This page has been archived and commenting is disabled.
CBO on Social Security – All’s Well!
The Congressional Budget Office came out with its annual review of Social Security today. I write on this topic often, so I feel somewhat obligated to comment on the report. Amid the backdrop of the past few weeks’ market action and the big move by S&P this is a ho-hummer. That said, a few observations:
This report looks at SS through the lens of a 75-year time horizon. I guess someone has to do that (its mandated by Congress). I’m having a very difficult time of late looking out 75 days. Forget 75 years.
The critical years for SS are the next 20 (Boomer explosion). If the program does not crap out before 2030 there is a decent chance it will make to the “infinite future”. There is no discussion of the shorter time frame by the CBO. I would score the report a “D-” on that basis.
There is one chart that I want all to make note of. This looks at projected tax revenue versus benefit expenses. Note that for the next 75 years there will always be a deficit in this basic definition of solvency.
Not a day goes buy without someone making the statement that SS is self-funding. That’s a lie. The CBO says so (so does SS, but many do not listen).
In the past three years SS has gone from a huge surplus to a large and growing deficit. This was predicted to first happen in 2016. It came seven years early due to the 08 recession. It’s not possible to look at what has happened and not conclude that there has been a very serious deterioration in fundamentals at SS. CBO does not accept that reality. Their status report reads, “Pretty Darn Good!” From the report:
The shortfalls for Social Security that CBO is currently projecting are marginally smaller than those projected in 2010.
How could the CBO come to this unlikely conclusion? Easy:
CBO now assumes higher immigration rates and projects slightly faster growth in real wages than it did in 2010.
For this I give the CBO another failing grade. In the past few years immigration has actually fallen. (No jobs – Why come?) And the notion that real wages are about to reverse direction and shoot higher anytime soon is the least likely outcome. If the CBO has any doubts on this fact they should consult with Ben Bernanke. He has staked his career (and our well being) on the assumption that real wages are not going anywhere any time soon. Just this one time, I’m going to agree with Ben.
It looks to me as if the CBO fudged the results of the study. Someone must have said, “Make the result look like things are getting better!” The CBO is not supposed to have an axe to grind in their review of government programs. I think they chose to spin the results in an effort to deflect pressure away from the program in the coming months. Shame on them.
The CBO does acknowledge that there is a great deal of risk in any economic forecast. They address that by doing 500 different simulations of what might happen. (For that effort I would give their computer an A). Using this statistical approach they arrive at probabilities of how various generations will fare.
The first observation is an easy one to understand. According to the CBO if you were born in the 1940’s there is a 99% probability that you will receive at least 95% of the payments that you are scheduled to receive. Not bad for the pre Boomers.
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. That’s lousy odds. If you are now 50, there is a very high probability (99%) that you will get only 70% of what you are expecting.
It gets worse the younger you are. If you are a child of the 80’s the odds of you getting back what others who are older than you have gotten fall to only a 16% chance. If one is ten years old today, well forget it. Your chance is about 1 in 10. I doubt too many toddlers read this blog, but I do hope a few parents of young kids get the message.
Ten years from now SS will be sending out $100 billion a month. It will be running cash deficits of 300-400 billion a year. That ten-year old will be 20. Probably entering the workforce. And that young person will be looking at a busted system that will pay him far less than he/she will contribute.
How much support from workers who contribute to this program will there be a decade from now? I would imagine close to zero. But don’t worry about any of this. The CBO said every thing is fine. Nothing to look at here.
The decision to downgrade the USA by S&P has forced the issue of entitlements. 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.
The CBO report is going to be highlighted by all of the defenders of SS who cry that this program is not part of the problem. I think the CBO has done us a disservice. Consider the language used to describe the status at SS by the Social Security Trust Fund in their 2011 annual report to Congress:
The open group unfunded obligation for OASDI over the 75-year period is $6.5 trillion in present value and is $1.1 trillion more than the measured level of a year ago.
Let’s be real clear here. The PRESENT VALUE of the shortfall in SS is $6.5T. A massive number. That number rose in the last year by $1 trillion. In other words things at SS got worse by 20% in just the last year. This measure of the imbalance at SS is growing by $100b a month! Yet the CBO somehow made it look good.
It is precisely this type of thinking (and manipulation) that makes it so difficult for our leaders in Washington to take the steps we must take.
»
- advertisements -
Don't forget they CUT how much we pay out of our checks to FICA this year as a tax break [Obama]. They want it to fail, otherwise, why do a bonehead move like that?
BK pontificates and rails about a projected 300 billion annual shortfall a decade away.
That's about 20-25% of the current expense of maintaining the Pentagon/CIA/Homeland Security empire. And who can say what those intend to be spending in a decade unless drastically curtailed?
Do not overlook:
(a) BK stats doubtless assumes no change in the payroll tax income ceiling (even with inflation?)
(b) A good part of SocSec is not handed out at all. It is IRS withheld and tossed into general revenues, or diverted to fund the big pharma/health insurance/privatized Medicare boondoggle.
(c) Just looking at annual receipts implicitly assumes the US will default on what it has 'borrowed' and owes the SocSec fund. Bad enough, but yet the US will insist on handing out trillion$ to the money cartel (16 trillion$ by a recent count) - no 'default' there.
A) I use SSTF numbers, not mine.
B) False. Of the $720b SS will pay out this year they collect back $24b in taxes.
C) Not sure which money cartel got $16T of late; so no comment.
(A) OK, for whatever difference it makes, I should have written "the stats BK uses".
But the point I was making about not changing the payroll tax ceiling still stands, and I have my doubts whether the ceiling was projected to be raised even to reflect inflation.
(B) why "false"? $24b annually is not exactly chump change, especially over a decade (and again, IRS tax rates are likely to rise as well as the number of people receiving SocSec who pay IRS). I also suggested deducting as SocSec outlays the amount transferred to support Medicare.
(C) Bernanke handed out $16 trillion
http://www.marketoracle.co.uk/Article29506.html
Yes.
I think everything is fine. They can pay out in as many dollars as required, see? The fact that those dollars aren't worth shit doesn't matter. I believe this is why the government has sought to decouple all payouts from Medicare/Medicade/SS from inflation, or to at least invent their own model. This is a model, remember, that "saved" TRILLIONS merely by defining what inflation is. What a fucked up way of doing things.
Pay no attention to tha men writing the fucking rules. And by all means have another scoop of the curd.
+1. Hit the nail on the head. Print to infinity and everyone will get the "dollars" they were "promised" from social security. The sad thing is that 99% percent of social security recipients and even the general public will go along with hyper-inflating out of debt problems. I know a lot of people who say "what is so bad about printing money?" and you can't explain how inflation hurts them. They can only think super short term, ie. "just print some money and give it to me"
Or even 75 hours...
As we sit here on Sunday morning, 75 hours is a very long time indeed....
75 hours = $18.75B borrowed (and spent) by Congress under the recent debt ceiling deal first tranche edition ($900B raised, 5 months until end of year, assume 30 day months).
Hey don't forget the $240 Billion upfront they spent the same day it was passed now, largest drop of cash in US history. I think that was just in one business day 9-5 EST. That is $30 Billion an hour, $500 million a minute, $8.33333 million a second, that is some serious looting, hell in 1992 damage couldn't even occur that fast when all of central LA was in flames and thousands were in the street doing the damage. It is amazing how 535 legislators and 1 executive can do more economic damage in a second than a tens of thousands deep mob could do to a city without any inhibition whatsoever. Based on that stat alone I think it can be argued ANARCHY is cheaper than government.
Bruce,
Appreciate the insight into the SS. 75 hrs is log enought to loot in DC, IMHO.
If they make a concerted effort they could loot in 75 minutes...hell if they really wanted probably could loot it all before Domino's delivers the pizzas to the white house, sorry no tip for you delivery guy!
*Server Burp*
BK's probably a big proponent for confiscation of private retirement accounts, just like he's a BIG supporter of stealing people's contributions to their SS Insurance accounts - I wouldn't know exactly what he parrots though, as I quit reading his drunk-on-da-koolaid diatribe several months ago.
Just dropped by to see what his latest spin on grabbin' SS funds for the Ivy League looters was...
Once an east coast libtard, always a (D) & (R) Free Shit Empire™ apparatchik addicted to redistribution of wealth & property.
EOM