On the 2013 Social Security Report to Congress

Bruce Krasting's picture


The Social Security Trust Fund has come out with its annual report. Some have looked at it and concluded that the relatively stable conditions at SS the past year is evidence that all is well. There are many headlines like this these:





I don't see all the "good news" that folks are writing about. A few examples:


- The 75 year unfunded liability grew to $9.6Tn, from to $8.6Tn a year ago.

- The unfunded liability for the infinite future grew $2.6Tn (+12.6%), to $23.1Tn.

What do these numbers mean? They are large and growing quickly. The calculation is based on the NPV of future liabilities, meaning that these are the numbers to consider today if one wanted to "fix" SS. These present values are an indication of what future generations will have to fork out to support the promises that have been made. As it's impossible for the USA to write itself a check for these big amounts, the conclusion has to be that at some point in the future, benefits have to be cut, or major tax increases have to be enacted.


- The SSTF calculates that in order to bring SS into balance some combination of benefit cuts or tax increases is required. To address the imbalances that exist one of two things must happen IMMEDIATELY:


- Payroll taxes must go up by 2.66%, or

- Benefits must be cut by 16.5%.


Either of these outcomes (or some combo that equals the same thing) would have a devastating and lasting consequence on the real economy. I see no support today for benefit cuts of this magnitude (or large tax increases), so this problem will have to fester for a few more years before action is taken. Every year that brings us no action will result in higher and higher costs to "fix" the problem.


- The Trustees added a new type of "fix" that should scare the crap out of anyone who is close to retirement age. The solution would be keep benefits as they are today for those who are already getting SS checks, and to reduce them for anyone who reaches retirement after 2013. This would mean that all future beneficiaries would see a cut in their scheduled benefits of 20%. There are 60Mn seniors (and those on disability) who now get checks; and they all vote. The idea that new beneficiaries take this big hit is politically viable. This potential outcome will force more and more people into getting their benefits early in an effort to avoid the proposed cuts.


- The following chart tracks the cash flow deficit at SS based on the intermediate (Base Case) analysis. Over the coming decade the cash shortfall is projected to be $950Bn. Every penny of this shortfall must be financed with additional Debt Held By The Public.


cash flow



- Interest income was revised lower by a lumpy $111Bn over the next decade. SS has woken up to the fact that the Fed has taken actions that will permanently reduced income at SS. I believe that the $111Bn downward adjustment is still understating the consequences of the Fed's actions.


- The 2021 TF balance is now anticipated to be $2.9Tn. That's $145Bn less than the expectation of $3.05Tn a year ago. I'm willing to wager that even these results will not be met.


- The TF report relies on a set of economic assumptions to achieve the results that were presented. A few of the key variables:

- There will be no recessions at all over the next decade. In fact, the TF assumes there will no economic downturns between now and 2090. Rubbish!


- Real GDP will be increasing rapidly for the next few years. These are the plug numbers estimates for Real GDP:

2013 - 2.2%

2014 - 3.4%

2015 - 4.0% - Not happening...

2016 - 3.8% - Not happening...

2017 - 3.4%

2018 - 3.0%

2019 - 2.6%

2020 - 2.3%

2021 - 2.2%

2022 - 2.1%


- The SSTF assumes that a rapidly rising economy will force a significant increase in interest rates. As SS is a saver, interest income is a big component of it's total revenue, so high interest rates are essential to keep SS afloat. I don't think these expectations for ten-year yields have a chance of being realized (if rates get this high, then we're in for a hell of a recession).

10-Year Interest Rates

2013 - 1.2%

2014 - 2.4%

2015 - 4.6% - Not happening...

2016 - 5.6% - Not happening...

2017 - 6.2% - Not happening...

2018 -2021 - 6.5%% - Not happening...But if it does, there will have to be a recession. The TF forecast is at odds with itself.


- The TF report relies on an optimistic assumption regarding unemployment. In just a few years we will be back to the 'good old days' of 5.5% unemployment. We will not see these results:

2014 - 7.8%

2015 - 7.2%

2016 - 6.6%

2017 - 6.1%

2018 - 5.8%

2019 - 5.6%

2020 - 2090 - 5.5% Seventy years of perfection??? Using these numbers insures that the SSTF "looks" solvent long-term. But the reality is that this result will not be realized.



A year from now the 2014 SSTF Report will be released. There will be another big downward adjustment in future interest income. I believe those revisions will total at least $60Bn. This will result in the TF reaching its highest balance ($2.85Tn) in 2016. This is a critical milestone for SS, it will come 5-years earlier and $75Bn shy of the data that SS presented in its 2013 report.

So don't believe those Press headlines that paint a rosy picture for SS. There's no good news in this report card.




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sculptor's picture

self employed, I'm 62, I took early SS.   I was paying 15% SS tax (you pay both halfs when you are self employed) in addition to my other taxes.

the break even point of taking SS early is 78 years of age! (and that doesn't account for investing those early payments) I can buy 2 KG's of silver every month @ $750/kg with my benifits.   I can still earn additional 14k/ a year and pay zero taxes on it, still get my SS.

Even at poverty income the 15% SS tax plus my regular 15%fed 6% state property and sales taxes meant that every dollar I made was worth 50cents.

I think SS days are numbered, and maybe the value of a future dollar will sink, so getting it now and stacking it in silver and gold is my plan.

I just want out of the system what I put in. when I first started working and paying SS tax... gas was 25 cents a gal, milk was 25 cents a gallon, and a quarter was made of silver.  We spent it in Vietnam, cold war, Iraq, etc instead of investing

You youngsters are getting screwed, FDIC tax is properly called "Baby Boomer Old Age Support Fund Tax"  it won't be there for you.  I'm sorry for the way my generation screwed up the world for yours, frankly, you should revolt and throw us boomers under the bus

good luck (going fishin now)  

lunaticfringe's picture

Look, I am a boomer too.

I didn't authorize this shit. All I know is that these theives took my money for 50 years. How fucking bizarre that now I would like it back.

I can't offer myself up for sacrifice since none of this was my invention.

Meatier Shower's picture

Not a problem.

Your children and grandchildren may do it for you.

Andy Lewis's picture

Whadda crocka chickenshit bullshit.

Lift the tax cap and the crisis vanishes.

Steve in Greensboro's picture

Articulately expressed.  But your progressive overlords won't do that.  Lifting the cap (without raising SS benefits) removes FDR's fig leaf that Social Security is something other than simple redistribution from contributing members of society (like me) to proud parasites (like you).

Bruce Krasting's picture

As part of the "fix" the cap will be allowed to increase, but I don't think it will be eliminated. As Steve says, this would end the FDR dream for SS. There is not enough Democratic support for a change in the cap for it to happen.


Part of me wants the cap to go through the roof. The result is that the workers and voters would revolt, and SS as we now know it would be dead.

geekgrrl's picture

Thanks for the analysis, Bruce. I always appreciate your reviews of these SS reports.

I will say that from my point of view as an early Gen-X, I never expected to see a penny from SS. Also, sad as it is for me to say, I have seen abuses of free medical care a la Medicare, and free money, a la SS, in my own family, and I am tired of supporting this "free money" paradigm. They have willfully abused it. My own grandmother bragged about not having to pay a penny for her six heart attacks and five strokes (probably cost half a million dollars all told).

The boomers need to share the pain, NOW.

Disenchanted's picture

Ok, I'm at the tail end of the boomers but I'll play.

The day I see the FICA deduction cease from my paycheck(and the matching amount from my employer) we can talk about sharing the pain. Then I'll just write off what I and my employers have paid to FICA since 1971. Yeah I had my first FICA assrape when I was twelve...it was a different world back then.


But feel free to continue spending FICA monies on supporting Israel, Saud, Pakistan, building infrastructure in Iraq and Afghanistan and who knows where else, and how about another war or two so the MIC/bankster crowd can continue their obscene profits, bloated special retirement/health plans for federal bureaucrats and politicians, etc., etc., etc..


Yeah lets share the fucking pain alright.



geekgrrl's picture

Not sure I'm following your argument here. FICA deductions cut across all the generations (except those living off SS), so there should be no debate that it is a transfer payment, from all the younger generations to the retired-and-living-high-off-the-hog generations.

When I talk about sharing the pain, what I mean is that borrowing money is effectively pulling future demand forward. This means that we are literally spending the future. The boomers are in actuality squandering the future, and there will be a very high cost to all this stupidity. They should bear their share of the cost, although if there is a single feature characteristic of boomers, it's their failure to take responsibility for their actions.

azzhatter's picture

I got my first taste of the SS penis in my ass in 1967 when I was 14. I will just take a refund of all my contributions. Fuck you very much .gov

de3de8's picture

Just give me my money back, no interest, no return, nothing, just my money. Talk about thievery made legal.

OneTinSoldier66's picture

Of course, it's only natural, that I would "trust" someone(s) that I've never met... to hold onto a significant portion of my money that they keep getting regularly fed with... in a "Trust" Fund... and that it would ALL STILL BE THERE, in 30-40 years.


Nope, no Ponzonomics going on and nothing to see here at the SSTF folks. Move along. And don't let the door hit ya where the Good Government spilt ya!


Sorry. But it's just that I don't understand any Government Redistribution of Wealth programs, and I never did. Talk about the ultimate divide and counquer strategy...


Interest Rates will never rise, like the price of homes will never come down... as long as The Bernanke is at the wheel. We're on QE 'til the wheels fall off!

Judge Crater's picture

Boring!  We have right now problems.  In Obama's speech about press freedoms, he mentioned that the Internet is used by terrorists to harm the United States.  The next step for Obama, if he follows the instuctions from his CIA handlers, is to start shutting down the Internet selectively to isolate regions of this country.  Sort of like a cyber "shelter in place."  Those YouTube videos showing stuff like a military jet with no markings crashing into Two World Center are very disturbing to the guys who created the Obama myth and the 9/11 game plan.  After all, who knows if there is a video out there showing something that could wreck Obama's reputation if the video got on YouTube.  Anything is possible when you have a President who publicly says he goes into the Oval Office to decide on which targets (usually people's homes in Pakistan) his CIA controlled drones should blow to smithereens.

Augustus's picture

All pension plans are necessarily based upon assumptions.  The absurd part of this report is that one branch of the government is forecasting that government interest rates will be less than 3% forever (to forecast the deficits) while another branch uses 6% to forecast solvency of the pension plan.  If it was possible to prosecute nonsense, there would be a great stimulus from the building of new jails.

Moe Howard's picture

I will say it every day:

We need a "Committee of Public Safety" [Comité de salut public] like the French Revolution.

Guilotines are cheaper than bullets. Sharpen daily. One blade should last for the 536 or so criminals located in Washington District of Columbia.

de3de8's picture

Who cares if the blade dulls?

shovelhead's picture

Monsanto's GMO Round-up Ready wheat...

Round 65 and you up and die.

Problem solved.

"Partnership of Government and Industry for a Better* Future"


* If shorter

Bear's picture

And we have to pay DC accountants and technocrats $120,000 plus to calculate a number every year that means nothing ... along with the $100,000 plus we pay the IRS to deny tax-exempt status to organizations that believe differently ... along with Congress that exempts itself and a million Federal employees from ACA Health insurance


I believe that Washington needs downsizing or have the Chinese bid on a contract to outsource the who mess. 

ebworthen's picture

I am confident that the CONgress will increase taxes and reduce beneftis; then bail out the banks and crony corporations all over again.

ponzisaurus's picture

Well its all up to the fed wether we get our puppy chow.  As long as the fed buys the bonds to finance the ones reaching maturity in the SS fund we are rosy! Remember Japan has proven debt to GDP of over 200% is sustainable. I just dont understand where the problem with Greece, Italy and Spain is.  If Japan can buy its own bonds, and USA can buy its own bonds why cant the ECB buy its own bonds? Rubber hits the road here.  The benefit checks get exchanged on real items food energy ecetera.  SS, veterans benefits, obamacare, all checks that get exchanged for real shit.  What do YOU guess the debt at in 2020?  27T?  1T revenue, 27T debt, collateral is what?  Yet my neighbor expressed with complete certainty upon hearing my doubts that "SS will be there for you".  Hope she is right and hope the unicorns dont piddle on my lawn.

Bear's picture

Use 'Lilly's Unicorn Repellent' ... It works great, I never had a single one infect my yard

espirit's picture

I use "Uncle Ben's Skittle Shitting Unicorn Repellent" and never had a problem in my yard.  ~Great Product~

Hohum's picture

Mr. Krasting,


Don't worry.  Within 50 years, industrial civilization will be a smouldering ruins.  An insolvent SS system will be the least of our problems.


Let's look at the 2001 (approx.) CBO projections and then put to sleep any notion that this forecast has credibility.

tango's picture

No, in 20 years folks will look back and say, "How in the world did they miss the rise of life-changing technology that revolutionized energy, food, entertainment, finance and science?"  They will ask why we worried about water with desalinzation technology able to provide abundant clean water.  They won't understand the ludicrous debt, the promises so phony no one - even those making them - believe.   They'll marvel at how such ponzi schemes as SS and Medicare could continue in the face of mathematical impossibility.  

In the short run, I am depressed.  But we have a good future in the long run .  (The best way to forecast the economy is to reverse the CBO estimates - lol.  Like savvy investors do exactly opposite of what Bernanke says.)

rubiconsolutions's picture

None of this is a big surprise. From the beginning Social Security was doomed. And those that rely on it are pretty much screwed. In their 1960 decision in Flemming v. Nestor, Social Security is a pay-as-you-go social welfare program with absolutely none of the characteristics of an insurance plan despite what politicians say. Even their own website acknowledges this. There is no contract and "benefits" are given at the whim of congress. You have no 5th amendment protections when it comes to Social Security. No property rights. Zero. 

What people fail to understand is how Social Security works. As a pay-as-you-go welfare program it means that whatever you "contribute" via payroll taxes right now doesn't go into some sort of discreet account for you. It goes into the general fund (see: Helvering v. Davis, 1937). Proceeds of both the employee and employer taxes are to be paid into the Treasury like any other revenue generally and are not earmarked in any way. Sure, there's a quasi accounting entry made but that's about it. Whatever you pay into the system now is paid out in benefits to current recipients. And when you retire and start taking benefits they will come from those employed at the time. In other words, it's a massive Ponzi scheme which relies on a constant turnover of new "contributors" in order to be solvent and pay "benefits." Kinda like Bernie Madoff, huh?

Frankly, it doesn't matter to me if you can save the program through some combination of means testings or benefit reduction or tax increases. What matters to me is that I cannot opt out of the program. This is the salient point that most people simply don't get. Given the opportunity to do so I'd guess that many people would simply not participate in Social Security and take responsibility for their own retirement years. I'd be happy to opt out right now and take what has been stolen from me, er, I've contributed and go on my merry way and indemnify the American people from supporting me in any way in the future. But we can't do that can we? Because while we are told here in America that we are free the truth is that in a sense we are all economic slaves.

Don Levit's picture

You get an A+ for doing your homework and acing? (aceing) the test.
One item I will add.
The FASAB, the acccounting advisor for the federal government, considers FICA taxes as a non-exchange transaction.
An exchange transaction is when one party trades with another party; I give you a good, you give me the money.
A non-exchange transaction is when one party (the government) compels you to do something (pay taxes), and out of the goodness of its heart, may return to you a benefit.
Don Levit

rubiconsolutions's picture


Thanks. You are correct and this was upheld with the SCOTUS's Flemming decision. If people really want to understand Social Insecurity they should read John Attarian's book - Social Security: False Consciousness and Crisis. It's a bit technical and not a page turner but informative. Unless and until people understand that SS is theft nothing will be done and the status quo will continue. A glaring example is Ida May Fuller, the first recipient of Social Security. She contributed $22.54 during her working career but her lifetime benefit total was in excess of $22,888.92. Not bad huh? And yet seniors think this is perfectly okay because they've been inculcated to believe that it is. 



tango's picture

I have seen numerous studies of SS and Medicare discrepancies.  The figures most commonly cited were about $100k for SS and $140k for Medicare (all costs included) as the difference between what is paid in and what is taken.  We will NOT have a gerneral revolt or uprising over SS for one reason - it has become, for tens of millions, literally the only game in town.  When we switched from savings to debt, from long-term to short-term thinking, the power of SS increased exponentially.  (It's the sub-prime event.  The reason it was such an instant crisis was the utter lack of savings - folks with higher bills or loss of job had literally nothing to fall back on. 

We've reached a situation where it is considered the norm to work for 40-45 years, save next to nothing then retire for 40-45 years on SS (the Obama voter).  With life expectancy rising another 30 years for this generation this means they will work only a third of their lives.  Some new paradigm, some technology, something will change.  

fourchan's picture

if those were still silver dollars it would be perfectly ok.

sgorem's picture

just write a rubber check for all the wars and future wars, pay everyones taxes for them, bring everyone up to millionaire status, pay everyones mortgages off, loan anyone and everyone any amount they want @ 0% interest, buy the continent of Africa, South America, hell, buy China, buy all the gold back that these bastards have sold and loaned out for the last 100 years! Social Security? wtf!......

sangell's picture

I turn 62 in October so the idea of a 20% cut for those not able to get SS this year sounds like an excellant plan to me. I guess those younger than me will just have to work harder so I can relax and live off of your labor. Too bad but as John Kennedy said, "life isn't fair"!


Jean Valjean's picture

Soon you will be old and senile and stupid.  "Your" ss check will be easy pickin's for the youngsters, whether they decide to beat and rob you or just con you.  What goes around, comes around.  The only chance you have to truly "consume" your "winnings" would be to purchases a bunch of black light posters and store them in a damp basement.  But I'm thinking even you're not that greedy.

tango's picture

Also turning 62 this year.  We really don't need SS (both consultants, lived below our means) but my wife said absolutely not.  We each paid the max for several years and  deserve something for our contributions.  I have decided to take SS this year for one reason - it will not be there in the future.   SS is a poison that has destroyed our traditional foundations of prudence, savings and planning. We know folks making good six figures with nothing saved for retirement, betting it all on federal solvency. 

de3de8's picture

You kidding me, too big a voting block for cutting near term benefits.

bonin006's picture

I thought that was Carter. Was he just copying Kennedy?

greatbeard's picture

>> I turn 62 in October

I've got four more years.  I'm of the opinion the cuts shouldn't begin until after that time.  Otherwise, we're in full agreement.  Kick the can baby!!!

fonzannoon's picture

just kick the baby instead.

Moe Howard's picture

Me too [4 moar years]. Even one check, I will consider that sucess. More than that? Gravy baby gravy.

Rainman's picture

A retired guy goes to the Social Security office to apply for his SS checks. The woman behind the counter asks him for his driver's license to verify his age.

He looks in his pockets and realizes he had left his wallet at home. " I will have to go home and come back later."

The woman says, " Unbutton your shirt". So he unbuttons his shirt revealing curly silver hair.

She says, " That siver hair on your chest is proof enough for me ", and she proceeds with his application.

When he gets home, the guy excitedly tells his wife about his experience.

She says, " You should have dropped your pants. You could have gotten disability too."  

sgorem's picture



Hal n back's picture

The entire annual social security and medicare reports are bogus. So many assumptions--life expectancies, GDP, interest rates, 250 pages of bs in each report--and still the respective trusts run out of money.



sunnyside's picture

I've told this story here on ZH before, but it is worth repeating.  A couple of years ago I requested and was eventually given a face-to-face, one on one meeting with my congressman.  I expected about 5 minutes for a pony show, but we talked in his office in DC for about an hour.  Just he and I and through most of it was 1 staffer.  Amongst the many things we talked about was SS.  I asked point blank to show me anyones proposal/numbers that would show that it was viable and would be there for me when I retired (I'm in my late 40's).  He said straight out, "there is none".  I then asked why should I keep paying into it.  His answer was "Because it is the law.".

My point to this again (and it was eye opening to me) was that they know.  They are just riding it until the end.  We talked about many other things like bailouts, and TBTF and even anti-trust legislation, but I'm telling y'all straight from the horses mouth, that many of them (I say many because I omit Sheila Jackson-Lee from any point of knowledge on anything) know what is going on and what will happen, just not when.

PiltdownMan's picture

I takes a true Statist or low information voter to believe that this will end well.

Bear's picture

In other words a Moron

GMadScientist's picture

Or benefits cut by 8.25% and payroll up by 1.33%...or 2.0625% and 2.3275%...


disabledvet's picture

"no check for you..." hell of way to pay down trillion dollar deficits.

monad's picture

Before I got gerrymandered into a really cool ultraconservative district my then conservative congressman told me he was working to unify Mexican SS with US SS = NAU.
SS is the trap that undermines your status as a sovereign Citizen of the State you live in as defined in the Constitution. Obamasnare expands this usurpation. The feds have no jurisdiction in the 50 States. The States didn't even cede title to the so called 'federal' land, but they cronied up with their friends to steal the resources from the soveriegn Citizens.
All the presidents swore to uphold the Constitution. Gun control violates the constitution, and without 1st amendment protection religious groups are not even recognized, so the complaint of religious bigotry is moot. But gun control and the ability to blackball nonparty members as the traitors propose are laid out in the UN charter, which was derived from the charter the soviet union laid out by VA Lenin. The push has been on from the top down for despotic central control. This executive is openly committing treason.

GMadScientist's picture

That's right! Shun those Meds!