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What's A Trillion Among Friends?
The Congressional Budget Office (CBO) came out with its latest baseline estimates for Social Security (SS) this week. This is the full report:
As an ex Wall Streeter I always go to the 'Cash Flow' numbers first, as cash flow is what drives most companies to success or ruin. The same rules apply for SS. I was surprised at the results presented by the CBO. They have a line in their report for Net Cash Flow, and I think they have it wrong. The following is a blowup of what CBO presented in the baseline for the fiscal 2013 Actual Net Cash Flow at SS:
CBO's cash flow number for 2013 is a surplus of $38B. But here is how SS presents its fiscal 2013 Net Cash Flow.
The difference between CBO and SS on the critical cash flow numbers is $106B in just fiscal 2013. The reason for this big discrepancy is the accounting treatment for interest. CBO includes interest income as a cash item, SS does not. The SS description of Net Cash Flow:
Should interest be included in the calculation of cash flow for SS? CBO says "yes", I would agree with SS, and say "no". Interest is paid in scrip - not cash. Consider what happens at SS when it receives interest payments (June and December). The December 2013 report from SS:
In December SS received $49B of interest, but the balance of the SS Trust Fund rose by only $36B, the difference is the cash deficit of $13B.
The cash flow numbers are important because they are a measure of how much SS has to borrow from Treasury to get the cash required to make monthly benefit payments. In December the TF got more 'paper' totaling $49b, but it had to immediately hock $13b of the paper, so the net SSTF increase was only $36B.
When SS is short of cash it must redeem some of its assets for the money needed to make benefit payments. When it does this Treasury is force to issue more Debt to the Public to cover the cash shortfall. So in December, SS forced an increase in the all import Debt to Public number of $13.4B.
CBO and SS disagree on the most basic definition of financial health - Net Cash Flow. CBO has projections going out to 2024. This is CBO's forecast of Net Cash Flow as compared to the accounting treatment for interest at SS:
The cummulative difference between CBO and SSA is $1.2 Trillion over the the next decade! Man that is a lot of cash, and it is also a boatload of additional Debt Owed to the Public.
Why does CBO have such a dramatically different assessment of Net Cash Flow for SS? I can't answer that. I did contact CBO for an explanation, I never heard from them. Does it matter that CBO is using an accounting treatment that is flawed, and that it is greatly understating the cash flow deficits at SS? I think it matters a great deal - about $1.2T in Debt Owed to Public in just the next ten-years.
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Long Grift to Privatize Social Security
Working 7/24 to take what's left of your honor.
Fuck SS. They will pay no matter what. They don't even send a check anymore, it appears as digits in a bank account. Literally costs next to nothing to produce. Of course, the more they produce, the less you can get with it. Why do you think 75 year old women are working the cash registers at Lowes or Walmart? They want to get out of the house?
Why worry? Life is short and then you die.
Don't forget to stack some XAU rounds Bruce. The "Ferry Boat Captain" raised his rates for banksters...
? Don't Fear the Reaper- Blue Oyster Cult - YouTube
My great uncle brought me a gift as a child. It was a box full of gambling "toys". A little roulette wheel, dice, cards, chips, etc. Before that he gave me a small Mosler safe. So I get my little brother to gamble with me and being 5 years younger it was easy for the "house" to clean up. After each gambling session, I would tally up what he "owed" me. I would then take a scrap of paper and create an IOU for that amount and have him sign it. I had dozens of these IOUs in my safe. I never tried to collect, although I could have since he was 5 and I was 10. They were always scraps of paper that allowed for us to enjoy ourselves by playing a game. I hope I did not damage him psychologically.
That is what our Social Security is: Scraps of paper and little else.
I'm sure China, Japan, Germany, Russia, Buffet, Soros and the Koch brothers feel the same way. Their investments are just scraps of paper, and little else.
For Christ's sake! How much longer are we going to parrot this bullshit. Will you just stop and think for three fucking seconds? Say what you want about the US economy, but US treasury notes are the most safe investment in the entire world. That's why low yields continue to bring investors. When the shit hits the fan again, and it will, treasury notes will be the safe haven.
You may be the only person on the planet that thinks our Social Security situation is really not a problem. You are a very unique individual.
All that's missing from your otherwise excellent analogy is a loaded pistol in your 10-year-old hand, and a dungeon in the basement to cage your little brother if he refused to pay.
Oh, and an IRS badge on your shirt, to make brutalizing a 5-year-old 'legal.'
The generation that is now beginning to retire has leveraged its size into favorable policy that it will enjoy in later life. This means the generous benefits boomers have continued to vote for themselves in programs like a prescription-drug benefit have caused deficits to explode.
An American born in 1945 can expect nearly $2.2m in lifetime net transfers from the "state" far more than they pay in. A study by the International Monetary Fund in 2011 compared the tax bills of what different age citizens pay over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. The article below focuses on the burden we are placing on the young.
http://brucewilds.blogspot.com/2013/03/the-young-will-be-burdened.html
This is all deck chairs on the titanic. Gen XYZ will never see a dime of this Fascist racket.
Bring the violence and skin everyone in pinstripes.
About the best you can say now is that we are in A World of Shit.
RE
The CBO has it wrrong?? A government entity lying about the numbers??? Mistakes were made??? You're a cynic???
Zoot and alours.
Next thing you know, we'll learn that hrc has cottage cheese thighs, Boeing inflates its costs to the government by billions, and some congresspeople are on the take.
And be just as 'surprised' that gambling is going on in Rick's club.
"Why does CBO have such a dramatically different assessment of Net Cash Flow for SS? "
Very simple. The SS trust fund exists in name only. Congress spent all the money. It was replaced with IOU's which earn interest on paper (which the CBO reports as real income). But the government is spending $1 trillion per year more than it receives in tax revenue so it has to borrow or print in order to make the interest payments. When SS pays out more than it receives in FICA income, it has to cash in those IOU's which requires more printing or borrowing. At the end of the day, it is all added to the debt and/or devalues the dollar.
SS was flawed from the start in that there was no mechanism to adjust benefits that reflected the change in life expectancy. When SS started, average life expectancy was 67 so, on average, benefits were paid for only 2 years. Life expectancy is now 78 so benefits continue for an average 11 years longer. As life expectancy increased, FICA taxes and/or retirement age should have increased. I see nothing wrong with means testing either. I am sure that Buffett, Gates, Dimon, and Blankfein don't need nor would even notice their SS check every month.
Even more basic flaws were not giving beneficiaries an ownership interest in their account (part of the deception used to sell the program), and the ability to invest in higher-return assets such as equities.
In an IRA, Keogh, 401K, etc., what you save and invest is yours. In SocSec it goes into a general pot. If you die young, it's gone.
'Means testing' is a euphemism for a tax to fund welfare.
Paying an unlimited portion of income to receive a benefit capped at around $2K a month is just another 'tax the rich' scheme. Don't feed the Beast.
Suffering and hardship for the masses--it's what's fiscally responsible!
Give us a break from your constant Social Security bashing and maybe write about America's bi-polar balance sheet where $77 trillion of untaxed household wealth rests on the balance sheets of our plutocrats and their constituents while the $17 trillion national debt has been strapped on the backs of the working class whose standard of living is being crushed by so called free trade agreements and Federal Reserve policies. How is it possible to have a legitimate budget crisis when household wealth has growing four times faster than the national debt for over 30 years?
This is a very interesting post but I can't understand it. What $77T is this ? Is there a reference for this number ? What;s untaxed household wealth ? What's a balance sheet of a plutocrat ? Are you proposing something? If so, what ?
The Federal Reserve B.100 data base publishes the historical values for household wealth. According to the latest report household wealth has increased to $80 trillion. In Obama's first five years, net household net wealth increased by $21 trillion dollars. During this period, the national debt increased by $8.3 trillion. Even though this ratio of wealth to debt has declined somewhat from its historical trend, the nation's aggregate balance sheet has never been stronger. The problem is we have strapped the nation's debt to people who earn no real wealth. http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf
Pointing out accounting inconsistencies is not bashing.
Look at SocSec's own numbers reproduced above: escalating deficits, trust funds evaporating.
When SocSec itself admits to being in dire condition, is that auto-flagellation?
Not surprising considering trillions of spending is unaccounted for.
The solution for social security is for them to finance the primary mortgage market in the US for US citizens. This way they are not relying on non-existant interest funded by taxpayers to make the nut. Of course any such program would need to have strict underwriting standards. 20% down, full credit check, cap on annual average appreciation available to be loaned, etc. Future SS benefits would be the collateral. Just have Treasury print the money and hand it over. It would simply replace current fractional reserve created money so it would not be inflationary. It's not going to help people who would qualify anyways except for the resulting social good. A 4.5% rate would bring more current income after expenses than SS is currently recieving from the government and out taxes (3.6%).
Putting the money in the stock market is a stupid idea. Too risky for one. It would also require $3 trillion to be taken out by other investors if it was to be price neutral. What you would have instead is too many fish going after the same bait, which raises stock prices, but only until the buying is done. At that point the market would go back to fair value, wiping out that $3 trillion in market cap. SS would be guaranteed losses. Of course the talking heads like the idea because they will end being the ones abscombing with that temporary surplus of $3 trillion in the market.
More Propaganda for Long Grift to privatize Social Security by Blackrock/Petersen.
The must have a whole office dedicated to breaking the government's promise to the American worker.
The "promise" was made by fucking liars that never had any intention of making good, because they knew it was not possible. Like those who designed the concept of the EU and the Euro, they knew it would eventually lead to default which is their entry point to absolute control. It is no conspiracy, it is a business plan.
For pete's sake we have 20% real unemployment and probably another 20% underemployed. I would be worried if social security was cash positive given the state of the economy which should only be measured by quality of life rather than profits and stock prices.
All organisms seek to survive. Unfortunately the parasite loses context with the fact that its survival depends upon its host. Once the host's defenses are substantially worn down, the parasite's prosperity takes bloom, completely indifferent to the plight of it's host and its own impending doom.
Remove the cap on SS for all wage earners.
Yes, a removal of the cap, or at least a hefty increase income subject to FICA taxes. Then, when that fails to stop the bleeding, means testing.
Social Security is basically welfare, but if you remove the income cap then it becomes plain for all to see. I have been surpassing the limit for decades and wanted to consider downshifting to a career path that would drop me below the $117k threshold. It really doesn't affect the projected payout much if I went part time to say $80k/yr for the last 10 to 15 years. So basically higher earners don't see much of a return with SS for their extra efforts.
If we are willing to accept that our government's policies are not just about money but manipulation or "social engineering" as they would prefer to call it, then we must believe that what you are suggesting is one of their specific goals and not just some unfortunate unintended consequence. Those who are willing to bust their hump to acquire wealth and independence are in direct conflict with their agenda. They are a threat if nothing else, and must be subdued. Everything we see today is deliberate and focused in only one direction...downward.
Not sure I agree with means testing, but all earnings should be subjected to FICA taxes without a cap. No, this will not affect anyone reading this post.
We know none of this is sustainable, so for the sake of those truly in need, I would support means testing social security...under one condition. Stop calling it Social Security and call it what it has become...welfare, and stop deducting it as an employment tax and calling it "insurance", paying it out of general revenues, just like the rest of welfare payments. We could use a little honesty in language. Our only hope is the embrace of reality as that is the only thing that will create the motivations required to find actual solutions. The constant lies and delusions of something for nothing will never allow solutions to come about.
Honesty starts from understanding Social Security law. When we don't understand basic facts, all sorts of bullshit gets thrown about. Your post is exhibit A of bullshit and intellectual confusion.
You are full of crap. If there is a trust fund that you think will pay for all of this, then why on earth would you need to means test it which almost everyone agrees will be needed to remain even close to solvent? If we are contributing and our blessed government sends us statements showing how much we have put into it, then why take off the cap on wages? If the glorious math is so solid, why will they need to tax the crap out of the rich to pay for set benefits that have little to do with contributions?
IT IS A FUCKING TAX and has nothing to do with a trust fund or our government setting aside OUR funds for OUR retirement. They are paying out of general revenues now to cover the difference between receipts and expeditures. The fact that we are 17.5 trillion in the hole so far and growing tells us it is not sustainable and that they are paying debts with more debts. There is nothing about our government spending that is not dependent upon creative accounting and fuzzy math.
Amen.
....but...but...but then Congress and the Prez would pay more too!
Full agreement.
Nothngn9.25 an hour can't cure. Or is it 9.75 and hour? Hard to keep track when we let "The Good Times Rool."
Like all Ponzi schemes the accounting method used should be FIFO (the First ones In are the ones who are the First ones getting anything Out).1 Once this is understood, one can understand why one should take SS at the first possible opportunity (i.e. 62 years), just so you get something out! Then your backup plan should be work and produce something of value and/or die.
References:
1. Madoff et al., "Its just a scam you silly goose", J. of Scams and Ripoffs, Government Press, Editors H. Reid and N. Pelosi, Published by Barney Frank Press.
Arghhhh!!!!!!
+100 Bruce, you’ve been the miner screaming “the SS canary is dead!” for quite some time. As one that has responsibility for, ahem, “creating” our Company cash flow projections (in a high cash flow business) I can vouch for the difficulty of such an endeavor. However, a 1.2 T difference between CBO and the SS Admin shows the level of political influence in play.
Any way you look at it, SS is doomed to failure (it was from the start) as a contribution based scheme. SS “contributions” are nothing but a tax, and from here on out the sucking sound you’ll hear is the money rushing out of the .gov general fund to feed the boomers.
Right, doomed from the start. 80 fucking years ago! Obviously you don't understand the Social Security System, or the Social Security law. By law, if SS pays out more than it collects, it must reduce SS payments. That is simply the law. Social Security will never go bankrupt, never go broke and a child born tomorrow will collect Social Security when they become of age. If you think otherwise, you are a small minded, gullible fool.
Let's pay close attention to what this hack Krasting is trying to convince you of. He wants you to believe that treasury notes held by China, Japan, Germany, Buffet, Soros and the Koch Brothers will be redeemed upon maturity, but you, the taxpayer, will not be paid back. The US Government will simply not pay you back. Absolute bullshit!!!
Yes, the treasury notes in the SS Trust Fund are a bit different than those held by the above mentioned entities, but they operate in the same manner. That's simply fact. No amount of dick pulling will change this reality.
He is a bit of a hack; but I think he's just confused. Your post makes it simple enough for anyone to understand; and you can see the results. It's simple enough to understand, but the will and the purpose to understand is missing in the population. They never actually learned how to think. Rather discouraging, isn't it ?
The problem that so many here have trouble with is the concept of investing. If you accept the notion of investing then you can't see how government debt can be anything but an asset. If you believe owning a piece of paper called a "stock" is an asset, then a bond can be no different. I watch business broadcasts quoting Buffett suggesting that stock should increase in value over time as the companies that they represent grow larger and more profitable. I ask, what part of any company do you own with stock? When GM crashed, how much was that stock OR their bonds worth? The reality is that they at best are worth what some court might suggest (even thought there is still no way to get blood from a stone), but really they are worth only what you can convince someone else they are worth that actually has the cash to pay for it. Which ultimately is what the stock and bond markets are all about....selling...convincing someone that what you own is worth more than what you paid for it. NO one buys a bond to hold to maturity, they only want to buy low and sell high. The bond could have a thousand year maturity and it would matter not one bit. It is just another trading chip, a means to lever or multiple wealth by relying on the desire of another to do as you are doing and make money without actually working for it. And of course the best part of the whole thing is when you are winning, you feel so damn smart! And when you lose you are not stupid, "you was robbed!"
To make a long story short; your're wrong. Bonds are used as instruments of trade; there are also many institutions that hold them to maturity.
Most revolutions start with young energetic people who don't vote.
IF any regime attempts to fuck with Seniors, they have a very short career. Because one thing the seniors do is VOTE.
You're right that the fund will continue to pay in full those who have contributed (and those that don't, thru various totally unrelated to retirement promises tacked on by cowardly politicians unwilling to tell the truth and raise taxes over the decades to pay for it, changing it from O.A.S. to basically a welfare program for recipients the original law did not intend).
The real question is what a $2,000 monthly check will be worth in 2024, vs. what it is worth today in buying porn downloads, twinkies, satellite TV, breakfast at McD's, and Ripple in the 'hood.
I'd guess half of what it buys today.
Some seniors voted in the last elections and will never play their corrupt game again. I know one for sure, and maybe two, if my wife goes along as promised.
Please consider that if the Snowdyke and her Federal Open Meteorological Committee can punch a computer button and massively bankrupt the country, computer vote counting is child's play. We had better go back to local paper ballots counted by people watching each other.
While I'm on a roll, we had also better return to septic tanks and end the local sewage treatment by local government lackeys before we all die of cholera or any number of other diseases.
Bad guess. Hot Dogs and gasolene have both doubled during the short, (it just seems like forever), tenure of the Kenyan in Chief. In 2024 you're looking at one tenth of your buying power; not one half. Inflation; it's a process; and it continues. It didn't stop.
"Right, doomed from the start. 80 fucking years ago! Obviously you don't understand the Social Security System, or the Social Security law. By law, if SS pays out more than it collects, it must reduce SS payments. That is simply the law. Social Security will never go bankrupt, never go broke and a child born tomorrow will collect Social Security when they become of age. If you think otherwise, you are a small minded, gullible fool.
Let's pay close attention to what this hack Krasting is trying to convince you of. He wants you to believe that treasury notes held by China, Japan, Germany, Buffet, Soros and the Koch Brothers will be redeemed upon maturity, but you, the taxpayer, will not be paid back. The US Government will simply not pay you back. Absolute bullshit!!!
Yes, the treasury notes in the SS Trust Fund are a bit different than those held by the above mentioned entities, but they operate in the same manner. That's simply fact. No amount of dick pulling will change this reality."
Accounting101.....you are the MOST IGNORANT cocksucker on the planet. What the fuck gives you ANY CONFIDENCE that the Federal Government follows the very laws that it makes? At one time it was a Constitutional requirement for the CONGRESS to mint coin and value it. But at the stroke of a pen in 1913 our Congress and President transfered that Constitutionally required responsibility to a cabal of private bankers.
Repeat after me a thousand time while hitting your balls with a hammer......LAWS.....IN.....AMERICA.....DON'T.....MEAN......SHIT !!!!!
So then you agree with me that its the law. I'm curious, what part of the law do you think the US Government will not follow? Reducing SS payments to equal money coming into the system? Honoring the treasury notes?
I hope you are not entertaining some stupid ass notion that the US Government will pay China, Japan, Germany, Buffet, Soros and the Koch's but not us.
You see what I mean; they have their little emotionally charged opinions; and they certainly don't need any facts to bother themselves with.
So then you agree with me that its the law. I'm curious, what part of the law do you think the US Government will not follow? Reducing SS payments to equal money coming into the system? Honoring the treasury notes?
I hope you are not entertaining some stupid ass notion that the US Government will pay China, Japan, Germany, Buffet, Soros and the Koch's but not us.
<slap on the forehead>
I mean....seriously.....anybody out there in ZeroHedge Land.....can I get a little help with this fool ??!!
OF COURSE THEY WILL PAY OFF CHINA, JAPAN, GERMANY, ENGLAND, BUFFET, SOROS, THE KOCH BROTHER'S....ET.AL.......because if they don't then we default. If we default the U.S. loses the Dollar's status as THE WORLD'S RESERVE CURRENCY. If we lose that....we are done as a 1st world superpower.....which means we lose control of the world.
We the Sheeple DO....NOT.....MEAN.....SHIT.....to our elected psychopaths. They will AND ARE DOING everything in their power now to screw us. And here's the simple reason why. READY ??
Everybody who has been elected or will be elected comes to find out through committees or secret briefings with the CIA, NSA, DOD, Pentagon, CBO, The Federal Reserve, and the President....how monumentally fucked we are and that COLLAPSE is right around the corner. Every action these psychopaths take is to.....
a: desperately delay the coming inevitable collapse
b: position themselves individually and as a party collectively NOT to be left holding the bag while in power or at least be able to shift blame to someone else or the other party.
c: enrich themselves against the coming collapse and make enough influential friends for protection against the coming chaos and civil unrest.
d: enrich their influential friends as payment for their protection against the coming chaos and civil unrest
e: enhance their chance of getting a cushy insider's job with one or more of their influential friends in the private sector once the smoke clears....or even before the collapse.
That's it. Simple as that. Watch every move.....mark down every vote.....and apply the above template. Then you will have total knowledge and wisdom when it comes to Washington D.C. And then you will see that Social Security law.....like the Constitution....is nothing but "a goddamn piece of paper"
The US will never default, and its very simple to understand why. The US prints its own denominated currency. Default is not an option for the United States. Basic economics folks.