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Bruce asked which is more toxic;: debt owed to SS or debt owed to the public?
Acvording to the federal government, future Social Security and Medicare benefits are not even liabilities.
And, on a scale of 1 to 4, the obligation to pay future Social Security and Medicare benefits is level 4, the weakest obligation to fulfill.
On the other hand, debt held by the public IS a liabillity, and is on level 1, the strongest obligation to fyulfill.
See "Federal Debt, Answers to Frequently Asked Questiuons, An Update," published by the GaO.
Pages 65 and 66.
See also "Fiscal Exposures Improving the Budgetary Focus on Long-Term Costs and Uncertainties," published by the GAO.
Pages 3, 12, 15, and 25.
"'But if you are born after 1950 the odds of getting full benefits is reduced. For example, if you were born in the 1960’s you have only a 34% chance of getting 95% of what you think you will get.''
WHAT THEY REALLY MEAN IS THAT YOU HAVE A 95% CHANCE OF GETTING 34% OF WHAT YOU THINK YOU WILL GET.
EUTHANASIA FOR POLITICIANS OF PENSIONABLE AGE
Sadly, SS is coming apart. I think a bunch of the "projections" for outlays in the report are shortsighted. My Dad was born in '46 and my Mom in '47. On Their 62nd birthdays both of my folks started collecting SS. Yes, they took a reduction in monthly benefits by collecting at age 62 vs 65 but they are both convinced SS is doomed and they wanted some of their $$$. I read an article in USAToday a few months back about the "surprise" of the SS Administration that many, many boomers are collecting early like my parents. Unfortunately, the boomers, the largest voting block in the country, have done nothing over the past 40+ years to stop CONgress and the White House from spending the SS surplusses. With unemployment getting worse over the next few years and SS recipients growing a butt-load the next few years, its all gonna burn baby! I'm ordering more MREs right now.
Your parents are very clever. I'll be doing the same thing next year.
Half-ass reporting, you get an “F”: If the SS surplus was not stolen by the government, it would be self supporting into the future.
wrong, not enough workers. But at least there might be a little cushion before the Ponzi collapses.
I think SS is the prime example of a pure democracy in action.
The majority get to vote entitlements to themselves away from the minority. This is why we are suppose to be a constitutional republic. To prevent this.
Obviously all the baby boomers are pissed. They were promised effectively 8+% return on the money they 'invested' in the SS fund, only they forget that they also voted to spend those very funds that should have been saved, not to mention the risk that the net return over the last 30 years net of inflation has been a negative return, but they were not obligated to take the investment risk, only entitled to the returns. Their children who could not vote were defrauded of their future.
Bruce, what is the present value of 75 years of our military obligations? Or the PV of our oil subsidies? Or the PV of our agricultural subsidies? Or the PV of the tax breaks for hedge fund managers?
You see, it all comes down to semantics and issue framing. Before the Greenspan Commission, future obligations to retirees were just that ---- something that might arise in the future, just like every other government expense. They were not considered a present "obligation" and nothing was done, therefore, to fund them.
In the 1980's, Congress followed Greenspan's recommendation to "do something" and raised SS and Medicare taxes to a level greatly exceeding that which retirees actually needed. It could have invested this surplus in gold, stocks in private companies, or corporate bonds, but the Commission thought that would be too risky and disruptive of those private markets. So, instead, the surplus was lent to the government in exchange for non-marketable securities.
Those securities are now coming due, forcing the government to redeem them. But the government is now facing a political movement, the Tea Party, that refuses to raise taxes to redeem the securities. Instead, we are told we must cut government spending.
Okay, that's fine as far as it goes. Each year Congress must decide whether to raise taxes or cut spending to balance its budget. But that's not what you are suggesting, Bruce. You are now suggesting that Congress cut not only its "other" spending but that it cut the very spending that these non-marketable securities were created to pay.
I'm sorry, but the SS trustee is entitled to be paid the full amount of these securities no less than the Chinese sovereign wealth fund is entitled to be paid its marketable treasury note. Period. End of story. There is no real difference between the marketable obligations of regular treasuries and the non-marketable obligations owing to SS trust fund/retirees. There is no real difference at all, only a market difference. The latter cannot be sold to third parties, only redeemed. But when it comes time to redemption, marketability is irrelevant.
We could have done this with all future government obligations. We could project future deficits in military expenditures, oil and agricultural subsidies and the like. We could then raise taxes and use this tax revenue to fund our current government expenditures, just as payroll taxes were used for the past 25 years to fund our current government expenditures. But we didn't. And until we do, all government spending must take a back seat to all redemption obligations of U.S. treasury securities, whether those obligations are evidenced by marketable or non-marketable securities. That, Bruce, is what the word "security" means.
Thanks. Well said. I just could not put so succinctly as you did. Saved me the trouble of concocting a cogent argument. The raised payroll taxes to pay for government is the key here. Where is the equity in taxing workers (real workers who make stuff) and not taxing those who shuffle paper? I'm not arguing the morality of taxes; that is taking from some to subsidize others in many cases. If we ARE going to tax, then make it tolerable.
This piece was about SS and the CBO. I did not mention the military, hedge funds, oil or agriculture. Yes, those thing are big items and they need to be addressed. But I maintain we can't fill the bucket without cutting this program too.
You are will informed on this topic. So answer this question:
Which dollar of debt is more toxic to the USA; a dollar owed to the general public or a dollar owed to SS?
Give me your answer. I'll give you mine.
They should offer early retirement benefits to those over 50 who would like to cash out with a 10% penalty. It would buy them a little time. Many would cash in just to make sure they get anything at all.
The fact that the SS fund is held entirely in recently downgraded treasuries should also be cause for concern.
"The critical years for SS are the next 20 (Boomer explosion)."
Mmm, not like SS haven't had 40 years of booming contributions and 40 years of booming trends to see 'the problem' coming and plan for this 'boom' is it?
If it weren't so pitiful it would be hilarious.
At this juncture, I do not for see a country here in 7.5yrs, much less 75.
Nor is there any such animal as an “infinite future”. Which I know you likely used as a metaphor.
As for self funding......................the stats I read from last months revenues, approx 7+ billion in SS funds were collected, and approx 4 billion was to be paid out.
That left a +/- 3 billion..................................surplus.
If this was/ is the case, where did that extra 3B go, and why did PO-TUS, say he did not know if we would be able to send out August SS recip checks, if we did not get a Debt Ceiling Raise?,when the funds to PAY were already IN THE COFFERS?.
Lying political scumbag,fear mongering,scaring the shit out of our 70-80's age groups.
If these were indeed facts, I would say, the surplus was spent the same way they always are.
Let's get serious on this, when we stop giving better housing, and cash allowances in the neck of $3-4k per month to illegals, and political asylum seekers.( Fact)
This is/has been done for years, under the radar of the American people.Funds paid in going out to foreigners, and illegals.
Then the PO-ME's we runnin outa moneeee from the sh**head* in D.C.
Do something to gut the freebies(to folks that DO not need them,are able to work,and won't), stop paying women to have babies (and paid per head) as LONG as they are unmarried ( so they can support the cigarettes/dope/Big 40 crowds drug habits, and keeping them from having to work).........they get close to $500-$700 per mo per child FREE.
( To be fair, Caucasians are almost as bad, and guilty), (except the black communities are a far smaller percentage of the OA population than Caucs)All the above has gone on for YEARS.......................decades......benefit of the Great Society, that has all but destroyed the Black community.
But, we from da guvmint, and we here to hep ya!.
Your victimhood is showing. The facts are opposite of what you believe. I am tax preparer menager and i want to inform you that illegals are paying FICA taxes without ever claiming them.
Since they work on fake SS numbers, they are paying thousands of dollars yearly for SS that they will never claim, and you are crying about spending to save their lives in ER. Shame on you
...I do not for see a country here in 7.5yrs...
...I do not for see a country here in 7.5yrs...
Well, not the one we'd like to see, of course. But the land and people will be here. The continent will not sink into its adjoining oceans. People will prevail, regardless of what happens in the sink hole of Washington DC.
That is optimistic!
Come on everyone, this one is a no brainer. Cap SS benefits; no more inflation adjustment. Then cause alot of inflation; the nominal tax revenues increase. Problem solved without a tax increase or changing the retirement age. That's how they roll.
Factor this in, as long as we have a voting system and not a dictatorship Social Security will be around, due to the fact this is the third rail of politics.
So, it seems to me there are plenty of non-government people doing all the correct analyses and have no vested interests, other than doing the right thing. It would be a good exercise to let these people run these things for awhile, it would be an eye opener for both sides.
gigo, why could you expect any change when they are so educated?
The solution is simple. Eliminate the cap on earnings subject to SS taxes.
Your comment is another of the favorate sound bites of the SS defenders.
This is false. If one contributes a dollar to SS they get $4 back. So when you increase contributions you also increase future liabilities by $5. Your proposal takes SS in wrong direction.
There is no fix to SS that starts with, "Let's raise taxes". It will never pass.
Great point. The crux of the dilemma. $5 for $1, based on today's mortality rates!
A safety net that started as a term life insurance policy became a whole life policy for all. Means testing is the most contentious part of the debate and serves as a great litmus test to a society where the chase to keep up with the Jones now trumps all rational thinking, and is largely the result of an equality of education. Too educated to be taken advantage of, too educated to accept defeat, the 4,000+ year old wisdom of the apple in the "Garden of Eden" has never been more prescient.
Just because you put money in, doesn't mean you get money out. You can cry that that is unfair all you want, but if, among all the gross economic inequities in our system, THAT'S the one that you feel is intolerable, then I say, get a grip. The whole system is gamed spectacularly in favor of the wealthy, Bruce. They get better health care, better education, better lawyers, better accountants to help them find tax shelters, unlimited access to alternative investment strategies, etc, etc. How about the inequity of the fact that the possibility of upward mobility that my parents were able to achieve, one a teacher, the other a civil engineer, from lower all the way to upper-middle, putting 5 kids through college and graduate school, IS COMPLETELY IMPOSSIBLE NOW!
There is no fix to the entire mess this country's economy is in that doesn't start with dramatically raising taxes on the wealthy to levels that were in place at least before Reagan. I agree with you, "It will never pass." That is, until campaign finance reform is passed. And, let's be honest: if we don't fix that, nothing will ever get fixed in this country and we can just kiss the American experiment goodbye.
They didn't factor in the 2008 crash? Did they factor in the next crash which is probably right around the corner?
Right Here, Right Now
Superstar DJ's Here We Go....
'Someone must have said, “Make the result look like things are getting better!” '
Rule#2 When someone is lying to you and you know that they know they're lying, grab your wallet, they're trying to steal from you.
Money or power their goal is theft.
The politicians know this and need this type of bad accounting to continue to cover their looting.
If they admit what most people know, that it will not work and we'll be lucky to get a fraction back, then the pretense that the money taken from you is still going to be your money one day is gone. Taking that money would then be plain old robbery.
with the S&P downgrade the politicization of government accounting is complete with left right and center lining up behind whatever set of numbers support their particular bias
The CBO is a partisan entity wrapped in non-partisan packaging easily manipulated by their political masters.
Elmendorf has a CV resplendent with traces of Federal Reserve and Summers/Rubin DNA.
Meanwhile, Arianna unloads on S&P in her morning musings today and Yves continues her lambast of the S&P decision. Business Insider (Huffington surrogate) pumps out schlock designed to reflect favorably on the administration. As Bruce sates in his article this CBO report will be defended by the usual suspects.
Forecasting and accounting are both art and science and in the hands of a corrupt bureaucracy and political system it will come down to the bond vigilantes and honest independent observations from people such as Krasting to discover the truth.
What's that? The government threw a party and spent grandma's retirement? Well, ain't that a bitch! What's that, insufficient cashflow? Here's the good news. This deadbeat has a lot of assets; grazing lands mineral rights, toll roads and so forth. I guess these assets will have to be turned over to the deadbeat's creditors, i.e. grandma. We'll see if grandma can "unlock the value" hidden in these assets. I'm sure she can, even with Alzheimer's. A simple bankruptcy proceeding. Same as for any other deadbeat.
When you come down to it, this is what is needed. Not a "Super Congress", but a "Super Receivership" presiding over a "Super Bankruptcy" proceeding. Take the current entire political class, put them out to pasture, and have a very public proceeding. The good news is there are enough assets to cover everyone's claims. And as a side benefit, the political class gets terminated, and this nation can begin to move forward again.
40 acres and a mule, bitches. For everyone.
Damn. I wish there was any chance whatsoever of that happening in actual reality. Now that would be something.
Of course it won't happen. Just don't buy the hype that these guys have nothing. It's bullshit. They are ripping the people off and that is exactly what they intended to do.
Post USSR pensioners received 2200 rubles a year.
The poverty line was 2700.
Better save those PMs
"It is precisely this type of thinking (and manipulation) that makes it so difficult for our leaders in Washington to take the steps we must take."
Hahahaha. That's a good one Bruce. Right, if only the politicians got factual, unmanipulated reports, they would do the right thing and fix things. Sure Bruce. Right.
I'm sure that most of us, growing up, thought of SS as a true trust fund (that's the way it was sold to us). Under that paradigm, we would get back only what we put in. I've never felt that I was "owed" anything more than that. We always knew SS would only pay part of the bills (reality can be a ...). I'm afraid now I should be grateful for even getting that much when the time comes....
Truly, there are people (certainly not the majority) who arguably deserve help because they simply cannot live on what SS pays, cannot work any more, and are forced to retire.
So, serious questions: At what point did SS become welfare, and when did mandatory retirement age become the law?
Sold to you by who? It's always been pay as you go (ponzi). For crying out loud, my grandma was saying so, and quite loudly in the middle of last century!
I guess common knowledge, like common sense, isn't common.
And on top of the ponzi, as noted above, Congress stole the money in there for other uses, promising to pay someday. Thinking it would be long after those currently in orifice were out of the job and doing something else.
The money owed to SS was used to pay for tax cuts, well make them less noticeable. The fund would now be into a position of lowering collections or retirement age if these funds were not stolen. Now they want to keep the surplus flowing to pay off what they stole. Eventually retirement age will be 90 and the Hayek sheep will cheer.
There is a very simple way to fix this. OASDI includes the word "savings" so emphasize the savings part.
Break the system into its many parts and repair it.
Old farts like to carp about "their money." In cases where they haven't withdrawn what they paid in, plus a reasonable rate of return, no problem. In cases where they have already taken out more than they contributed, boot them to a means tested system called what it is, "charity." People who are living off of others, especially future generations who weren't voters when this wreck was created, should show some humility. There is no reason someone with their own money should withdraw beyond what they put in. Shout these liars down. When they say "my money" ask them when they retired and watch them go balistic. Leeches.
The disability part is a disaster and needs to be reviewed. Sorry, you don't get a free ride if you are crazy, depressed or fat, get back to work.
SocSec is a retirement safety net intended to provide a retirement floor for most all workers.
Whether one worked at minimum wage all one's life, or was highly paid should not matter in eligibilty for a guaranteed floor pension.
You have an arguable point about funding pre-retirement-age disability payments separate from SocSec. However, you undercut that argument by insulting the disbled and telling them to get to work, as though none were actually disabled, and jobs were actually available.
"F See me after class"
Nice write Bruce! A good read!
And yet, there are proposals to extend and/or expand the "payroll tax holiday". Given the 2% "holiday" this year, is it any surprise the shortfall has grown?
We have serious issues in this nation and the politics as usual crowd in DC is giving us more of the same. It's not smoke and mirrors any longer, it's outright fraud in most cases. As I posted on another subject, my concern is less that these weasels lie about the actual state of things; rather, my concern is that "policy makers" actually are using these lies as the basis of formulating policy! How the hell are you going to address issues when you're deluding yourself about the issues in the first place. I would think, for example, that the policy response to 9.1% unemployment is significantly different from the policy response to a 16+% unemployment rate. But our so-called leaders are basing their policies on 9.1%. It's like an alcoholic saying that he wants to get treated because he drinks a couple of glasses of wine coolers every other day instead of admitting he drinks a fifth of Jack Daniels every day. I've had never liked the idea of term limits before because I always felt that the electorate could vote out politicians that weren't doing their job. Silly me. I'm starting to believe that what we need is a group of people in there for one term only that don't give a shit about being reelected. Maybe a group like that could actually address the issues we need to face. What we got now ain't workin.
Thats no problem at all..Pay me now or pay me later..At some point in the future the truth always comes to the surface..It may be awhile but it will come to light..When it does there will be people held accountable for all of their actions and reports such as this..I sure wouldnt want to be one of them, I can tell you that..
SS is not broke, the econ is broke. Good econ, raise the exclusion of the rich incomes, now at 40% of total national income, viola, solvency, all in one sentence.
Bruce: what was the rate assumption to get to present value?
Dismal report Bruce, but thanks for your analysis. I do feel for the future generations that will get less and have to pay more.
A short anecdote...years ago I was provided an office by an older fellow and his son in law for a few years in exchange for my services as a young geologist just getting established. He was well-heeled, lived in one of the best neighborhoods in town and belonged to the "right" country club, etc. Around the first of the month he wouild come in, yell to the secretary..."Jane, bring me some coffee please....and did my social security check come in yet?" He would then take the check and cash it, go to the mens card room at the country club and promptly lose it in a game of Gin Rummy. I am sure he collected many times over what he paid into SS.
So Bruce, as a 54 year old myself, I assume I am better off taking reduced benefit SS on the first day eligible rather than waiting for full benefits? That is what I am planning on doing anyway...to get "something" back is better than less , if any, later?
The point being that the SS money he got stayed in the economy. It didn't get stashed away, it didn't go to China etc.... So it is a wash. Taxes, of one sort or another, stay in the country. Money borrowed from China does not.
75 year horizons are completely ridiculous. Just go back to publications from the 1940's and look at what they thought the world would look like now. Hell, you only have to go back to the CBO 10-year deficit estimates were from 2000 to have a good laugh.
BK -- I appreciate your focusing on this issue and I hope you continue to do so. Given our politicians' track record, I am a little puzzled by your assertion that "We will not get through the rest of this year without SS and Medicare coming on the table and subject to significant cuts. There is no way to avoid that at this point" -- but I hope you're correct.
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