week SS acknowledged that its condition had sharply deteriorated in
2010. This sentence from the report is all you really need to know about
what the status is:
The open group unfunded obligation over the 75-year projection period has increased from $5.4 trillion (present discounted value as of January 1, 2010) to $6.5 trillion (present discounted value as of January 1, 2011).
Note that this is a present value calculation. The total unfunded
obligation has grown by a cool $1.1 trillion in just a year. In other
words, if we had to shore up the TF to the level that it was just a year
ago the USA would have to write a check for $1.1 T. The unfunded status
was a disaster a year ago at $5.6T, it got worse by 20% during 2010.
The cost of “fixing” SS goes up as a result. To put things in balance
one of these two extremes are now required:
For the combined OASDI Trust Funds to remain solvent, the payroll tax rate could be increased an immediate and permanent 2.15%, (or) scheduled benefits could be reduced by an immediate and permanent 13.8%.
If you think this a ho-hum result, think again. If benefits get cut
across the board by 14% we will have many seniors who will fall into a
hole. An increase in payroll taxes of 2.15% is simply not going to
happen anytime soon. There is no support in Congress for an increase
like that. It would mean that taxes on all workers/employers would have
to go up by $110b in the first year and rise every year thereafter. This
would be a very regressive tax increase that hurts lower end workers
the hardest. For 2011 there is already a payroll tax holiday of 2%. If
the required increases take place in 2012 it would mean a 3.2% reduction
in wages. Kiss the economy goodbye under that scenario.
I underlined the TF’s use of the words immediate and permanent as this language highlights the fact there can be no delaying on the fixes necessary at SS. One thing that you can take to the bank is that nothing will happen with SS in 2011 or 2012.
This is a problem that will simmer for at least another 24 months. This
delay will prove to be very costly for all involved. Both the required
tax increases and/or the required cutbacks will be much larger than
today.
The NPV of the unfunded liabilities at SS are now growing by at least
$100b a month. One would think that this massive cost would spur some
response in D.C. Don’t count on it. As a result, SS is going to come off the rails in about two years.
Bruce,
What were the actuarial changes that caused the increase in underfunding? Did they lower the assumed rate of return, increase the inflation assumption for benefits, etc.? Point is, your headline about losing the money is misleading, because in 2010, it damn sure wasn't negative returns in the investment portfolio. Do you know what the driver(s) was?
Thanks,
Agent P
Expenses up, revenues down. The usual stuff.
I will be writing about the details in the coming weeks.
Look forward to it. Thanks.
Bubba sez:
Morons? Maroons? YGBSM. SS tax is paid equally by employer and employee. But in reality, all of those monies come from the employer, don't they? Right now, every employer is paying a 14%+ TAX on every employee first 100K or so. Raise the cap?
And what about the self-employed?
Gee, what happens when you raise taxes, Wally?
Maroons.
Beam me up, Scotty!
Bubba,
No............
Wrong ! All of those monies are taken from the employee, and paid to the government.
Government programs get funded?
Fire another cruise missle out in the ME desert!
I take more free time.
Pay less in taxes.
And do everything possible legal and illegal to avoid showing earned and unearned income.
That is what me and my business will do.
Normally, I disagree you you, troll, but this time you are spot on. There are three ways to win in this environment:
1. Flee to another country and start a new life.
2. Stay and fight when the wheels come off permanently (within 2 years, if not already).
3. Make as much money as you can, pay as little tax as you can, invest n PMs and hope for the best.
You and I are in group 3. We will be targeted as financial terrorists, at which time we will have no choice other than to join groups 1 and 2. Personally, I have not decided, but am leaning toward group 2.
Yeah the key is to stay in group number three as long as you can.
The Empire wont go down without a real bloody fight and so they will be going after group #3 with a vengeance. If you choose group #2, find a farm/ranch where you can be self sufficient; otherwise look into joining group #1.
There are no easy answers: Cut the military? Those guys have the real guns.... Cut SS or MC/MCaid? A whole bunch a pissed off people gonna be in the streets. Raise Taxes? For what, to pay off the banksters again? Nobody believes that raising taxes does anything that solves any problems, the extra $$ always goes to some fucking bridge or highway named after the Senator that stole the most or to pay higher bonuses for wall street gangs.
BK
Nice work.
Have you heard from Mr. Web or the hacks at SS who questioned your credentials and conclusions last year? What a shill.
Webb made it very clear in an email that he never wanted to hear from me again. He is SS's strongest supporter, so that (sort of) makes sense.
Two years ago I started writing about SS. I saw right away that this thing was coming unglued. It was the 08 recession that killed SS. I'm not such a bright guy who has a crystal ball. This was very obvious to anyone who bothered to look. That means more shame on all those who were in denial.
I was right about SS all along. I'm still right. This mess is about to go nuclear on us. I wish Webb would see that. He is a very bright guy who knows SS better than most. But he loves it so much he can't see the fire.
SS was dead from its inception. 2008 was just when you noticed the nails and recognized the coffin.
Webb exists only to create a legitimate facade of SS in your eyes. To believe that he can't see the fire, is to admit that you can't see the facade.
Honestly, I do not understand why you act so childish in public. All you do is to empower criminals who plunder and steal within your facade of pretend legitimacy.
Meanwhile the world falls apart around you, but you can't even imagine that you're culpable, let alone how.
Yes, another in a long string of great articles. I keep telling people - my own relatives and friends in their late 50s - not to rely on SS or pension funds for their futures, but few, if any, have listened.
Those who understand what's been going on for years have already made plans, by diversifying out of stocks and bonds into physical gold, silver and other assets.
Some will make it; others will suffer badly. Almost everyone will be disappointed in government, which means... old people's revolt?
I like your humility Bruce.
Given your account of Mr. Webb, I'll take your word on his intelligence but he's lacking in wisdom.
when the checks stop, is when the problem begins.......
yep
I've said THIS for 15 years, (even while I was in this group), JUST TAKE THE FUCKING CAP OFF EARNINGS FOR SS. ANYONE making over the $95-97-100 thousand dollar earnings cap DOESN'T NEED THAT EXTRA FREE MONEY!!!! FUCKING MORONS! It might not lower the deficiency, but at least it would keep it afloat.
sgorem,
BINGO...........
When you make that kind of jack, you NEVER ,miss it.
But, you never can trust a politician to do sensible things.
Rectal Defilade is a prerequisite for being in the 10sq mile caca pile.
Would you please let me know how much of my earnings I actually should be allowed to keep? A percentage figure would suffice. If I don't need this SS deduction money what other money I've earned don't I need?
For bonus points please tell me what other control over my private property I don't need. Thanks.
Your bases are belong to us.
Point well taken 'Hell. Trust me when I say "I AM NOT A BLEEDING HEART LIBERAL!" My first point is that the "government" have the sheeple fighting amongst ourselves now. Secondly, I believe YOU should be able to keep 100% of your hard earned monies, but we don't live in a perfect world. WE didn't create it, but WE let it happen. I worked for a large communications company for 33 years. I made over a $100k for many of those years. I retired 6 years ago when the SS cap was about $85k. I looked forward to October of each year for that "extra tax income" from the cap expiring. I know times are very different now, BUT, even then, if the "government" hadn't had a cap, I would've kept on working, and it would not have made a BIG difference in my standard of living. I've been on both sides of the fence, and putting SS tax on the fewer and fewer workers we have to support the large migration of retirees coming seems unfair. I have 4 adult children working and complaining about their taxes, etc. ALL i'm stating is the least we could do to keep this Ponzi going for the truly needy in our population, the elderly. I am for cutting the size of "government" by 20-30%-NOW. Taking fraud and abuse out of the system-NOW. Getting term limits for the assholes that call themselves politicians-NOW. Getting our asses out of countries that we don't have any busy being in-NOW. Taxing the financial system(Fraud Street) for trades-NOW. Let banks fail-NOW. Get the "government" the hell out of my business-NOW. Getting back to a Gold/Silver/Precious Metal monetary system-NOW. There's MORE, but I wanted to get MY bonus points out of the way. If you own your property, ie. house, cars, land, etc., then YOU have THE RIGHT per the Constitution of the US to hold and defend it with any means available. That means by force and/or violence if necessary. It'll be up to each individual American to decide for himself/herself what intrusion they will let their so-called government take in their lives. For me, THAT MEANS NONE! I appreciate your reply, and point, and I agree with you wholeheartedly. I'm just trying to throw out a quick fix/bandaid on the above mentioned article. Thanks for your time, sgorem..............
++++++
You didn't read Executive Order 1127H-33?
As of April 15, 2007 there no longer is ANY private property in the USA -- unless said property totals in excess of $500million, and annual campaign contributions (either party, or both) total greater than $1million.
Snipe hunt?
http://www.archives.gov/federal-register/executive-orders/2007.html
I say means test only your employer's contributions to the fund.
Based upon what, political affiliation?
"Means" testing is an idea completely open to any standard of means anyone might wish to apply.
All this would accomplish is to further destroy any remaining productive activity. In other words, the exact opposite of what we need to survive and prosper, as it would be the most successful businesses (the ones best solving human needs) that would be targeted for further wealth extraction. So instead of expanding their businesses and hiring, they would be hiring lobbyists for protection (bribes/contributions/etc).
Still so sure this is what you want?
It's the "Obama" Plan" - work 'till you're 80, then they shoot ya.
Problem solved -
Or, don't wait. Just initiate Soylent Green program.
don't worry. obama care will be kicking in soon.........
I wish I was 62 so I could jump on the lifeboat and help sink it.
Moe,
That was a stupid statement, WHO do you think is going to pay, if it's dissolved?.
Y_O_U. Still
If I'm going to pay I want to tear it down rather than be an obedient mule; what would you suggest, total acquiescence?
There is a reason the retirement age was set at 65. The avg life expectancy at the time I believe was 55.
They never intended for the majority to receive any of the funds they contributed and kept passing the buck to the next "leader" to deal with it.
And now we are getting to the end of the line. Sad, sad, sad.
well technically, once SS was created, it took on a life of its own as is the case with most government programs. it went from a partial retirement payment plan to a full retirement payment plan or so it would appear. anyone that is just living on SS, however, is just living , barely.........old people are expendible and are useless eaters and are of no use to the system. i promise you. this is the mindset now. watch and see as this thing evolves. perhaps you will not like it......
Just to give you an idea of how likely it is that SS reform (or even "reform") will ever become a reality...apparently the president now thinks it's a joke that some are concerned that it's too easy to two-step over the border and start helping yourself to entitlements: http://www.cnsnews.com/news/article/obama-claims-he-s-done-all-gop-wanted-bo
Mercury,
This is ONE major reason for the shape it's in now.
The Fed Gov, has been handing out Welfare, and SS/MC/MedCaid Bennies to NON citizens for years.
Stop and think how you would feel if someone told you you had to take your wallet out every payday, and give it to someone who was able to work, was not a citizen,and you had NO choice?.
Would you FEEL the love?.
1. Did SS ran surplusses for most of its existence - Y/N?
2. Did the Central Goveernment use the surplus as part of general revenue for decades - Y/N?
3. Did the SS surplus enabled the Central Government to claim that their books were balanced while in reality they weren't and as a result allowed for at least some of the post-WWII tax cuts (top rate from 89.9% to 36%) Y/N?
If the answers for #1 and #2 are Y and Y, then #3 is also a "Y", and if it's so , then there's more than enough justification to apply SS tax to *all* income, or at elast increase the threshhold significantly.
The cap is going to go up. But this is not the solution it would appear to be. There is a formula, the more you put into SS the more you get back. So incresing current receipts by raising the tax also increases the payouts that will be made in 25 years.
On paper SS gains $1 from the higher tax. It loses $1.5 on the added benefit payments in future years.
The problems at SS are bigger than the cap can fix.
On paper SS gains $1 from the higher tax. It loses $1.5 on the added benefit payments in future years.
Is this an actual, factual calculation? Or just a ballpark example?
Edit: thank you Urban Redneck for the clarification.
Bruce , why not treat SS like any other welfare program ? It has never been more than a transfer progam. Dump the "formulas" and accept the reality that the system was socialized long ago.
FDR knew that if it were perceived as a welfare program it would be ended by a future congress
Dot,
Nobody "pays" into any "account." The money is stolen at gunpoint via coercion placed upon employers to "play ball."
the wage cap is taxing only the first $x (currently about 100k dollars of income)
an accrual cap limits the growth of the monthly payouts an individual is entitled to (e.g. Warren Buffet receives the same maximum benefit as his secretary)
the wage cap eradication is only an ineffective solution when not paired with imposition of an accrual cap
the problem is that politicians are either cowards, eunuchs, or whores, so they will never actually solve the design problem in the program
When a normal person's car engine starts making horrific metal on metal noises the owner will take it to the shop and fixes it as soon as possible. However, as far as the President and Congress are concerned, the car is a rental, so who cares?
Yep.
That is also the flaw in the logic of the "more-immigration-will-fix-SS" crowd as well. The few extra dollars in increased taxes today are meager when compared to tomorrow's entitlement liability. It's the old "we lose money on each sale, but we make up for it with volume" logic... which leads inevitably to eventual bankruptcy.
that 100B per month that they are losing/need, its already spoken for...
that's da vig the banks expect from Bennie Boy....
so if these peasants think that whining about that shortfall is gonna get their money back...
think again.
Good lord people - read . . .
This is a 75 year projection . . . that is for 75 years in the future.
Social security paid for itself this year - please look it up.
This is a ploy to justify raising taxes. It is what liberal demorats do.
And when they raise those taxes, the money will conveniently be spent elsewhere