SS Report Due Out This Week

Bruce Krasting's picture


The Social Security Trust Fund annual report to Congress is due out this week. It will be discussed in the Press for a few days. Some of the things that will come up:


- The NPV of the unfunded liability will go up by approximately $2 trillion, to $23 trillion. Every year this horrific number is discussed, and then ignored. What does this number mean? The 2012 increase in new liabilities is double the reported increase in federal debt. If this number were added to the existing debt, it would bring the total nut the country faces to $39T - 250% of GDP.

The problem is that the calculation measures the present cost of the infinite future. Who cares about something that might go wrong 50+ years from now? Hopefully, the scary NPV number to be released will focus attention on SS. The fact is that SS is PayGo. It has a revenue base, it spends more than it takes in, the Treasury makes up any shortfall by issuing more debt. If this reality were the basis of looking at SS (versus goofy TF accounting), then there would be no infinite future issues.


- The date of exhaustion of the OASDI TF will be shortened by 2 years to 2031. This means that anyone 47 or younger is paying "full price" for a benefit that will be worth only 75 cents on the dollar. That is how the law is currently written; I keep wondering when younger workers will wake up to the realities of what they are paying for.


- The SSTF will recommend that either payroll taxes go up by 2.5%, or that all current and future benefits get cut by 2.5% (or some combo). These recommendations would require an immediate change to achieve the desire long term stability of SS.

There is note a chance in hell that anything like that will happen. Washington can't agree to a change in benefits that amounts to .3% a year. There is no way that an across the board cut could be agreed on. More payroll taxes are not going to happen either. They are regressive, so liberals don't like them and conservatives will just say "no" to higher taxes. Either of the options would be a drag on the economy, so nothing will happen.


- The "drop-dead" date for the Disability Fund will be revised to the 4th quarter of 2015. In 30 months all DI benefits will be cut by 30%. Again, that is current law.

I think the TF report will make it clear that a fix for the problem with DI must be addressed ASAP. Nothing will come from that plea; the fix on DI will be resolved a week before the drop dead date.


- There will have to be significant downward YoY adjustments in interest income that the TF will earn. It's the Fed's policy to starve SS. ZIRP and QE will "cost" SS $500b in lost income in the 2008-2018 period. The deterioration at SS in 2012 will largely be attributable to the realities of the Fed's policies.


- The combined OASDI Funds will "top out" in 2017, the peak of the Funds will be ~2.85T. This milestone is coming much sooner than had been anticipated a few years ago. The maximum size of the TF will be smaller than what has been assumed.

The reality is that the Baby-Boomers did not "save" enough to cover their cost. The Boomers will come up 'short' by at least $1T. The day that they will be hitting the principal of that 'savings' is coming 5 years sooner than hoped for.


- The Report will contain all sorts of economic projections. (There might also be changes in mortality rates.) There are dozens of ways to push numbers back and forth. One of the more significant variables is the Labor Force Participation Rate (LFPR). In May of 2013 the USA is facing the lowest LFPR in decades. The SSTF has assumed that this will reverse course and move substantially higher over the next five years, and remain at higher levels forever. If the SSTF does revise downward its assumptions on the LFPR it will have significant consequences to the long term health of SS. I do not think that the necessary changes will be made, an unrealistic assumption will be used again.

I expect an overall "Blue Skies" set of assumptions in the SSTF report to Congress. There will also be an analysis that is referred to as "High Cost". This set of numbers will be ignored by the main stream media, but these numbers will be closer to what is coming for SS.


-There will be ZERO discussion in the TF report to Congress on the most critical short-term issue that SS faces - Immigration Reform. I study these things, and I can't give you an idea what will happen to the economics at SS when there are new immigration laws. There is no data available to draw a definitive conclusion as yet. The TF report should address the uncertainties (or at least provide some numbers that could be studied), but it won't.

The consequences to SS regarding changes in immigration range from good, to neutral, to bad. SS has previously disclosed that it has collected hundreds of billions from illegal SS cards. My estimate on the amount involved is +$300B that has been collected and retained by SS. What will the resolution of this be?


* The new immigration laws could say that any prior contributions are lost - that is the "penalty" that must be paid. This would be a windfall to SS.

* The law could be written in a way that would recognize those prior contributions, and allow them as "credits" to the individual's benefit calculations. This would result in significant additional liabilities for both the DI and the Retirement Funds.


For wonks like me, the annual report is something to look forward to. For the 99.0% of Americans who have no idea what is at stake, it will be another ho-hum. SS is the largest source of government spending and the biggest source of tax revenue. It's not financially sound - the report will reconfirm that. The upcoming report will make for some splashy headlines for a few days, and then it will be forgotten. D.C. has neither the guts nor the desire to take on what is America's biggest economic problem.




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HurricaneSeason's picture

I love it when the government talks about their 10,20 or 30 year projections like they know what will happen between now and then. They can't even pass a 1 year budget and kick the debt ceiling 4 months per kick, soon to be a monthly punt. There is no way to fix it at this point, other than a total collapse breaking all contracts. It's too slow of a fix to correct one law or contract at a time and hopefully too slow of a process to pile it all back on after the collapse and the contracts are broken. There are infinitely more contracts than social security. We need a free market like China.

nofluer's picture

We need a free market like China.

ROTFLMBO!!! You mean with 8% minimum dialed in inflation to feed the kleptocracy? And have you noticed that as soon as someone starts making some serious money, they get arrested for some "crime"? Yeah.... I'll pass on a "free market like China." We need a free market like the USA before the FED and income tax.

nofluer's picture

"Trust Fund" - there is no trust. Nor is there a fund.

"And, it's gone."

Why do people insist on talking about SS as if it is going to be around in 5 or ten or twenty years? They say things like "Revenue stream", knowing full well (or they should) that since LBJ the "revenue stream" pours directly into the US government's general treasury account and is immediately spent.

The 14.6% (+/-) ODASI tax is not for old age or for "benefits" for the people. It is a minimum tax on workers who don't make enough to pay income taxes. And like all taxes it is paid mostly by people who can't afford a good accountant.

I'm over 55 and by the time I reach "retirement" age, the USA will either have a full-bore USSA style government, or something else. The Government of the "United States of America" will either be reconstituted after an armed revolution or it will not exist as presently constituted except perhaps in name only.

When I become an old person - IF I become an old person, I will either live with one of my kids or if my "retirement" plans are effective (the things I'm doing now to prepare for the world I see coming - bears no relation to bank accounts or annuities, etc  - what most people think of when they see the words "retirement plan") then I may be living alone or maybe with my current wife. We'll be moving slow, but could support ourselves if we don't have to pay taxes on income we won't have.

Social Security? No such thing.


ebworthen's picture

The right and the left are going to screw over S.S. recipients present and future; I guarantee it.

The elites need more money, more cars, more mansions, more pools, more jewelry, more exotic vacations.

El Viejo's picture

+1   But don't be so sure.   Old people vote and AARP keeps them informed and packing clout.  And with a boomer majority I would plan on a Japanese economy if I were you.

AGuy's picture

Existing and soon to be SS recipients will fair better than the younger crowd, as Older citizens are still the largest voting block What will happen is lot of money printing and much higher taxes on younger workers to prop up entitlements.

HurricaneSeason's picture

The Bernank will stop writing bad checks before then and we'll all go down together. There will be nobody else to loan hundreds of billions a month. At least the factories will come back from the other side of the world (no reason toilet paper can't be made here) , but prices will go through the roof.

HurricaneSeason's picture

More wars, more F-35 laser star wars planes. At least $500 Billion for those. If they say $500 Billion, they want $1 Trillion, but are afraid to say it. Regan wanted to spend trillions on satellites that could shoot a bullet out of the sky and hundreds of bombers to drop nuclear weapons on Russia after we are already dead.  The universities all accepted their money and agreed it was feasible, so it was good for schools as well as those practicing the bombings. Luckily the savings and loan crisis came along or we'd be getting gas stations all over the country getting accidentally blown up with lasers.

HurricaneSeason's picture

Social security isn't the problem, it's healthcare.  Regardless if the healthcare is paid by the Pension Guarantee Corp or underfunded government worker healthcare or medicare, it needs to be cut back. Anyone over 60 should be limited to one doctor visit a year, regardless how it's paid for, and then the budget will balance so we can have some more bombings and create good jobs.

kchrisc's picture

"Social security isn't the problem, it's healthcare."

No, the problem is government. ALWAYS!

That SS and healthcare are a mess is just proof that the only thing that comes from government is theft and death.

History repeats because people fall for the lie of government over and over while all evidence points as to outcome being theft and death, again. That is the lesson of history that mankind is want to learn if it wants to stop this crazy cycle.                  hujel

HurricaneSeason's picture

Really, it's a fireman that gets a $300K check on the way out the door at the age of 40 and collects $4K or $5K a week for life and unlimited free healthcare that will bankrupt the country. It isn't granny's $1K a month social security check. That will be especially true as there are fewer and fewer "private" jobs that aren't DBE, MBE, WBE and all the other negative action jobs.

the grateful unemployed's picture

heres the solution: put all the SSN assets into stocks, then have the Fed buy stock futures (they can type in any number they want but dont get greedy) when the market goes up, take profits, and have the Fed flip its position and go short the futures. The market ends up where it started and the profits are booked. [Oh and make sure the Fed leaks out advance notice of their plan in order for the other major market players to help them do gods work].

W T F II's picture

David Walker will tell all those who'll listen abiut the real #s. How many are listening is the question..??

kchrisc's picture

The funny thing about all this talk about Social Security is that it is just more evidence of the Ponzi-welfare scheme that SS is.

There is no "fund" just a cabinet full of Treasury bond numbers representing "investments" in government spending. i.e. "We stole the money and pissed it away, thank you very much."

The worse thing about SS is that it tricks millions into welfare dependency via "I paid in, so I deserve it." bullshit. No, they taxed (stole from) you with the excuse of welfare benefits years in the future and you fell for it.

SS is clear and present evidence that those in government are thieving and murderous criminals. Usually those in government leave some token thing behind to hide their theft, like a bridge or road, or shiny new "tanks" for local PDs, but the with SS they have left nothing but a cabinet full of "receipts" and "promises" worth the peanuts in a pile of shit.

It it weren't so tragic, it would be funny.             hujel

monad's picture

There is no Social Security Trust Fund. No such thing. Never was, doesn't exist, never will. Will you ever learn?

azzhatter's picture

Raise or eliminate the income cap. Means test the benefit payout. It can be fixed pretty simply. the original intent was insurance so that old people who didn't have any money would be able to eat. There was never an intent for people with millions of dollars to also draw $25K in insurance income from SS. This program became so bastardized over the years that it's unreognizable from original intent. This was a typical liberal program to provide a better society for the less fortunate/more profilgate amongst us.

Sofa King Confused's picture

In my opinion, Social Security was used as an asset of the government to be able to borrow money. And as the money that used to be "in the bank" was used up in the 80's and 90's a new scheme had to be created to show potential lenders that the govt would be able to pay them back and that is where I believe the 401K and IRA,s come into play.  See creditors, if we have to we will steal from our own people to pay you back. No risk here for you, you'll get your money back guaranteed.

Omen IV's picture

screw the illegals and keep the funds - let them stay in the country with no SS as offset to their crime - fair trade

raise the cap to $500k and rescind the WTO agreement which will solve the  Labor Force Participation Rate (LFPR) instantaneously - on that basis will have long term surplus for the next 100 years - stop the hand wringing - its all about adult decisions not potential near term available cash flow

kaiserhoff's picture

Bruce, your stuff is painful to read.

You are not just ignorant of accounting, you are hostile to any honest set of books.

SS is, was, and always will be a ponzi, but section 8 housing is far worse, and killing this country.  Why not focus your wonk skills there.  There is no revenue to confuse you.

That said, there is something useful here.  We have a latest possible date of death for the Ponzi.   Mark your calenders, gentlemen.

- The "drop-dead" date for the Disability Fund will be revised to the 4th quarter of 2015. In 30 months all DI benefits will be cut by 30%. Again, that is current law.


MrBoompi's picture

Sure, the analysis is great, but I never see any solutions offered.  What do you think we should do?  Increase the salary withholding cap to $250,000?  LMAO  Or just privatize it?  I'm sure Wall St is licking their chops.  I'm sure you'll want to do whatever's best for you, like most good conservatives.

fuu's picture

"Wonks like me."

Wrong vowel.

ChanceIs's picture

Have any of you ever noticed how completely incapable the government is in terms of contracts and obligations.  They always want o keep options open to suit things to their last minute whim...and f(*$ anybody who ends up on the short end of the stick.  Witness:

1) Fannie and Freddie paper have printed all over the front that the US Government does not back the paper - just the agencies.  If the agencies go bust, then you lose.  But there was this "implicit guarantee."  What did the government do in '08?  It guarantedd the paper.  And for what?  What valuable consideration did the paper holder give to the government in return for the bailout.  As for me, I get to help keep the stupid SOBs who bought at the top of the market from losing their shirts.  I get to keep the stupid SOBs who lent for that from losing their shirts.  I pay through the inflation mechanism.  An i pay because the misallocation of capital hasn't happened which means that what might be natural demand for say...iPhones (just joking)...goes to an inflated mortgage payment.

2) Social Security and the Illegals:  So SS collected funds from the illegals.  It now owes these illegals something!?!?!  Where is the contract?  The Supreme Court has ruled any number of times that the government doesn't owe SS to anybody.  It Justice Roberts so infamously quipped WRT ObamaCare....a tax.  Besides those people are here illegally.  Don't residents of the Big House lose there vote for a while for having raped, stolen, etc?  Hey.  Tough s*&t.  Paying SS you won't receive was just a cost of doing business.  And if I went doen to Mexico and worked illegally, I wouldn't doubt for a second that I would be laughed at should I make such a request.  You trade...NAFTA...all of that good stuff.

Oh.  BTW...f*&k FDR.

kchrisc's picture

Another reason for the "legalizing" scheme--money, slaves and "tools" for a broke government.

They are going to extort billions out of the "illegals" for "status" with the "promise" of "benefits" later while fascist big-business will use them as de facto slaves. They will also have no independent political voice because to try is to say "adios."

These poor dumb bastards will pay for the privilege of "status" right before the dollar dies and then will be hung out to dry as the culprit--"Juan took your job. Juan has your landscaping job. It's Juan's fault."

And those that consider themselves independent thinkers and libertarians need to keep this in mind as well, because the whole thing is a mindfuck to divert attention away from them, the thieving and murdering criminals of government, and toward "Juan." The typical scapegoat/class-warfare diversion.

Regardless of your opinion on immigration, the priority should be dealing with those behind destroying the economy and those that came up with the Patriot Act, NDAA, etc. and those that occupy town/cities and fly the drones, etc.             hujel

dontgoforit's picture

Turned 62 last summer - filed then.  Went in to see the SS folks last Monday just to be sure everything was copa seti - and lo and behold, it appears that since my income was so abysmally low last year, they apparently owed me - so two days after I went to see them, a deposit of nearly $4K shows up in my checking acct.  Yeah, I'm pleasantly surprised - didn't expect it.  First regular check comes on the 22nd of this month.  Wow.  Manna from heaven.

Keynesian Mess's picture

Your manna has very little to do with heaven.

You are already riding on the shoulders of your grandchildren and great-grandchildren.  The only hope that they have for a future is for the good old reliable USofA to default on the trillions that they are currently borrowing to drop manna into your lap.  Some hope.  Enjoy it while you can and teach your offspring how to live without.

Dixie Frank's picture

Via the SS website:



  • Employees — the Social Security tax rate is 6.2 percent on income under $113,700 through the end of 2013. The Medicare tax rate is 1.45 percent of all income;
  • Employers — the Social Security tax rate is 6.2 percent. The Medicate tax rate is 1.45 percent; and
  • Self-employed —the Social Security tax rate is 12.4 percent on income under $113,700 through the end of 2013. The Medicare tax rate is 2.9 percent.


Why not eliminate the employee income cap on SS payments? That way the damn rich movie stars, professional athletes, music stars (all commie fucks) can pay their fare share?  Pay up you rich, 1%, greedy, poor-hating, oppressive pigs!


Seriously though, why not raise the employee cap from $113,700 to $200,000 or $300,00, etc?  SS and Medicare are the only true falt taxes we have.

slightlyskeptical's picture

The cap is put in place to represent the cost of receiving the top level of benefits. I could see raising it a bit, but doing it regressively. So 113,700 to 123,700 tax at 5.2%; 123,700 to 133,700 tax at 4.2%; 133,700 to 143,700 tax at 3.2%; 143,700 to 153,700 tax at 2.2% and so on with the tax stopping at around 175,000.

Or you could allow social security to cash some treasuries and deploy that money in other investment vehicles. I favor mortgages with the assumption that underwriting is done responsibly. The beauty of doing it through social security is that benefits could be withheld in the case of default. This would make social security a very safe funding source for mortgages. Let them act as a bank with these same standards and then they could quite easily make good on their promises through eternity including disability and medicare.




drdolittle's picture

Several years ago it was supposed that social security would be bankrupt in 2039. I'll be 69 and eiligible for benefits then. I found it funny.

Seriously though, ERISA is a big reason wall street has so much money to play with and buy politicians with. And, the idea that we're all going to "buy the market" and we'll all retire and sell to the next generation is ludicrous. Retirement will be like it was before SS, you'll work until the day you die. The only way you can retire is if someone else takes care of you (waiting for my kids to pay off!). My job is not one an old man can do, but I can garden like a mofo. That'll likely be my retirement plan.

Compund the fact that we can't all retire off the profits of buying "the market" with the fact of the criminal  actions of "the market makers" and it's clear the market is no place to be. Unless you can do your homework and buy specific companies (most cannot) you'll get raped in the markets.

It made some sense that 2008 would be the start of the fall. That's when the first boomers started withdrawls en mass. With fewer workers to buy the stock, the price would have fallen except for zirp and ppt.

Handful of Dust's picture

I read Kotlikoff's book, "The Coming Generational Storm" and he says the gov will have to print trillions for SS.....or simply cut it and let the old people die. I used to think they would print and save those folks but now I'm not too sure...they may cut Medicare payments to doctors so much more no health care provider will see them. In my town fewer then 10% of the doctors will accept M/M. Seniors have no effective lobby compared to the bankers, insurance companies, realtors, and big oil.

dontgoforit's picture

However; if we're lucky, we all get old.  Don't spend that $5000 on a vacation because you may need the money to feed yourself later?  What will that money be worth then?  Dilema.  Politicians can screw up all the best of everything and generally do.

Dr. No's picture

Next step (Obamacare amendment?), Government run clinics which accept medicare.  These clinics will be staffed by underwater student loan doctors/assistants and will be the New deal labor corps.

MachoMan's picture

Yep.  Already seeing this.  But you won't see this until the larger private clinics/programs fail.  Then there will be no choice but for uncle sugar to step in.

The massive expansion and capital/overhead costs of medical facilities are now a noose around the necks of many hospitals/clinics as the government demands increased paperwork (increase in costs) while cutting reimbursements for services (decrease in revenue).  The reason why the system developed in the first place was to avoid the cutback...  to prop up medical professionals by keeping up their revenue streams, or even increasing them.  In turn, medical professionals built-in to these revenue streams (just like universities).  Now, the programs that were designed to prop them up have failed and need bailing out...  oops.  All of the buildout of the last 20 years is about to come cascading down...  taking what is left of CRE with it.

I know that my smaller/medium medical professional clients are moving away from accepting both government insurance AND private insurance.  The private insurance contracts aren't much better than uncle sam's, albeit with slightly less paperwork, netting slightly more money...  sometimes (they're also more diligent with rejecting claims).  The best clinicians will be able to rekindle the traveling doctor and perform gp services for the local country club folk...  the next tier will have clinics catering to the working class...  and then the rest will be forced to go to "free clinics" where they're seen by nurses and scrub doctors that couldn't hack it in private practice. 

The approach is simple, if you have too much overhead cost, then you're going to drown in this environment.  You have to reduce your costs to bare bones and focus primarily on the services provided, not how big or shiny your building is...  The issue is obvious, a gutted out america cannot afford the price of medical services (nor houses, nor anything else).  There is still time for people to position their practices, but some are "locked in" and others are in denial.  It doesn't have to be a death sentence for one's practice...  in fact, there is a lot of opportunity there...  but it isn't going to jump in your lap.  For most practitioners, it means making less and working more (and they, nor anyone else, much fancies that).

[this is why cost-push inflation is such a bitch...  you're essentially preparing as though experiencing deflation in many respects]. 

Dixie Frank's picture

Nawww, the old folks will demand the young folk's SS taxes go up. Guess what, the SS taxes will go up.

MachoMan's picture

You can't get blood from a turnip.  If the boomers wanted us to be able to pay for their retirement, then they should have thought about leaving us an economy that could do it.

Nobody For President's picture

You ain't no turnip motherfucker. The Bloodmobile is paying $25/pint.

Get in line.

CheapBastard's picture

Old folks have no meaningful lobby.....they will just cut them off slowly....

Balanced Integer's picture

You may be right...but AARP would still like a word with you. Perhaps they just want to tell you to get off of their lawn?

JustObserving's picture

Kotlikoff has US unfunded liabilities at $222 trillion instead of the more conservative $123.8 trillion others cite.

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

TheBird's picture

While mentioning ZIRF and money lost to the "trust fund" the author ignored that ZIRF also raises the NPV of the liabilities. So ZIRF is in fact a double whammy. PV of $100 30 years hence at 7% is $13, at 3.5% is $36.

Perhaps what is needed is akin to the fuel surcharge from airlines and fedex. When rates drop below a certain point, the FICA withholding goes up.

sangell's picture

But that would mean the FOMC would have to take into account the effect of their policies. No more 'free ride' if you put counter cyclical impediments on their interest rate decisions.

LawsofPhysics's picture

That which cannot be suatained, won't be.  No matter what wonks like you think, do or say.  All fiats will die, ZIRP and NIRP only accelerating the theft and death of all fiat currencies.  Hedge accordingly.

LawsofPhysics's picture

How?  BRICs already trading in PMs and real resources.  Wake up.

Bearwagon's picture

Gold is far down the line, first you need skills.

fonzannoon's picture

Bruce good to see you back here.

sangell's picture

I would be happy to have my SS benefits cut by 50% if the FED would end ZIRP.

JustObserving's picture

The NPV of the unfunded liability will go up by approximately $2 trillion, to $23 trillion

US debt clock has the unfunded liability of Social Security at only $16.3 trillion while Prescription Drug liability is $21.6 trillion and Medicare liabilities are $85.9 trillion.  So Social Security liability is only 13% of the total unfunded liabilities of $123.8 trillion.

Moreover, these unfunded liabilities grow at $7 trillion a year.  Or at 45% of the US GDP.