that money. Save your cabbage now folks, 'cause Uncle Stosh embezzled your retirement kitty to use on other "things".
SSI is not SSA.
The treasuries allocated to SSA future payments have
already been issued and accounted for in the national
debt #.
We don't need any hysteria about funding SSA.
We need to end the US war machine.
WE need to eliminate the earnings cap for FICA.
It's very simple; stop spending on bombs and start
spending on people.
Someone may have already answered this, but there are no treasuries allocated to SSA future payments. What SSA has are non-marketable securities also known as IOU's. The only way to cash in the IOU's is for the government to issue new treasuries. Have you ever seen the movie "Dumb and Dumber"? The SSA trust fund is like the suitcase when Harry and Lloyd get through with it.
http://www.youtube.com/watch?v=7GSXbgfKFWg
Even if you cut all the war spending AND end the caps on FICA, there is not enough money to fund the promised entitlements. They need to be cut, and they will be cut, whether we like it or not.
Also cut the $Trillions for the BANKSTERS.
I see you represent yourself as BUSH III (O'BAMA).
The actuaries disagree with you.
Read the SSA trustee reports.
Just getting rid of the FICA cap would fund
SSA and MEDICARE forever.
It hasn't been embezzled. Earmarked funds flow in every day. Check your paystub. It's right there. The people need to make sure the earmarked funds get directed to the rightful recipients.
Really genius? The only thing in the "lock-box" are promises to repay with future tax receipts. This is the largest fraud in history and you seem to think everything is peachy. I have paid in to this continuing fraud for thirty four years, and no, I will never see one dime. The PTB will find a way to screw me out of every penny, either through defaulting on the program entirely, or by keeping payouts the same while the dollar goes Zimbabwe.
But I guess you can't cipher that out.....since you're a bicycle repairman.
Psst. Don't spread this around, but I'm not really bicycle repairman. I only play one on ZH. Mum's the word.
There are no "rightful recipients." The people drawing SS (in the aggregate) never put enough money into the kitty to cover what they're withdrawing. They are parasites on the backs of working people.
This entitlement has to end. The sooner the better.
They are parasites on the backs of working people.
Really, people that have worked and paid into SS their entire lives are now parasites?
Look asshole, if you want to end this "entitlement" it's fine with me. Just be sure to refund everyone's contributions, plus interest!
SSI is not the retirement fund. That would be SSA.