On the Social Security 2012 Report to Congress

Bruce Krasting's picture

The Social Security Trust Fund (SSTF) 2012 report to Congress is now out (link). It’s 242 pages and contains a great deal of information. I have reviewed a number of sections in the report that I consider to be key measures of SS’s health. Not one of those variables showed any improvement. Some highlights:


-The Net Present Value of the unfunded liabilities at SS is now a staggering $20.5 Trillion.  One year ago this was $17.9T ($2.6T increase - 15% YoY). This yardstick grew at more than double the rate of the entire national debt 12/31/10 = $14T, 12/31/11 = $15.2T, total increase = $1.2T). This deterioration is staring policy makers in the face. The burden that SS will put on future generations is growing exponentially.


-The “Drop Dead Date” where the SSTF is exhausted has been moved up three years to 2033. This is a number that the MSM will focus on. It is a bogus deadline. The SSTF must maintain at least one year’s worth of benefits. The year that TF assets will equal one year of payments will be ~2026. This means that anyone who is age 53 today can expect to get 75% of the value that a baby boomer will get. (Under current law, when the TF is exhausted, benefit payments must be cut.) Fourteen years is not a very long time for people to plan and adjust for what's coming. The Politicians will have to address this reality sooner versus later. It is already passed the time where it is unfair to those who will be affected.


-The Drop Dead Date for the Disability Fund has been changed from 2017 to 2016. This is important as the TF has confirmed that the next President will HAVE to bailout one component of SS. It is crucial to ask the candidates what they will do if elected. They better have an answer. When the debate on the future of Disability Insurance (DI) gets going, it will be marked with a sharp divide of opinions. It could easily be a factor in the election.


-The SSTF creates  Best, Base and Worst case scenarios for 2012 through 2021. The Base-case is for SS to run an $800B cash deficit for the period. The Worst-case analysis is for a $1.8 Trillion cash shortfall. I’m firmly convinced that the Worst-case is most likely.


-The critical assumptions used to develop SSTF’s assessment of the future include: i) CPI will average only 2% in years 2012 – 2015. From 2015 – 2021 inflation will average 2.5%. Utter hogwash. ii) Real GDP will average 3% a year for the next decade. There will be no recessions according to the TF. More hogwash. iii) The TF uses these estimates for Real GDP:

2012 – 2.6%
2013 – 2.9%
2014 – 3.5%
2015 – 4.0%
2016 – 3.8%

These results simply will not happen. Is the SSTF not aware that the USA will face the biggest cut backs in spending, and the largest increases in taxes in the country’s history,  eight months from today? iv) The TF uses the following estimates of ten-year interest rates:

2012 – 2.4%
2013 – 3.4%
2014 – 4.4%
2015 – 5.0%
2016 – 5.1%

These are important as the TF is sitting on $2.6T of IOU’s. The interest it earns on this surplus is critical to the short-term results. Possibly the TF is unaware that the Fed has promised to keep ZIRP in place until 2014. This interest rate outlook is based on the assumption that the economy will be zooming along without any interruptions. Nothing could be farther from the truth.

I stick with my prior forecast for SS. The TF will “Top Out” in 2017 and will have a maximum surplus of $2.75T. That’s five-years earlier than the TF forecast in its report today. It is $1T light of what the TF says the Maximum TF balance will be. I’m please to report that the SSTF’s High Cost (Worst-case) scenario is now ahead of my own forecast. They have the TF topping out in just two years. The TF will not exceed $2.75T.

If anyone in D.C. wakes up to this reality, they would have to yell, “Fire.” Given that it’s an election year we probably won’t hear a peep.


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Arnold Ziffel's picture

teresa, good summary...thnx. I read over 43% of people between 45 and 55 have zero saved for their retirement including ira, 401, roth, etc....zippo, zilch, nada, nicht....


Umh's picture

For those who have saved there is a surprise coming; means testing.

eddiebe's picture

Thanks for all your work Bruce, much appreciated. As with most reports coming from the Gov. it is very disturbing.

jayman21's picture

This is conditioning.  You pay today, but it will not be there in xyz year.  You might as well plan that it will not be there.  Another way Washington takes but does not produce.


Based on actions of the people, they are ok with this.  That is the amazing part.

Amish Hacker's picture

Also amazing is that we have been told repeatedly that just a little raise in SS contributions would guarantee the solvency of the system going forward. The Commission on Social Security in 1983 (Greenspan, James Baker, Daniel Moynihan, et al) claimed that increases in withholdings would see us through the Baby Boomers' retirement years. So we all paid up, not happily maybe, but at least reassured that a future crisis had been foreseen and avoided. 

Cut to 2001, when G. W. Bush announced the need for a Commission to Strengthen Social Security, and once again we were told the underfunding problem had been headed off. Even as late as 2004, America's financial gurus were confident that, "the trust fund will contiue to grow as its assets earn interest. Then, from 2025 to 2038, Social Security will be able to meet its obligations to retired baby boomers by selling its accumulated assets." (This from Robert Reich's Economic Policy Institute. http://www.epi.org/publication/issuebriefs_ib159/ )

Only a PhD economist would think the SS Trust Fund has ever been funded with anything but politicians' promises. Remind me again where I'll be able to cash those when the time comes?

steve from virginia's picture


The real problem here is no jobs.

Demanding industries to create jobs is pointless as these deploy more robots or shift jobs overseas. Workers overseas should be required to pay into US Social Security (tariffs).

Tariffs are a tax on consumption, the way the country used to raise funds for government ... for 150 years. A $100 per barrel tariff on imported oil would serve conservation and add needed funds for Social.

Unemployed workers over 100 weeks go on Social Security disability. More specialists across the country 'helping' people qualify. Needed: a doctor who can spell 'Bad Back'.

Medicare is big sinkhole as funds go straight to golf course developers and Porsche salesmen. Solve Social Security problems by banning health insurance and eliminating Medicare. The healthcare racket would have to price its 'products' to meet the cash market or fail.

Thisson's picture

"Solve Social Security problems by banning health insurance and eliminating Medicare. The healthcare racket would have to price its 'products' to meet the cash market or fail."


TeresaE's picture

I agree also, but will never work.

25% of American woman are on anti-depressants/anti-anxiety meds.

You think you are going to get 50% of the country to pay for things they think are "free?"

Good luck with that.  There will be no system long before we go back to a pay as you go one, with insurance only for major illinesses and injuries.  Too much money in it for the docs, labs, drugs, Walgreens of the world.

LowProfile's picture


25% of American woman are on anti-depressants/anti-anxiety meds.

Best thing that could happen is that supply of tranquilizers is CUT OFF.

Gonna need all hands on deck here.

jayman21's picture

If we could just get pricing discovery back into medicine, it would go along way in solving problems that are created by Washington DC and our loved/hated insurance companies.  Doubt it will ever happen.  Too much money flowing around DC and our insurance companies wrote Obama care to stop any of this nonsense.  There will come a time when the supply chain cannot take DC anymore and just breaks.  I know many doctors who just gave up due to the insurance nightmare.


I would love just once to know exactly what something costs comparing it to three doctors and/or and three hospitals.  I know, good luck with that.  Nothing to see here, keep moving.

ejhickey's picture

what's the Bad News?

lolmao500's picture

This means that anyone who is age 53 today can expect to get 75% of the value that a baby boomer will get.

Please. Nobody who is 53 today will get a damn cent.

The Worst-case analysis is for a $1.8 Trillion cash shortfall. I’m firmly convinced that the Worst-case is most likely.

The worst-case will be the best case. Bet on it. If they said 1.8 trillion shortfall, it's gonna be a 3.6 trillion shortfall minimum.

Real GDP will average 3% a year for the next decade.

What about GDP contraction of 20%+??

These results simply will not happen. Is the SSTF not aware that the USA will face the biggest cut backs in spending, and the largest increases in taxes in the country’s history,  eight months from today?

Not gonna happen till the bond market implodes.

Possibly the TF is unaware that the Fed has promised to keep ZIRP in place until 2014.

Make that until 2020...at least.

Bicycle Repairman's picture

If you are 53, you are a boomer.

steve from virginia's picture




If you are 63 you are a boomer.

If you are 53 you are doomed.

Everybodys All American's picture

Our president Obama's desperately needed (according to him) and whined about payroll tax cut has now created unintended consequences.

Bicycle Repairman's picture

Obama wants to fund SS with general taxes in addition to the payroll tax.  He views the payroll tax as regressive.

TeresaE's picture

It IS regressive.

Taxing labor is always regressive because it guarantees that those that do will always pay more (in percentage) than those that don't/capitalize on major assets.

Taxing transactions and reenacting fair tariffs is the way to go, SS or not.  Nothing will change until it all crumbles around us and the argument over taxing jobs/labor is completely moot because there aren't any left.

greyghost's picture

correct.....when all he needs to do is create the funds for soc. sec. just like the federal reserve would. yes...i said create the money.....hell you wouldn't even need to print the paper...just direct deposit all soc. sec. money into peoples bank accounts. this moron poster spent hours going over 242 pages of made up figures? to what end? the solution is simple...take the power to create money back from the bankers. we have seen what 23 trillion dollars of printing has done for them.....well it hasn't solved the crisis...has it?

Stackers's picture

Great Solution. Instead of the bankers creating hyperinflation. We'll have the politicians do it. FAIL.

greyghost's picture

okay smart ass stepup...what solution do you have other than fucking millions of americans out of their soc. sec. payments? remember hotshot you're talking about poverty level payments to people who have paid into the system....cracks me up when i hear clowns on the boob tube  talking about payment levels and they need to be cut back...lol. yes all the millionaires collecting their soc. sec. payment. i notice you didn't bring up the 23 trillion dollars given to bankers in some form another just to pay themselves million dollar bonuses AND STILL NOT SOLVE THE BANKING CRISIS....can you spell DEAD MEN WALKING? come on jackass step up to the plate!!!!! could you create the monies for the current and future people collecting after a certain age and create a system say more along the lines of Chile's system for the younger workers? it is a blank page here, nothing in concrete. what are you bringing to the table except the same old economics professor's horseshit or talking bobble head tv experts. i don't know whether to laugh or cry with fools like you taking in oxygen all day.

Arnold Ziffel's picture

greydog, i agree with you...seniors are not 'organized' politcally and will get screwed badly....i read what happened in germany during the hyperinflation of the 1920's and 1930's and seniors were some of the big losers--their saving and any fixed income wiped out by inflation.

greyghost's picture

yes very true arnold. however we all know what a slippery slope this solution could start. i mean we have bankers creating trillions for themselves and the talking heads blabbering on and on about cutting soc. sec. and medicare...really? what planet do they live on? have they really seen what soc. sec. pays? as the election swings into high gear you watch the republicans put the gun to their head and pull the trigger as it pertains to soc. sec. and medicare. this is the same shit out of their mouths since i was a kid in the 1960"s. the democraps are no better, the same crap from them. what frightens me is how close minded people on zerohedge can be. i mean you get this constant chant about not changing the basic struture of "money"...who creates it and profits from that creation. reminds me of the mindless statement taught to my friends who went to college......... DON"T WORRY ABOUT THE DEBT.....WE ONLY OWE IT TO OURSELVES". i called bullshit, the money is owed to someone. someone being the bankers, your grandparents, your mother and father....that someone wants their money back...yes. this moron nonsense has always wanted to make my brain explode. allas this kind of crap in still floating around on campuses of lower learning. i am thinking that obama will win. however i hope the republicans run congress. when obama starts picking apart the mormon's business model and reminds everyone how in the mid to late eighties this business model looted hundreds of businesses of their funds set aside for workers pensions, billions upon billions looted. lights out for the great hope of the republican party. romney even looks swarmy and this from a person who leans towards the republicans.

blunderdog's picture

Honestly, this would probably be a good solution as long as the big banks are all thrown into receivership.  As asset valuations continue to fall and the banks collapse under the leverage, we could maybe cover ongoing demand for currency and credit from the deposits being made by the folks who continue receiving their bennie checks.

People spending their own money won't cause hyperinflation.  You can get price increases and high inflation, but hyperinflation *requires* that people shift their spending away from the legal tender.

Thisson's picture

People should only get back from the system what they put in (plus reasonable amount of interest).  Anything else is a ponzi scheme.

Cthonic's picture

You've reached the bargaining phase... two more steps and you'll have accepted reality. Bruce otoh...

greyghost's picture

thisson i agree 100%. however that is not what the clowns created. so the question is how do we make right by all the people who will live off the slim funds paid out now? how do we as a country correct the  ponzi scheme without creating utter pain and starvation for millions who trusted the system? how do we do this without bankrupting the younger generations. all i am saying is that with the banking class creating money out of thin air to continue their ponzi scheme and keep dead banks on life support, than my goverment should do it's duty and create the payments to soc. sec. pensioners out of thin air until the whole system is killed or fixed. all i know is that borrowing money to pay current pensioners will destroy the country.

odatruf's picture

With respect to SS, it isn't too hard. The worse case is that benefits get reduced by 25% and we go on our way. That's not good government or policy making, but it is probably the most likely outcome. Run the status quo into the ground and that's where we'll end up. Smaller tweaks, sooner push the problem out or mitigate the negative effect.

What to do about Medicare, is a whole other matter and is the extinction level problem.

knightowl77's picture

and yet the Obummer cut the payroll funding to Social security two years in a row....he did not reduce the income tax deduction, but the social security payroll deduction...almost like he wanted to increase the rate at which it fails...

blunderdog's picture

You think he's a Grover Norquist fan?

Tax cuts are supposed to be stimulative for the economy, if you listen to the past 30 years of political rhetoric.

There are a zillion good reasons to hate Obama, but it's hard to understand why ANYONE would complain about tax cuts.

TeresaE's picture

Want to know why I complain about these bogus "tax cuts?"

Because we are BROKE.

We are spending more than we make, to ever bigger multiples.

We are dooming our children, grandchildren and great grandchildren, to have to work longer, harder, and for less, just so we can "get ours."

We are choosing short term highs (2% makes virtually no difference in a minimum wage paycheck.  However, thanks to the rules of annuities, it creates a hole in the future disproportionally large), for LONGER, HARDER and MORE DEVASTATING pain.   Huh, exactly what a crack addict goes through.

That's why.

People need a reality check.  Quit expecting the mommy/daddy government to make all our booboos better.  Politicians lie, we all know it.

And the myth that we have "paid in" to SS is nothing but one of the biggest lies of all.

The politicians spent that money, our kids future food money too.  Long time ago.  Spent it, came back for more, then spent that, and tomorrows, and the next generations.

Now deal with the truth and let go of the myth of what we are "owed."  We are broke, it doesn't freaking matter what we are owed.

Two types of people in the world, those that choose to believe in kind, gentle, always protecting me government, and those that know what evil it is and plan accordingly. 

blunderdog's picture

Well, sure, but what do you think is going to fix stuff?

If the payroll taxes weren't disproportionately paid by the lower-paid wage-earners, I'd be inclined to agree that tax cuts would be a bad idea right now.  But honestly, if the political climate is such that we can't fold the SS costs into the general fund and pay everything from income/capital gains taxes, I think it's far better to give the poorer folks just a fraction of the "break" that the wealthiest and higher-earners have been enjoying for decades.

I'd prefer to see the end of the transfer payments.  Crashing that system may be the only approach that's going to work.  You don't think the Feds can actually cut the budget, do ya?

Rainman's picture

and Jerry Brown wants a tax hike to pay for "education", yet the whole banana goes toward slowing the blood loss of the #1 most insolvent pension fund....California State Teachers


Woodyg's picture

Sorry but the California dems from Brown to Pelosi to Feinstein are FIRMLY privatized for profit school people - with family and friends profiting off the misery they are dumping on the kids who are force fed loans in a shitty job market to try to get ahead.

These dems will destroy the once vaunted California state university system to enrich their crony capitalist friends and families.....

Give me HUEY LONG!

GCT's picture

Ahh but the people want this.  Funny thing about CA is the people get what they voted for!!!

Woodyg's picture

Of course Obummer did - he is the manchurian candidate for the rethugs - if the rethugs could see clearly they'd know that only Obama amd the dems can get the cuts that the rethugs truly want.

Of course then we'll have grandma and grandpa living on the bus bench - but the majority of Americans could probably give a shit -

Funny how laying off good paying jobs and replacing it with McDonalds Wally world jobs hurts the Social Security trust fund.

And if the Tust fund is non-existent - then it was double taxation on the true job creators - the lower and middle class - 70% of spending and the vast majority of jobs are created by those 2 classes....

But instead we've codified the predator .001% class to have it all......

Well historically we've handled that with tar and feathering during the revolutionary war - the French invented a nifty little toy called the guillotine - the ruskies lined them up against the wall and at the end of WW2 we hung them from the nearly lamppost -

And FDR and Eisenhower taxed them at 90%

Now they're back - the choice is theirs - think they'll choose the Eisenhower route or force us into one of the other routes?

I'm thinking sociopaths don't choose the easy route....

LowProfile's picture

There you go again with that Left/Right dialectic.

It don't work too well here, son.

Besides which, you utterly fail to deal with the root of the problem, central banking, central control, central planning, and the concentrated wealth that has resulted from such.

Flakmeister's picture

Wealth has concentrated long before there was central banking...

Call it a symptom of the human condition...

fonzannoon's picture

I guess the other thing they would say, especially if they are retired is...."what am I supposed to do about it?"

vato poco's picture

What they/we are "supposed to do about it" is to grab your ankles, try to relax, and think of England. They'll drag this farce on to the *very last second*, until *every last cent* has been spent. THEN they'll get around to admitting that, perhaps, "mistakes were made". (Not by THEM, mind you: it was those _other_ SOB pols who are now conveniently dead who're to blame!)

Human Nature 101: although for some reason this isn't taught in US schools - and I'll bet BIIIIG bucks it ain't ever mentioned in Japanese schools - when Hirohito announced to his nation that they were gonna surrender because the Americans were doing to them about what Japan had done to China, except for medical torture camps that would have made Mengele envious and the large scale biological warfare, he set the standard for every coming generation to follow. Their 2 largest cities in flames from the firebombing; 2 other cities completely obliterated; their navy & air force reduced to twisted rubble, the army reduced to 13-year-old boys and old men, he knew the time had come to speak. But the idea that he, or the government, or any of the noble old familes that ran the country for the Chrysanthemum Living God were in any way at fault couldn't be allowed to take root. Much loss of face would follow - very unpreasant. Why, there might even be unrest or disharmony! Still, *something* had to be said, so he said it. In his own divine buck-passing words: "The war situation has developed not necessarily to Japan's advantage."

Sometime in the near future, a grim federal bureaucrat - with a solid-gold, defined-benefit pension paid for by you & me - will utter words very much like those above. People will be stunned. How could this have happened? Why haven't we heard about this before? How come nobody ever mentioned this crisis to us???

Lednbrass's picture

You are correct on Japan in general but there is one sizable mistake- their army was largely intact.  The US only took our relatively small numbers island hopping across the Pacific- most of their army was still untouched in China.  If even  a fraction had gotten back to Japan before an invasion it would have been a bloodbath.

Okinawa and the Philippines were the biggest fights with the Imperial  Army, and they only had about 100,000 men at each, it is not accurate accurate to say that their army was reduced to boys and old men.

bank guy in Brussels's picture

There are significant numbers of American exiles, smart and with a little money, quietly retiring here in little places all over Europe ... like here in the Belgian Ardennes, where you can still buy a little country cottage for €40,000.

The ones who come here generally have other assets, but they expect their US social security retirement cheques to keep coming.

But I ask them:

Are you sure those American cheques will keep coming overseas, from an imploding US empire?

Are you sure those American dollars will stay worth something?

Are you sure that America will even be here by 2020?

They tend to just shrug their shoulders and repeat the magic words, 'I think Social Security will always be there ...'

GeneMarchbanks's picture

Who's going to stop that? Only militarily will a true global shift be felt. The Chinese are probably about two more decades away from matching their counterparts in that arena and that is only if they continue recycling Tpaper which is now already destabilizing their own economy.

Thisson's picture

Oh, please.  The Chinese have all the same idiotic problems we have.  It's just a different "brand" of central planning over there.  We're all on the same road to serfdom.

Anglo Hondo's picture

Gene, explanation needed on how you go about recycling toilet paper.



LowProfile's picture

You borrow against it and buy more paper.

hidingfromhelis's picture

You could re-hypothecate it, but it does leave a "trail."

tarsubil's picture

The biggest problem is that people are not psychologically prepared for the future.

DaveyJones's picture

I'm not even psychologically prepared for today