that the SS program can be stabilized without significant and prompt
action to address the underlying imbalances. Failure to deal with the
problem in a timely way will result in a systemic problem for the US
economy in less than ten years.
While there are a number of proposals to address the imbalances, there
really are only two possible out comes. Either the 60-70% of the baby
boomer population who are highly dependent of SS are going to have the
benefits cuts, or younger workers are going to have to dig into their
pocket to pay for the Boomers for the next 30 years.
Bottom line; either a significant portion of seniors are going to be eating cat food, or the next few generations are going to be paying (unfairly) through the nose.
I have not written one of these critical pieces without getting a bunch
of complaints from the big guns who support SS (as it is) and maintain
that what I am saying is just bunk. They are wrong, I’ve been right all along.
Charles Blahous, the Public Trustee for the SS Trust Fund gave testimony (Link) to the House Ways and Means Committee on Friday. I think he laid it on the line rather nicely.
The 2011 Trustees’ report is the first in which Public Trustees have ever participated to have concluded that an era of permanent annual deficits has been reached.
This is important. It’s all you need to know. SS has turned a corner. It
is headed south. It will continue to head south as far as the broader
economy is concerned for the next 75 years (actually SS is in perpetual deficit).
Social
Security expenditures exceeded the program’s non-interest income in 2010
for the first time since 1983. This deficit stood at $49 billion last
year and is projected to be $46 billion in 2011.
These are not small numbers. The $100b shortfall in 2010-11 is a fairly
big burden given that the rest of the government’s finances are in such a
hole. Blahous said something that may have been a “tell” as to what we are looking at in the future with these deficits:
This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
Blahous is not following the SS “script” with this comment. These are the projected deficits based on the SSTF annual report:
Note that the “projected” annual deficits remain fairly small all the
way out to 2018. So what is Blahous referring to regarding big deficits
post 2014? SS provides an alternate forecast that they call the
“High-Cost” analysis. This chart looks at the two forecasts together.
For Blahous to suggest to Congress that the deficits will be “growing rapidly”
post 2014 represents (to me) that the real thinking inside of SS is
that the actual results will be closer to the worst case scenario.
Should that be the result, the cumulative deficit at SS from 2011
through 2020 will be a very lumpy $900 billion.
My own review of the numbers says that we have little chance of achieving even the results of the high cost analysis. It is likely to be much worse than that.
The problem is that the economy is simply not producing enough jobs.
There are fewer workers contributing to the system. The SSTF is
anticipating “a strengthening economy”, I see no evidence of this today
and have no expectation for a turnaround in the jobs picture any time
over (at least) the next five years. The following graph says it all on
payrolls in America. The recession killed us. As of today the number of
workers contributing to SS is less than it was in 2000. Look at this at
you will understand the problem.
I think that Blahous made some important comments. One’s that will shut up the defenders of SS. The argument that those defenders repeatedly use is that SS does not impact the current deficit. That is flat out wrong:
Social
Security operations are currently adding to the unified federal deficit
and will add substantially more in the years to come.
The facts folks. SS is adding to the annual budget deficit ($116b in
2011). It is adding to our funding deficit (the amount we need to borrow
from the Public). That number was a manageable $49b in 2010 but it will
grow every year from now on. In less than a decade it will become
unmanageable.
Blahous spoke about the “Assets” of the SSTF. The believers in SS constantly point to the huge $2.6T surplus at SS and say: “There is plenty of money in the piggy bank. There is no need to mess with SS today”. That is not the case at all.
If we look at the bonds from the perspective of the Trust Funds, they are assets. If we look at them from the perspective of the unified federal budget, they are a net wash, as are the interest payments that they receive.
Folks, there are no Assets in the Trust Fund. There are pieces of paper
to be sure. But they are just pieces of paper. The merely represent
claims on future taxpayers.
The following words are, I think, critical to the debate on SS:
The costs that will be borne by younger generations will grow significantly each year that a new cohort of baby boomers joins the benefit rolls.
I am screaming at the top of my lungs, “How can we let this happen?”
To me, it is absolutely insane to think that the Baby Boomers (I’m one) can put the burden of SS on younger workers. This simply will not work.
The result of a policy approach that sticks everyone under 50 with the
cost of the Boomers is going to result in deep social divides. We have
enough problems in our society today. We don’t need/want Age Warfare to be added to the list. But if the plan to “fix” SS is one that sticks the bill onto young people we WILL have age warfare, it’s inevitable. The social consequences would be greater than the economic costs. Why does no one see this?
Addressing the imbalances at SS will be painful, and no one likes pain.
So the result has been that our political leaders just kick this can
down the road. I don’t think that there will be any fixes at SS until
after 2012. While an extra two years will not result in a crisis, it
will result in a higher cost of the necessary fixes. I hope all the
defenders of SS read what Blahous has said on this:
Elected officials will best serve the interests of the public if financial corrections are enacted at the earliest practicable time.
Earlier action will also afford elected officials with a greater
opportunity to minimize adverse impacts on vulnerable populations, including lower- income workers and those who are already substantially dependent on program benefits.
The big defenders of SS call themselves Liberals. Paul Krugman and Dean Baker are on top of the list. But there is nothing liberal about their position. Who is going to be most hurt by what is coming (absent changes)? The answer is clear. Older people who are 100% dependent on SS and younger workers who are on the bottom of the income scale.
The Liberals have to come to understand their dilemma. The more they put
their foot down and demand no changes to SS, the worse off will be
those that they are actually trying to help. The liberals are shooting their own constituency.
Note: On these matters I consider myself a liberal. But I
come to a completely different conclusions than those who actually call
themselves Liberals.
My position on this complicated issue:
-We can’t cut benefits across the board. Too many people would be eating cat food. That’s not American.
-We can’t put the burden of the Boomers on younger workers. It’s simply not fair. That’s not the American way either.
-The solution(s) have to be born (largely) by the Baby Boomers
themselves. Post the Boomers, SS can be a PayGo concept. But the
transition is not PayGo. It is a huge inter-generational transfer of wealth. This means that well off Boomers (there are many, including myself)
are going to have to dig into their pockets to support those in their
age group who did not fair so well. That, in my opinion, is the only
viable solution. That would be more representative of the American way. Fairness.
Eschew needless words.
Could you expound on that?
This will be solved along with Medicare and our enormous debt ...
When a dollar is worth a dime … new acronym … WADIWAD
The Boomers (I am one) will ultimately pay for their own excesses by eating less, living in less housing, and being given less health care. The young worker will be paid out in dollars and the SS recipient will be receiving dimes. Problem solved ... devalue the fixed income and the recipient has to adjust ... justice for all, the American Way
OMG this is terrible. And BTW pay no attention to the 1.2 Trillion dollar yearly unfunded Military/Security liability behind the curtain. SS is chump change compared to the Military Industrial gravy train. And for what? To chase a handful of Islamic criminals around or conquer a stone age rock pile. Fuck that. If the Corporatocracy needs an Army to protect their global investments then why don't they fucking pay for it.
You're right that the military is killing us. $680b this year alone.
SS is $720b this year. SS exenditures will rise much more rapidly than the military for the next 20 years.
Both of them have to be addressed.
When you address not having money this is where you start. The endless fucking war machine. Not what I have paid for.
Why not start saving SS by stop building nuclear powered submarines to fight the Soviet Union that has been gone for 20 years in IsraelfirstUSAlastJosephLibermanConnecticut? Let's talk about that instead of Warren Buffett's SS and 100k cutoff which really means me at half of that number.
680b is just the DOD admitted budget. The rest is buried in Homeland Security, Dept. Of Energy, NASA, etc. It all adds up to at least 1.2t and growing plus there's no trust fund for this monster. Ten years of this will about equal the entire National Debt. And we're worried that the SS trust fund might run dry in 30 years at a projected GDP growth rate of 2.1%??
you forgot to also mention that much of this spending has ABSOLUTELY NO ACCOUNTABILITY, much less transparency.
see http://projects.washingtonpost.com/top-secret-america/
on Sun, 06/05/2011 - 08:23
#1340907
680b is just the DOD admitted budget. The rest is buried in Homeland Security, Dept. Of Energy, NASA, etc. It all adds up to at least 1.2t and growing plus there's no trust fund for this monster. Ten years of this will about equal the entire National Debt. And we're worried that the SS trust fund might run dry in 30 years at a projected GDP growth rate of 2.1%??
****************************************************************
PREACH BROTHER!!! PREACH!!!
PREACH IT FROM THE MOUNTAIN TOP!!! PREACH!!!
http://goo.gl/FnxBZ Treasury Direct $14 Trillion Debt
http://goo.gl/TMl74 $15 Trillion in Loans
http://goo.gl/EXzal ='s $29T
http://research.stlouisfed.org/fred2/series/BASE 3 Years 300% More Dollars Printed Out of Thin Air!
military spending = corporate welfare program
Don't worry folks,
You are all equally, and have been bipartisanly fucked, by the elite. Have a nice day.. !
I didn't get a kiss or dinner...and now it hurts when I sit down.
The 55 million already on social security are the ones who have been riding the boomers backs. A lot of the "greatest generation" was retiring at 55 with free health care for the rest of their lives. But two wrongs wont make a right.
Repeat after me.
A Ponzi is a Ponzi is a Ponzi.
Right -- and that generation made the AARP one of the most powerful lobbying groups in the Washington--they blocked any significant SS reforms and pushed hard for Medicare.
And keep reading all of the posts of young people who don't know how to wear pants that it is all the "boomers" fault. Younger and just as stupid people are right behind them. They should prepare themselves for being blamed for this whole fucking mess.
Bruce is just wrong.
<We can’t cut benefits across the board. Too many people would be eating cat food. That’s not American.>
Oh really?
Whadda crocka chickenshit bullshit.
In light of these SS deficits being drummed up by the ruling elite...
We'll just have slap Wall Street with a 1% transaction tax... Especially on HFT and derivatives...
Add a 50% windfall year-end bonus tax on top of that...
<To me, it is absolutely insane to think that the Baby Boomers (I’m one) can put the burden of SS on younger workers. This simply will not work. The result of a policy approach that sticks everyone under 50 with the cost of the Boomers is going to result in deep social divides. We have enough problems in our society today. We don’t need/want Age Warfare to be added to the list. But if the plan to “fix” SS is one that sticks the bill onto young people we WILL have age warfare, it’s inevitable. The social consequences would be greater than the economic costs. Why does no one see this?>
Come on Bruce - this problem has been well documented for years (remember when Bush II wanted to privatize SS?) and the "solution" has always been the same as for every other difficult issue that politicians lack the courage and/or political capital to tackle - let's kick this can down the road since YBGIBG (You'll be gone, I'll be gone) when the $hit hits the fan.
And now after the GFC, where Wall Street has screwed the middle class out of their homes, their savings, their jobs, etc., you expect us peons to sacrifice even more to bail out SS???
The power elite (i.e. Wall Street banksters who run the country) will take care of this & all all of the other problems as only they know how. Fyi, its called hyperinflating the dollar so that what the boomers end up with will be devalued (aka worthless) dollars.
I'm buying physical gold to look after whatever future I might be left with - that is the only viable option at this point for anyone who truly wants "social security" in their future.
Give that guy/gal a Kruggerand! (What? No, I'm NOT gonna pay for it! LOL)
Ideologues and blamers. Neither approach will resolve the clear and present crises in social security and medicare. Bruce raises very appropriate issues. Beyond fairness, the younger productive-years generations will need to be globally competetive to an even greater degree than today. Shifting the tax burden from my generation (retired boomers) to theirs (productive workers) isn't going to help their competetive position.
The Fed will keep printing every damn dollar the politicians have promised to the people. In fact, before it all ends, there will be many, many more promises made by future politicians, which the Fed and Treasury will duly fund.
What in the world makes any of you think isn't going to happen? Fear of inflation? Hyperinflation? a debased currency? sudden remorse?
Look at what is in front of your eyes--it is impossible to misunderstand. Europe, Japan, and, yes, the U.S. will print and spend, print and spend, until the citizens demand change--which they will never do.
don't forget, though, Bruce, that for a self-employed worker, SS withholding is nearly __15%__. I'm sure LOTS of retirement fund managers, would LOVE to have that kind of steady income stream, over a worker's entire life!
Also, be careful who you call "liberal." President Woodrow Wilson was considered (by American textbooks & "establishment" historians) to be "PROGRESSIVE" - but he was a kkk SYMPATHIZING racist bigot (who TOLERATED LYNCH MOB quasi-state TERRORISM) who was in the POCKET of the VERY PRIVATE BANKING CARTEL (a rothschild's toady) when HE SIGNED the 'FEDERAL' Reserve Act in 1913.
IF you have radical right-wing Concentration of Wealth & Power Fed/bankster appartchiks RUNNING the Social Security trust fund (JP Morgan gets FIFTY CENTS of EVERY food stamp dollar!) - they can of course devise 1,001 ways to LOOT & GUT it from the inside..
If only Americans had not been so complacent when things got off track, but they were.
In reply to Sam:
, you are quoting untrue statistics: Here are some facts:
Furthermore, Social Security is an insurance program and Medicare is the national health plan. The notion that Social Security and Medicare must somehow pay for themselves is false. These programs need not to pay for themselves anymore than does defense spending, housing, veterans administration, Fed Retirements or Supplemental Child Nutrition etc. It is simply a matter of what we choose to spend our money on, in particular: war mongers or the aged.
I am supposed to believe that this is a "fact"?
By "worth", do you mean cash or assets? Should people sell stuff to get cash to hand over to the government, or would it be more efficient if the people that would buy those assets just hand it over to the government?
If the people with land and valuable assets would give 5% to the government and eliminate the middle man, how would that help the deficit unless it was exchanged for cash beforehand? Where is that cash going to come from?
Wealth confiscation in the land of fiat is more complicated than you think...
Bingo! Logic and reason meet bullshit and lies.
Great post, the cost of war is endless and heroicly supported by media saturated morons with chants of USA, USA
Its past time we set our priorities, the US spends 7 times as much as its nearest competitor China. The US makes up about 50% of all global defense spending. Half the global defense spending to protect a country of 308 million people. WTF?
Actually, it's a Tribal outpost in Palestine that's being protected. Co-incidentally, no doubt, an astonishing proportion of our banksters, plutocrats, and politicians belong to the same Tribe.
Should
If the Money collected for SS & Medicare was a Fraud. Only a tax and not toward Benefits then that Money should be returned to the people it was collected from. With Compounded rates of interest comparable to the rate of interest on an Money Market fund or the interest the IRS charges for delinquent taxes.
If the payment of SS & Medicare tax is not an entitlement then all moneys collected should be returned as they are in excess of the tax rate that was required to be paid at the time.
Basically an overpayment of taxes which needs to be refunded according to IRS standards.
This planet that you're from sounds like a dreamy place...
Instead of paying for their meds I would feed them healthy, love them and let nature take its course.
P.S. Without Social Security then younger workers will be in a position that they have to financially take care of their Parents. How much of the GDP will go from the producing young people to financially take care of their elders?
Will you let your Mother or Father eat cat food? Or, will you help to support her? Do you really want her or him living with you for the rest of their lives? What will happen to your Inheritance if Health Care eats everything they ever worked for in their entire lives? How will that effect you if they have nothing left to pass down from their life time work?
Will you pay for their medications if they cannot or will you let them die? They will know that you did not want them to live if you did not pay for their medications. Can you accept that responsibility?
What are the trade offs?
"Am I my Brother's keeper?" What's your answer?
Yeah, it's sad, but I'm in no shape to help anyone with what I've managed to keep.
If gummit cuts SS or Medicare, my parents are FUCKED on that front. In such a case, I'd do what I could to help them out, but I'm just scraping by on my own. Maybe if we pooled resources we could afford a house and have enough to eat, but no way would they be getting the medical care they currently receive.
These are only trade-offs for the working class, though. 0.01% of the population sees nothing but upside, and they're the folks in charge, so we'll just deal with it.
Thanks for this. You made my point. We can't let this happen to your parents.
From what you describe the are part of the 60% of seniors who would be in deep trouble without SS. To cut their benefits by 16% would hurt much more than the same cuts for thosethose 40% who actually could get buy without SS. Warren Buffet gets a check every month. That makes no sense to me.
What makes you believe that younger folks will have jobs to take care of there parents? Cut out entitlments, and you take out close to $1 Trillion in gov't spending. That will have major economic ripples in the economy. We also are facing declining energy production as the result of declining Oil production. Less oil mean many fewer jobs, as whole industries go bust (travel and leasure, aerospace, air-freight, and even car manufacturing).
Note that Oil prices have been above $60 since mid 2009 and are slowing increasing, depite 8 to 10 million full time jobs being lost. Jobs loss are rising, as oil prices rise. No cheap oil, no job growth.
Absolutely correct Waterfallsparkles.
More silliness. Your math is wrong.
First of all the Government ROBBED the Trust Fund. If the Money collected was still there and had been earning interest there would be no problem.
Second they used the Money in the Trust Fund for Welfare, Disability and Medicade on people that never paid into the system.
Third if the Government can print close to 3 Trillion Dollars and give it to the Banks and then expect those that paid into the system to just go away they are mistaken.
Everyone paid for their benefits and deserve to be paid.
For the Government to now say it is an Entitlement is wrong. I was self employed and paid 15% of my income into the "Trust Fund". If in fact the Money I payed was not into the "Trust Fund" then my tax rate would have been 15% higher than was indicated. So, for example if my tax rate was at the time 35%, I was effectivly paying 50% in Taxes. Or, if my tax rate was 45% then I was paying 60% in Taxes. No one would have allowed their tax rate to be that high if it was not for paying into a future benefit like Social Security & Medicare.
It is almost like a double tax. You paid into the system and now they want to increase your taxes retroactivly and say that the money you paid was only a tax and not for a benefit. Yes, it is a retroactive tax increase on anyone who paid into SS & Medicare.
Why is Bruce here writing about fixing SS and not you?
You cannot rob something that doesn't exist.
The government created a fictional book entry and called it SSTF. That's all folks.
End all foreign military actions. Secure border. Deport non citizens. Sell gold and federal land to pay treasury notes. Decrease size of federal government to what can be supported by 10% income tax on all income. Make SS and Medicare void. Unemployment too, since not all unemployed are even eligible. People will scramble, have to move in together, etc. Simple shelters and soup kitchens in lieu of the more generous welfare we have been providing can be provided for those who have no other support group. Add a tariff to foreign imports as well. Go back to localism. Buy from small suppliers if you want wealth redistributed. Globalism sucks, but we all were enablers.
We all need to be responsible for our own health as well. Junk food?dangerous activity? Aging? Your decisions. Your responsibility.
To all the Baby Boomers taking the position that 'it's my money and I am entitled to all of it" You are DEAD wrong.
The current SS rate of 15% is relatively new. You jagoffs paid more like 2-4% into the system during the bulk of your working lives.
Anyone retiring in 2009 received every penny of their SS contributions (plus interest) back in their first 2.5 years of retirement. After year 3, it's all gravy -- well really it's all sweat off your children's backs.
I think you got your generations a little mixed up. It was the so-called "greatest generation" that started the scam - paid in little and still taking a lot.
But it really doesn't matter - the details any way. Because it is your generation that, with things on the current course, is set to be the first to take out less than they put in.
I, for one, would not take that sitting down - but vent your rage at the appropriate people.
I hope that eveyone is happy fighting over their bullshit ideologies that don't work anymore...They are all just infinite growth ideas that have been proven not to work on a finite planet..
Figure out what actually works for people, instead of your profit over everything ideologies...
It's all gone too far and now the only cure is a fucking complete break-down so people start dealing with reality.
"I have not yet begun to print!"
--John Paul Bernanke
It's nice to see such a passionate debate. Unfortunately, for BK and everyone, the gubmint is not going to do one fucking thing about it. They won't. You watch. Not. one. fucking. thing.