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.
Technically (and what isn't with the government) Social Security in 2010 paid in 865 Billion dollars to the general fund revenues. Social Security Outlays totalled 701 Billion dollars, so technically, yes, SS did pay for itself.
The "however" part of that is that the SS taxes are considered revenue for the US Government, not part of a "trust fund" which as has been pointed out, is full of Treasury Bills. Therein lies the problem, because the SS revenues are 40% of what the goverment takes in. Sequestering that amount to "only pay for Social Security" would emasculate the budget and torpedo the other two "pillars" of Medicare and Medicade which cost another 719 Billion dollars between them in 2010
Basically, sequestering social security is a net loss for the government of 164 Billion dollars in additional debt.
Still, upping your future debt load by 20% in one year is a killer.....
You look it up. SSTF ran a cash deficit of $48.9b in 2010.
SS will run a cash deficit every year for the next 100. They will never have a cash surplus again.
This is the link for the 2011 SSTF annual report. Read it and weep.
http://www.ssa.gov/oact/TR/2011/index.html
liar, your own reference shows on page 2
http://www.ssa.gov/oact/TR/2011/tr2011.pdf
that sstf received more than it payed out, and now owns 2.6 TRILLION in us treasuries with annual income over 117 billion in just interest income on treasuries. jeeezee ain't that a significant portion of outstanding treasuries; yes.
Yes, but the interest is not paid in cash. It is paid in script. Not even the SSTF recognizes it as a cash receipt. You shouldn't either.
Every month SS pays out $60b or so. But it does not have the cash to honor those checks. So it hocks some Bonds to honor the checks. The total deficit came to $48.9b in 2010. That much money had to be borrowed by Treasury from the market (aka China).
I know it is a stretch, but you have to trust me on this one. Cash Flow is what is important. The US does not have an unlimited amount of borrowing capacity. It can't borrow $2.6 trillion from China (or anyone else) to pay this off.
Any guesses as to who has to pony up the $2.6T in principal and $117B annual interest payments?
In the same light though, I think it's disingenuous for Bruce to use the phrase "lost" in regards to the funding gap, as it tries to paint the ponzi as a legitimate investment vehicle.
What the fuck do you mean " Social security paid for itself this year ..." ?
I posted this on Saturday in another thread-
Social Security is already toast, just like the soldier who takes a 7.62 to the chest and stumbles around with a glazed look in his eyes not realizing he is already dead. The trust fund is cash flow negative and the only assets it has to meet the shortfall are US government bonds. In case you didn't notice the US government is running deficits, hence Treasury's perpetual DEBT REFUNDING instead of DEBT REPAYMENT. So not only is Social Security no longer underwriting a significant portion of Congress's excess spending, the negative cash flow now requires that new Treasury debt must be issued on the open market to meet 100% of the current Social Security shortfall plus 100% the maturing debt held by the trust fund itself.
+55
Thank you Urban. Astonishing how many people here at ZH do not understand this.
i think this is why they want to seize all private and public employee pensions, ira's and etc. throw it one big pot and then pay from that. they will call it a national emergency and that we must do this for the good of our people........yeh right...
i keep telling anyone that will listen. get your money out of those damn pensions and ira's and do it now..........
That's exactly what they'll try to do! But first it will start with punitive measures to prevent cash outs trying to lock people in. Internal capital controls.
someone told me one time a few years ago, that they thought that all of these IRS type retirement accounts etc, were all designed to make the baby boomers save their money in them and when the time was right, the government would come in and seize them. looks like we are near that time. another words, the whole damn thing was one big lie from the start and was designed to steal the money from the baby boomers who have saved all of these years and soon will have nothing.....people with nothing, have no power. people with no power, have no stomach for rebellion are much easier to control and to kill.
I totally disagree. People with nothing have more power in terms of nothing left to lose so they might as well fight--why roll over? Looks at MENA. With 80% of their income going to inflated food damn right the younger and older generations are fighting.
This is what rebellions are made of.
Yet when starved slowly, one becomes listless as opposed to rebellious. SHAEF, USFET, EUCOM counter-insurgency tactic employed in post-war Germany.
http://en.wikipedia.org/wiki/Rheinwiesenlager
http://en.wikipedia.org/wiki/American_food_policy_in_occupied_Germany
No doubt - confiscation is the goal.
If FDR in 1933 could rescind bondholder rights and confiscate privately held gold why would the government of today not confiscate IRA's in "exchange" for national security, the children, bald eagles, and puppy dogs for the blind?
Just wait - they will be creative - and have a massive media campaign so that anyone protesting that it is their money they saved will be made to look like an unpatriotic pedophile.
I didn't see RAISE THE RETIREMENT AGE on there. What's the magic number, if all that changes is the retirement age?
Raise the retirement age only works if YOU Have or CAN get a livable job.
It's not possible in this climate.
If you are not currently employed,and have a good shot at staying that way, you WILL be sent to the house by age 65, for the most part.
Age discrimination in the workplace is a pandemic.
Used to be if you were 60, you were Shiite out of luck for a decent job(unless you had a specific skill set).
Now, employers are discriminating at ages in the late 40's-early 50's.
Several of my friends and I are anecdotal evidence to support you. All of us have excellent work histories, education; in other words, all the "correct" tickets punched. None of us can even get an interview, much less a job, even for jobs with lower requirements/pay.
P.S. Cost of health benefits goes waaaaaay up after age 50.
I don't think they need a specific age.
Just a note from the doctor that says: TERMINAL, 2 TO 3 MONTHS TO LIVE
I got exactly that note,11years ago.
Wow, that's showing em!! Good for you.
Or maybe a note that says "On a long enough timeline..."
I think 112 years old would work... early, reduce dbennies after 106,
112 is not the right number. It is closer to 97....
more like 212
98.6 is the number
As your body cools down before death, you will receive a temporary increase in your SS benefits.
an Option C, from the depths of the last credit crisis...
... would approach the challenge of significantly increasing short term revenue by reforming Social Security. Do not simply stabilize the deteriorating cash flow model, but instead implement a much stronger model which would be fundamentally cash flow positive. This might be achieved by first eliminating the wage cap and imposing an accrual cap. In addition, the Government might impose a nominal and progressive increase in the employer component while keeping the current employee component unchanged, and simultaneously implementing some sort of permanent relief to the double taxation issue for the self-employed so as to avoid harming small businesses.
Fiscally- this would increase revenues in a progressive manor. It would not materially harm small businesses or promote the mass layoff of low wage earners. It would incent companies to compensate high wage earners in a manor consistent with the profit they generate for the company and its shareholders. This approach would increase Government revenues without creating impediments to the desperately needed increases in aggregate savings. This approach would also increase Government revenues without creating taxation impediments to risk capital creation or deployment into new ventures which creates both jobs and wealth.
Additionally, Congress could impose a special surtax on those specific Companies which receive future taxpayer TARP or similar support, and remove the recently legislated compensation limits. Management would be freed to hire those individuals with the talent to actually extract their companies out from the holes in which they find themselves. Simultaneously, management would be incented to cut the excessive salaries that are not a function of delivering demonstrable results. This would increase both the income and payroll tax revenue generated for the Government without diminishing the Companies’ obligation to the taxpayers, or the Companies’ ability to meet that obligation.
Finally, the Government might introduce a substantial means test for receipt of Social Security benefits. If a retiree can earn $150,000 or $200,000 in the economic climate of 2009, and a similar amount going forward on an inflation adjusted basis- then the retiree should not ‘need’ the benefit in order to lead a comfortable retirement.
Eliminating the cap and doing away with the current accrual calculation would make a big difference to the numbers. But this is not going to happen. That would be socialize the system. There is too much opposition to that kind of thinking.
The cap will go up by a significant amount, say to $150k. That will help, but it does nothing to address the larger problem.
I see this as a Baby Boomer problem (it is). Therefore I see this as having to be a Baby Boomer solution. That takes you to your means test.
That option is extemely unpopular. It is my strongest recomendation of what to do.
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Bruce,
While I agree if one is well off and does not NEED the benefits,then that's one thing.
But to penalize those that paid in the most, and get nothing, is morally reprehensible, and is criminal.
If you have enough savings to get a return of the same as the SS benefits would pay you(separate from the system), you will be screwed.(there will be no Earnings Guidelines)
Retired people do not receive wages.
Helping those that have less,and cannot get by is one thing,that paid into the system over a FULL lifetime of work I can see.
The problem is the .gov doesn't want the American people to know WHERE, and to WHOM benefits went to, that were not entitled to them.(and is still going on)
Would you be happy with Red Neck's suggestion? $150k for an individual, $200k for a couple. Above that no benefits. Tough luck.
I would lose my benefits. Tough luck. But that would not be unfair. There are people who absolutely need every penny. I don't think that across the board cutbacks are a solution.
Many boomers did just fine. Now they have to chip in to help those of their age group who did not do so fine.
SS is not a busted concept. The problem is the Boomers and the 08 recession. Can't fix that recession. So some boomers have to suck it up. Not a big deal.
Despite your many thoughtful, thorough and intelligent analyses, Bruce, I must differ with you on this point.
Any kind of forced retirement savings is just another example of attempted societal engineering via statist coercion, and is immoral, unethical, impractical, and bound to fail. I want to see us as a society embrace more freedom, more choice and more individual sovereignty and responsibility instead of less, and not devolve and regress into further collectivism and ultimately, neo-fuedalism, as we are well on the road to today.
How do so many sufferers of Stockholm Syndrome come to defend their captors and their agendas, and willingly support policies that are expressly to the benefit of the latter and not to themselves?
To the extent that a society is based on voluntarism and the free market, that society prospers both morally and economically. I aver that there is NO realm of society in which coercion, force, and control by a small power elite is necessary, much less beneficial.
I agree with all that you posted. However...
"To the extent that a society is based on voluntarism and the free market, that society prospers both morally and economically."
This just ain't going to happen, not until the ENTIRE world operates this way. As long as we're shelling out through the nose for a standing army (and associated "security" sectors) we're going negative. And while I absoltutely detest the aims of the neo-liberals and neo-conservatives to police the world, they DO have a point, but the underlying point cannot be known lest we accept the crimes that are committed in our names. It is highly unlikely that the rest of the world will settle down and be happy when the US is bathing in ill-gotten gains (whether this is the reality or not I'll leave to each to grapple with, I'm just pointing out what is perceived).
The only way that a fresh start can occur is if there's a big reset, a releveling of wealth. Don't get me wrong, I'm not advocating this (I'd end up the poorer from it), I'm just saying that there's really no way to circumvent the demons that will pop up in the form of past baggage.
Well, okay, I deserved that. Let me try it different.
Where it not for the historically unusual bulge called the Baby Boomers, Social Security could be (more or less) paygo. By this I mean that it takes in in a year what it spends. There is is no trust fund or IOU or intergenerational transfers. There is no government borrowing from or loans to. It is not a budget item for the US taxpayers.
Without the boomers this could have worked. But the boomers do exist so it will not work.
Ah, point taken --- I understand where you are coming from now.
I hope I did not come across as overly harsh or critical.
Not at all, I have very thick skin.
Ah, point taken --- I understand where you are coming from now.
I hope I did not come across as overly harsh or critical.
The cap needs to go much higher than 150K. It needs to go to the absolute tipping point on the scale where it just touches the bottom of the controlling elite income level.
How about $1 mil? Any takers at that level?
If your Cadillac is less than 5 yrs. old you get no SS.
unless you have it lowered
When the entitlement bubble blows.......watch out!
Zing,
You said it.
These clowns need to look at the term "Entitlement".
SS is not an Entitlement, it is a paid for, by the recipents Trust.
A misnomer meaning it's like a Freebie, and/or Gift.
It's not, never has been.I/WE pay YOU, with the understanding that I /WE will be paid back in the future on OUR investments.
If you fail to live up to your end, we Barney Frank you till death.
It's one thing to stop recieving a ", GIFT",it's quite another to be stolen from.
Agree: SS not an entitlement. But Section 8 housing, food stamps, etc. definitely are. The BSD's ("Big Swinging Dicks" for the uninitiated) know that they can't turn off the benes without a revolt, but the working people don't like the spongers and they are getting restless. Ultimately class warfare will result and chaos will reign. (See Roman Empire, collapse, for verification).
Then who will pay for HBO? Will the masses be stuck with basic cable?
"Blow Up Your TV, Throw Away Your Paper, Move to the Country, Build You A Home, Plant a Little Garden, Eat A Lot of Peaches..." -John Prine-
And the $1 trillion per year going to the "defense" sector...
I'm now living Prine's song :-)
All your life you have been lied to by those that seek to control you. They have also picked your pocket. Now, what are you going to do about it ? Steal from your grandchildren ? You paid for it, brought it home, now its broken.
FD: Boomer
Yeah, my entire working career, I never thought it was gonna work. When it was explained to me when I was 16, I said to myself, "well, I'll never get a dime back on that." And now at 62, I get some benefits. For how long, a couple more years? How long til inflation destroys it? I paid in a fortune in dollars that were considerably more valuable.
Said the exact same thing when I was 16. Now, at 57, I'm sure I did the right thing by not paying into it for most of the past 10 years.
Always considered work to be for stooges, so I worked for myself most of my life. Through diligent effort, a bankruptcy in 1989 and general hatred for all levels of government, I have effectively avoided a huge level of taxation.
Lived within my means and when the rest of my peers are wondering what happened, I will be enjoying the benefits of my thriftiness and advance planning.
SS will never pay me a dime. Full benefits are 10 years off for me and I'm sure our government won't make it in its present form.
So, like Zorba the Greek, I dance!
The whole system needs to go away starting right now, but I prefer a non-violent wind-down rather than the sudden stop we're probably going to get.
In the meantime, why not do what Ron Paul says: stop policing the world and spending money (we don't have) on all sorts of ridiculous stuff, and instead, start taking care of our own.
"why not do what Ron Paul says: stop policing the world and spending money (we don't have) on all sorts of ridiculous stuff, and instead, start taking care of our own."
Ah, because many who lambast the govt for wreckless spending on social programs applaud its wreckless military spending (they love waving the flag for the empire). NOTE: very rarely do you get people making the point of excessive military spending, nowhere near in proportion to the amount of money stolen in the name of "defense."
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