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On the 2013 Social Security Report to Congress
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.
- 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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Is that all you got?
Of course, there could have been a cost avoidance of 6 trillion dollars by not implementing all the corporate and central banking wars engaged by the US on every continent of the planet. But then, why puts citizens first when corporations do so much for everyone. Of course, the Social Security threat is the greatest financial threat that must be eliminated. Serves them right, those fools who contributed to the fund for fifty years. They should have understood that the SS fund was nothing but a slush fund for looting by successinve administration. Damn fools thought the fund would actually be used for its intended purpose.
Maybe the SSTF can fill some of the hole by purchasing MBS from the Fed.
Simple remedy .....send them all to our public schools ,so they can become sheep .....
For those of you under 50:
no job, no prospects, no retirement,
Perfect set up for revolution.
But you have all had too much Koolade and educational dumbing down to do anything but meekly follow authority down the path to destruction (or the nearest FEMA camp).
i was thinking anyone in the Government who isn't ex military or never served in a combat zone actually. but hey, "far out dude." i'm with that too i guess. http://www.marketwatch.com/story/regulators-close-wisconsin-bank-14th-of... good thing that Wisconsin Government has a surplus cuz it sure looks like a lot of banks might be heading south unless the recovery really starts "leavening." http://www.youtube.com/watch?v=YVwAqcBkAFM
"For those of you under 50: no job, no prospects, no retirement, Perfect set up for revolution."
Except that Americans are too Fat to revolt. They are more likely to have a heart attack on their way to a demostration!
Hey now, how about a revolution led by people OVER 50 or even over 55. I'm 59, will be eligible for full benefits (stifling huge laugh) in December of 2019 if 66 is the number they're using then. Yep, my name is Rick and I'm a baby boomer. There, I said it, so now I can begin my 12-step path to recovery. Bah!
Anyhow, I keep seeing more people around my age working out, eating properly and generally being in better health than when we were in our 30s and 40s. Personally, I lost 53 pounds in a year and have maintained it, love physical work (keeps me fit) and have shed all the junk food and high yeast breads, pasta, etc.
So, since a growing number of us around 50-60 are beginning to perceive that the government is going to pretty much stiff us (so, what else is new), and, since we have not much to live for in a life of poverty and desperation, I think a lot of us might just say, F it, let's give the bastards hell. Anybody like me, who's seen enough of lying politicians, overpaid .gov bureaucrats and slinky banksters, might just figure it's better to be human sacrifice than human death/debt camp fodder and take out a couple of .gov types with us, thus clearing the path for future generations to live prosperously, knowing full well that the government is only there to fleece us of every last cent forever.
Nearly 60 years on this planet, and it's been a nice ride, until about 9/11/2001. Since then, pure suckage, and this old fart has had enough. Who, in failing mind, body and spirit, will join me? We probably can't outrun the useful idiots; might as well stand and deliver!
+1 Nice Rant.
I'm with you.
Bruce,
Looks like SS uses about the same growth predictions as the CBO report on the Debt/Deficit you commented on a week or more ago, but not the same 10Y Treasury rates. Increasingly, (and I was already more cynical than is good for me), I look at all these government agencies as being on crack.
They're working backwards from the outcome they're required to come to.
They don't even have to work that hard. All they have to do is throw numbers on a peice of paper and mail it in. Has anyone gone back to any one person who made a 2013 forecast 10 years ago to see how close their numbers actually were? In 2023 no one will remember who it even was who put pen to paper. They could just as well draw a big happy face on a peice of paper and send that around instead of any numbers at all.
If the 10-yr goes to six percent, the interest component of the US budget won't be a little slice of the pie any more... All the BITCHES who report to the Secretary of the Treasury should be required to use the SAME SET OF US ECONOMIC ASSUMPTIONS. This is outright fraud and breach of Fiduciary Duty by the Secretary of the Treasury.
Great point. I never hear any of these geniuses on CNBC or elsewhere talking about how higher interest rates mean higher refi costs for government debt. The government always over-estimates GDP, employment and tax revenue. Projecting anything financial beyond a year or two is nearly impossible.
There will eventually be a two-tier debt system. One sovereign. One non-sovereign. The sovereign will most likely always be quasi-ZIRP and they will fleece the private sector with the end of the rate spectrum.
Greatest theft in human history and DC is more worried about gay marriage, abortion, gun control and illegal immigration. Bunch of red herring issues.
Hunger games in real life.
The beauty (from the politician's point of view) of the baseline system is that all the hard stuff that really matters is written in stone (except they could break the stone any time they want). So the inconsequential stuff (budgetarily) is where they can bluster and pose for the cameras.
Not true, the Treasury Secretary upholds his fiduciary duty to his owners.
Real GDP will be increasing rapidly for the next few years. These are the plug numbers estimates for Real GDP:
2013 - 2.2% NOT HAPPENING
2014 - 3.4% NOT HAPPENING
2015 - 4.0% - Not happening...
2016 - 3.8% - Not happening...
2017 - 3.4% NOT HAPPENING
2018 - 3.0% NOT HAPPENING
2019 - 2.6% NOT HAPPENING
2020 - 2.3% NOT HAPPENING
2021 - 2.2% NOT HAPPENING
2022 - 2.1% MAYBE HAPPENING
Fixed it for ya
The GDP will grow- due to the new "intangible" component.
(ouiji board component to be introduced in 2016!)
"If the 10-yr goes to six percent, the interest component of the US budget won't be a little slice of the pie any more."
Thats why interests will stay at zero until the dollar dies. There is no chance the Fed will raise rates. Wanna know who is the front of the line for the next Fed Chief? Why its no other than Larry Summers!
"This is outright fraud and breach of Fiduciary Duty by the Secretary of the Treasury. "
We are well beyond that point. There is no US treasury! To have a Treasury, one must has a surplus of money or something of value. The "Dept of Treasury", has changed its name to "Dept of Debt and Deceit"! Nothing that it does matters anymore.
I've said the same thing for years but my financial advisor now says it is possible to raise rates. How? The FED will monetize the interest on the debt just as they are monetizing the deficits. When you think about it, that could give an easy 50% boost to markets by the sheer nerve of such a ludicrous move.
Treasury department
Ministry of peace
ecetera
Obama to create a new cabnet position "Department of Debt" (the new DoD)
Great retro cartoon, BK
Would like to see more of your writing on Switzerland and Europe in general
And maybe one day, get Swiss citizens Bruce Krasting and Marc Faber together to talk over the state of the world ...
Visit him in Thailand maybe and hold a webcast ? Perhaps surrounded by some of Marc's female friends there ...
I think they know deep down that the whole economic system is going down and they have no intention of keeping any of those promises. They will find a scape goat and then some major war and talk sacrifice.
I was on FOX Biz channel a few months ago. Faber was the guest before me. I introduced myself to him. He's not a reader of mine. I was disappointed. Thailand? That does sound good.
yeah, well...i hear he's not only a reader of mine..."he's a reader of mind" too. never has so little been owed by so many to so few. these clowns in the "financial district" have been speaking in the echo chamber for so long (television) they don't even know what a change of thought is...let alone a change of heart. don't mind you sticking with this theme of course...i'm a believer in the "accelerated path" myself. "they did it for money"...move along.
She's cuter than spray paint!
deathpanels will take care of things
That's the idea. One way to cut costs is to cut the numbers and Obamacare will handle that job nicely. You're intellectual superiors, by virtue of expensive degrees and winning an election or knowing someone who has, will decide if its thumbs up or thumbs down. Even Stalin wasn't this advanced in his thinking. Only Adolph Hitler grasped the nuance of this kind of population control, well, and Pol Pot, and Mao. But they were crude in the effort. Friendly, loving government health care will keep the frogs from realizing that that "hot flash" is really boiling water.
Nobody will address the real issue. Obama spoke of it in passing as did many others but quickly shut up when Death Panels were raised. The overwhelming majority of medical expenses occur right before death and particularly the last month of life. For my dad, it was close to 90 percent for the last 2 years. My mom was 50% for the last month. My father-in-law was 80% for the last 3 years. We are left with only a few choices: higher taxes (always the first choice), technology (robotic care, longevity cures, etc), limiting end of life tax-supported care or going broke.
We cannot continue to lose (on average) $100,00 and $150,000 per individual on SS and Medicare respectively. That's not how things operate in the real world.
You're right, each Panel Plus ruling saves $162,000 NPV. In typical .govSpeak a 'Plus' is an elimination (reduction) and a 'Minus' is a negative ruling that requires a continuation of member's existence.
But Social Security is such a great investment!! I'll give the government $1 today for them to give me back 75 cents when I retire (thats probably optimistic--its probably more like 50 cents or maybe even nothing).
Kind of like increasing my ration of chocolate from 30 grams to 20 grams.
SS is nothing but a welfare redistribution ponzi. My wife and I maxed out SS for 14 years (each) but our payments will be only slightly more than someone who contributed next to nothing. The "solution" being advertised for SS is yet another redistribution scheme - raise the salary cap but deny benefits to those who contributed the vast majority to the "lock box" due to their prudent habits and wealth. How long can they keep running these redistribution schemes?
Social Security is a redistribution scheme taking money from black men (who die young) to white women (who don't). Check the actuarial tables, my brothers. But Social Security is a Democrat program and black folk have to vote for Dems. It is all part of the service from our progressive-communist overlords in the U.S. government.
I'd go with nothing.
You bigoted neo-con piece of shit!