Inflation “Bend” points

Bruce Krasting's picture

One part of the debt ceiling debacle debate that has been agreed to a long time ago is that there will be changes made to inflation calculations. The result will be bracket creep (higher taxes) and a slowing of the rate of benefit payments. I am concerned with this type of thinking. I don’t think it addresses the fundamental problem.

The raging argument in D.C. is about something called Long Term Fiscal Solvency. The apparent goal is to slowly reverse the direction of the big ship and ultimately turn it around. Sounds great. The time frame that is being measured is at least 25 years. (It takes a long time to turn a big ship).

Social Security is a micro component of the budget picture. The “Financial Health” of SS is something that is looked at over a 75-year time period. Some even look at SS based on something called “the Infinite Horizon”.


This is crazy thinking. We have no idea what will happen over this time span. The operating assumptions behind all this long-term thinking are that the economy grows at a steady and predictable rate, inflation will remain modest and well below the growth rate. FOR EVER! Call that economic utopia. It will not happen.


I am much more concerned about the short-term. I think the US has to make very substantial changes over the next ten years. We can’t wait for adjustments to take effect a decade from now. But that is what we are going to get. The following looks at Social Security and what changes to inflation calculations would mean to benefit payouts from 2012-2021. (all data from SSTF Annual Report to Congress, Link)

These charts show the anticipated SS benefit payments (by year and cumulative). This data is from the SSA Intermediate or base case assumption:

 

Note that benefits rise by 70% over this time frame. That increase is a result of two components; A) Net new beneficiaries and B) Inflation adjustments.

SS has a range of expectations for inflation. They start with the 2011 number and they all increase over the ten-year period. These are the numbers that are built into the SS calculations for inflation. This chart covers the Low Cost, High Cost and Intermediate projections for inflation.

 This chart of data looks at what the inflation component is in actual dollars.

Now let’s put our D.C. thinking caps on. If they are going to mess with this inflation adjustment how much can they actually do? They can’t eliminate it. That would be politically impossible. It would also be flat out unfair. So less than 100% is the answer. IMHO it will be impossible to achieve even a 50% claw back in inflation adjustments. If that were to happen the results would look like this:

A more modest (but still significant) result would be a 25% reduction over the next ten years. If that were the case (it’s likely to be less than this) these would be the savings:

Consider the conclusions. Depending on the actual rate of inflation the savings of a 25% cutback plan would result in very small changes to actual payouts. In the SS Intermediate Case the savings would amount to a measly $54 billion over the period. That comes to ½% of total benefits. This is a meaningless result in our big economy.

I’m not going to bore you (further) with more charts. I will just tell you that after ten years or so the miracle of compounding comes into play. With each additional year the difference between actual inflation and the COLA adjustments will widen. When you extend this type of thinking over long periods of time it does make a very big difference. After 25 to 30 years this would be significant.

This type of thinking will be presented to us in the next few days. Leaders on both sides will say that they have set a path toward long-term fiscal solvency. They will show graphs produced by the CBO that support the claim that after fifteen years (or longer) the bend point on benefits is reached. They will be able to show dramatically improved debt to GDP ratios as a result. But all of that “good stuff” will be far into the future.

My concern is that we don’t make it through the first ten years. The absence of any significant improvement in the foreseeable future (versus the infinite future) is going to trip us up. It won’t take all that long for the markets to recognize these implications. Any relief rally in bonds or stocks is likely to be short lived.

The stock market looks out (at best) six months. The bond market looks longer (not of late); two years is as far as the bond boys can see. Macro economic policy starts with ten years and looks beyond that. My point is that the two groups are looking at entirely different playbooks.

It’s quite possible that we will see the D.C. crowd showing one set of graphs and claiming success. At the same time Wall Street will be producing another set numbers on the visible supply of government debt for the next 48 months.  D.C. will be crowing about long-term solvency, while the markets will fret about short-term insolvency. Ten-years is forever on Wall Street.

The term “Voodoo Economics” was a popular term that was used to describe "Reaganomics" back in the 80s. I wouldn’t be surprised if that term comes back into vogue.

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gwar5's picture

We'll just have to take your advice and start killing baby boomers, Bruce. There's no other way.

Bastiat's picture

Just kill yourself; it's more efficient.

BlackholeDivestment's picture

... people just don't get it. People may think it's silly bullshit that can't possibly be real but,  are they wrong to think that. Why would they be wrong? ...because the occult reality is a fact? How in the wide world of sport can people even look at Washington D.C., with it's large penis (Washington Monument) pointing the middle finger at the world and not even stop to consider the stupid pyramid right on the world reserve currency with the word ''DEBT'' written right on it. How delusional can they be, to see that shit in their right hand and they don't even have a clue of the occult reality which placed it there?

We are not getting out of this mess my friends. What ever version of another Hitler comes to power, what do you think the end result will be? Hello Israel.

World War 2 established Israel by the massive slaughter of people and obviously enough Jewish people. What do you think the end goal of the New World Order United Nations Agenda is for the corrupt occult boys who built this city on rocking roll? Everything is being done, and that has been done, was meant to bring all the nations to a point of order, the new world order that is, so there would be no market border and one single market system no one can legally buy sell or trade outside, and all the nations will sign onto it willingly, as they have been doing so far. The leaders of the nations and the ''debt power'' that put them in position established this through deception and the offer of temptation, that's just the nature of the whore and the beast. Now, does anyone see a major flaw in this.? It's called Israel of course.

No way in hell will there every be a real peace that lasts with Israel and the nations, not only is it written and prophetic but, even if you think that scripture is not true, you must take into account the occult boys, like the evil bastards that put Hitler on stage etc..., ''they'' do think their cause is worthy and ''they'' have something called ''power''. Christ, even if you do not accept the offer of Christ, is defining the spirit of independence, freedom, liberty and justice for all with one major reality people tend to not want to come to grips with and that is ''they'' killed him and that image is the laborer of the harvest which is you in agreement with truth, justice etc... and love. Who are ''they''? ..are ''they'' not evil bastards? ...be they Jew, Muslim etc... and idiot Christians that will kill you thinking they are doing Blankfein's gods work or some shit? 

That stupid pyramid etc... occult symbol represents that same power that does not care for Truth, Justice etc... and the slogan ''the American way' or anything to do with you as an individual, ''their claim of dominion'' requires your body and your blood for ''their own sake by their own will'', not yours and certainly not the will of our Father in Christ or the principle if you reject the historic truth. It does not matter if you know that the end result of the game comes to the point where Israel is the sacrifice as a nation, rather than Christ this time around, the pattern of slaughter is as clear as history. The human slaughter through history defines the claim of dominion which brought us to this point and America is obviously a tool of destruction which has been used perfectly. We are in debt because we have accepted the stinking ''DEBT NOTE'' of Chairsatan, come on. How much more can you get played and still think the devouring beast in your pocket does not relfect the strong delusion in your head. For a little help, maybe people might want to visit the reflecting pool in D.C. so they can see two dickheads, as above and so below but, I doubt that will ''change'' a thing for them. Maybe that image will inspire people to divest or something but, I doubt it. There are people doing it right now in D.C. as tourists, not concerned people coming to grips with reality or going to the Hill and White House to express the fact that these branches hold them in contempt.

Social Security number... ha! BULLSHIT! TOTAL BULLSHIT! http://www.youtube.com/watch?v=tkJNyQfAprY

 

gwar5's picture

Perhaps Obamacare is the democrat's new "Final Solution" and the new Reich is already among us.

A 65 year-old man with prostate cancer and 50% chance survival could be denied care and let die.  The statists benefit 4 ways. They avoid the cost of the treatment, they don't have to pay benefits such as SS to a person >65, they get to confiscate their estate upon death, and they will never have to admit that their monstrous central planning is what caused this hideous outcome. 

Fundamental question is, should the statists even be in charge of economic central planning, much less life and death, when they have such a keen vested interest in the most unpleasant outcomes? 

I like the Washington Monument mental inmage.

inca's picture
The Enemy Is Washington An economy destroyed

by Paul Craig Roberts

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase.  The downgrade threat is not credible, and neither is the default threat.  Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt.  If Goldman Sachs is too big to fail, then so is the US government.

There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70% -75% of the federal budget deficit.

In contrast, Social Security is solvent.  Medicare expenditures are coming close to exceeding the 2.3% payroll tax that funds Medicare, but it is dishonest for politicians and pundits to blame the US budget deficit on "entitlement programs."

Entitlements are funded with a payroll tax.  Wars are not funded. The criminal Bush regime lied to Americans and claimed that the Iraq war would only cost $70 billion at the most and would be paid for with Iraq oil revenues. When Bush’s chief economic advisor, Larry Lindsey, said the Iraq invasion would cost $200 billion, the White House Moron fired him. In fact, Lindsay was off by a factor of 20. Economic and budget experts have calculated that the Iraq and Afghanistan wars have consumed $4,000 billion in out-of-pocket and already incurred future costs.  In other words, the ongoing wars and occupations have already eaten up the $4 trillion by which Obama hopes to cut federal spending over the next ten years. Bomb now, pay later.

As taxing the rich is not part of the political solution, the focus is on rewarding the insurance companies by privatizing Medicare at some future date with government subsidized insurance premiums, by capping Medicaid, and by loading the diminishing middle class with additional Social Security tax.

Washington’s priorities and those of its presstitutes could not be clearer. President Obama, like George W. Bush before him, both parties in Congress, the print and TV media, and National Public Radio have made it clear that war is a far more important priority than health care and old age pensions for Americans.

The American people and their wants and needs are not represented in Washington. Washington serves powerful interest groups, such as the military/security complex, Wall Street and the banksters, agribusiness, the oil companies, the insurance companies, pharmaceuticals, and the mining and timber industries.  Washington endows these interests with excess profits by committing war crimes and terrorizing foreign populations with bombs, drones, and invasions, by deregulating the financial sector and bailing it out of its greed-driven mistakes after it has stolen Americans’ pensions, homes, and jobs, by refusing to protect the land, air, water, oceans and wildlife from polluters and despoilers, and by constructing a health care system with the highest costs and highest profits in the world.

 

[ This is a must read article! ]

links+more here

inca's picture
The Enemy Is Washington An economy destroyed

by Paul Craig Roberts

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase.  The downgrade threat is not credible, and neither is the default threat.  Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt.  If Goldman Sachs is too big to fail, then so is the US government.

There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70% -75% of the federal budget deficit.

In contrast, Social Security is solvent.  Medicare expenditures are coming close to exceeding the 2.3% payroll tax that funds Medicare, but it is dishonest for politicians and pundits to blame the US budget deficit on “entitlement programs.”

Entitlements are funded with a payroll tax.  Wars are not funded. The criminal Bush regime lied to Americans and claimed that the Iraq war would only cost $70 billion at the most and would be paid for with Iraq oil revenues. When Bush’s chief economic advisor, Larry Lindsey, said the Iraq invasion would cost $200 billion, the White House Moron fired him. In fact, Lindsay was off by a factor of 20. Economic and budget experts have calculated that the Iraq and Afghanistan wars have consumed $4,000 billion in out-of-pocket and already incurred future costs.  In other words, the ongoing wars and occupations have already eaten up the $4 trillion by which Obama hopes to cut federal spending over the next ten years. Bomb now, pay later.

As taxing the rich is not part of the political solution, the focus is on rewarding the insurance companies by privatizing Medicare at some future date with government subsidized insurance premiums, by capping Medicaid, and by loading the diminishing middle class with additional Social Security tax.

Washington’s priorities and those of its presstitutes could not be clearer. President Obama, like George W. Bush before him, both parties in Congress, the print and TV media, and National Public Radio have made it clear that war is a far more important priority than health care and old age pensions for Americans.

The American people and their wants and needs are not represented in Washington. Washington serves powerful interest groups, such as the military/security complex, Wall Street and the banksters, agribusiness, the oil companies, the insurance companies, pharmaceuticals, and the mining and timber industries.  Washington endows these interests with excess profits by committing war crimes and terrorizing foreign populations with bombs, drones, and invasions, by deregulating the financial sector and bailing it out of its greed-driven mistakes after it has stolen Americans’ pensions, homes, and jobs, by refusing to protect the land, air, water, oceans and wildlife from polluters and despoilers, and by constructing a health care system with the highest costs and highest profits in the world.

 

[ This is a must read article! ]

links+more here

mt paul's picture

pealing 

peas...

Everyman's picture

"Pealing" is what a bell does, "peel" is what you do to a potato, as for peas, they are shucked from the pea pod.  If you peel a pea, there is nothing left.

cara leaf's picture

We're printing counterfeit money to pay our debts.

We've already defaulted.

ConfederateH's picture

"It would also be flat out unfair"

Unfair?  How about taxing expats on their offshore earnings while not giving them representation in the house or senate?  How about "progressive" taxation that gives tax credits to those who have squandered every opportunity the tax payers provided them while penalizing the wealth creating small business owners with marginal tax rates approaching 50%?  What does fairness have to do with anything? 

Abolish SS and deny all past SS recipients their representation in congress, that would be "fairness" in the eyes of this expat. 

 

tom's picture

In the current fiscal year the federal government is projected to earn about $2.8t and spend about $4.4t.

This counts the parts of federal spending funded by so-called "applicable receipts" - the non-tax revenues earned by federal programs and enterprises, which range from postal revenues to military surplus sales. The government doesn't count those in its published budget numbers, which brings you to the projected $2.2t of revenues and $3.8t of outlays for FY11 that you've probably seen.

Of that $3.8t, the big-ticket items are:

Defense and vet benefits: $909b

Social security: $631b

Medicare: $494b

Other health care (mostly Medicaid): $388b

Interest: $207b

Which by themselves add up to more than $2.6t, compared to the $2.2t of revenues.

Ds say the Social Security, Medicare and Medicaid can't be touched. They keep going up.

Rs say Defense can't be touched and taxes can't be raised. Defense keeps going up. Effective tax rates have been going down.

The government's creditors say interest can't be touched. It keeps going up.

So how do they fix this? I expect nothing but fiction. The FY12 budget forecasts are already ludicrous - defense, medicare, unemployment and various kinds of welfare spending are all projected to decline, when obviously they will all be going up. The 2% cut off the payroll tax is projected to go away as scheduled, the AMT is projected to remain in place unadjusted, the Bush tax rates are projected to expire on schedule. Fiction, fiction and more fiction. And what will this debt-limit deal give us? I'll be surprised if there's even $1 of non-fiction in it.

Sorry, fellow Americans, the Social Security system is doomed.

 

cara leaf's picture

I wan to know:

Which of Congress's Entitlement Programs get axed to death as their part of our "shared sacrifice?"  Their Pension Entitlement Programs?  Their Health Care Entitlement Program?  Perhaps their Retirement Entitlement Program? 

And please, in dollars (even worthless ones,) Goldman's contribution to our "shared sacrifice?"  How 'bout Citibank's?  Mo Greenberg?  Ken Lay?  Ken Lewis?  Bob Rubin?  Sandy Weill? John Boehner?  Nancy Pelosi? Health Care Whore, Max Baucus?  Dick Cheney?  Halliburton?

Remember....

Sacrifice means it hurts. 

For further instruction on insurrection see: http://carolelieffthecuriouscapitalist.co

Rainman's picture

The only thing that could be described as a net positive in this Great Recession is that the unwashed masses are becoming more aware of how deep the Big Con really goes. At least Madoff finally confessed when he ran out of cash and was faced with hard time....not so with the .gov kleptocrats.

gmj's picture

The unwashed masses are aware of nothing.  If a revolution comes, it will be led by a charismatic leader with a good voice and a list of scapegoats, controlled and scripted by a few educated elites.  As always.  The investment bankers have every advantage in this game.  Their platform is global; their assets are vast; they control the political leadership; their strategies are knowledge-based.  What tools do the unwashed masses have?  Votes and violence.  Votes are useless in a rigged game, where all politicians serve the same hidden masters.  Both votes and violence can be redirected by charismatic leaders, or a few days of dramatically presented misinformation on TV.  The ignorant masses have never had real power; not in ancient Greece, not in Communist Russia, not in the US.  They are pawns. 

Pure democracy only works when it doesn't matter which decision you make, because the masses are utterly incapable of making complex decisions.  If humans were created with equal intelligence and morality, pure democracy would be the perfect system.   

Quaderratic Probing's picture

Your right giving a herd of cattle the vote will not change anything

Cpl Hicks's picture

Bruce, you say- "I will just tell you that after ten years or so the miracle of compounding comes into play."

That's not quite the correct way to look at it. The miracle of 'the miracle of compounding' is that it is always at work; WRT to social security it was chugging away very nicely in 1951- babies being born, 'promises' being made. Remember Al Gore's lockbox? He wasn't the only one who thought that concept was true.

 

Bastiat's picture

The "young" don't want to pay SS?  Why should the elders pay for the young?  Why should anyone without children pay taxes for schools?  Why should people with few or no children subsidize those with many?

minus dog's picture

What, the "old" think we're going to let them get away with just arbitrarily declaring that they get a retirement income that we have to pay for, but won't get ourselves?   That takes some balls.

Bastiat's picture

I paid for 40 years, got nothing. Tell you what, I'll take it as a tax credit, how bout that? But I want an exemption for school taxes too--intergenerational tit-for-tat, eh?   Hell, if you don't have job you can home school 'em eh? 

StychoKiller's picture

I've heard this argument before.

Better become completely self-sufficient, because the Plumber, your Mechanic, Nurses and Doctors DO have children in school.  Go ahead and stop voting/paying property taxes that support the school system, then watch ALL those people that provide services TO YOU move away to a different area where the school system and their children, are looked after.

Bear's picture

Opt out with a future reduction in taxes ... I really like this 'out of the box' thinking. Except we would probably get the opt out and no reductions in taxes. When the money is already spent, it's hard to get it back.

Bastiat's picture

Thanks. I made a good living on that "out of the box thinking."  It got me into PMs early too.  :-)

JuicedGamma's picture

The amount of money flowing into Social Security has increased astronomically over the years and it's still not enough to keep solvency. It is a scheme worthy of Madoff, difference is it's right there upfront of everyone to see. Like the hotel California, you check in but you can never leave.

See  http://www.ssa.gov/OACT/ProgData/taxRates.html and this http://www.ssa.gov/history/pdf/t2a3.pdf for how much you are paying into it.

John_Coltrane's picture

Bruce, I think you've made the case for why nanny government programs which eliminate personal responsibility for the future like like SS, medicare, medicaid are a bad idea.  They will always turn into ponzi games.  The productive end up paying for the feckless and unproductive in a vain attempt to "level the playing field".  Only individual responsilibity can solve any of these problems.  One needs to save for one's future expenses, not rely on some external entity (either God or government) to save us.  One needs to take care of ones health through daily exercise and proper nutrition combined with saving for any unexpected accidents requiring medical care.  Who benefits from good health?  You do, so you should pay via proper health habits.    When something is "free" and "easy" it loses all value.  There is no free lunch-it takes productive work to reduce entropy and enable life. 

RagnarDanneskjold's picture

Isn't SS a small part of the problem though? The politically smart thing and fair thing, is to take SS off budget and make changes that keep it solvent. It sounds like their plan is to cut more and use the savings to make the picture look better.

Bear's picture

From one Bear to another ... they spent what we put in and they continue to 'use' SS benefits to pay for other programs. If no upper limit on SS taxes existed and the minimum retirement age were lifted to 67 then SS would be self funded into the future (if only Congress could not be allowed to use it for other 'emergency' programs).

Hubbs's picture

Good insights. Health care is in a bubble, just like the housing market- i.e. people want more health care than they can actually pay for.

snowball777's picture

I love my country. I'm ready to start shooting old people in the head. Who's with me?

<crickets>

Bear's picture

This must have been the genesis of the 'Death Panels' discusssion. I have a better idea: just leagalize all drugs, encourage smoking, drinking to excess, free McD fries, close all hospitals and outlaw condoms ... self regulating systems

nmewn's picture

Anders?...is that you Anders? ;-)

pupton's picture

Can we include illegal aliens in your cleansing operation? They don't count anyway.

RockyRacoon's picture

You're going up against a cadre of some experienced veterans.   You'd better bring a lunch -- and lots of ammo.

DCFusor's picture

No need for lunch or extra ammo - they won't live long enough to need either.  "Don't bother running, you'll only die tired".

Greenhead's picture

New Tom, I agree with your assessment.  Once they raided the fund and took the money and left an IOU, at that point the obligations became like every other obligation of the federal government.  It is delusional to say the Trust Fund is solvent when the money to fund it has to be borrowed or printed or raised through new taxes.  The IOU's are like the rest of the Treasury IOU's in that the only way they will be paid off will be through the collection of new revenue, or new monetization via the FED or by borrowing more from the Chinese et al.  Sorry that folks have to discover the fact that their leaders told them less than the whole truth, again.

tom's picture

As for all of the talk about Social Security's solvency as if it were something distinct from the federal government's solvency, you're missing the forest for the trees.

The federal government collects various kinds of taxes, including FICA, and pays various kinds of programs, including Social Security. If the federal government doesn't collect enough taxes to pay for all its programs, it can borrow the money for some time until it can't, and then it will have to renege on a lot of its promises, including, most definitely, Social Security. That is the forest.

Going into further detail, the US government in its accounts treats Social Security as an off-balance-sheet special purpose vehicle. Social Security has its own dedicated income streams, and when these exceed its expenses as they did until recently, the government records this as a credit taken by the rest of the federal government from the Social Security Trust Fund. When as at present Social Security's dedicated income is less than its expenses, the government records this as a credit given by the rest of the federal government to the Social Security Trust Fund. Whether or not this fund is rich, poor, broke, or in the hole doesn't much matter. If the SSTF went broke while the federal government remained healthily solvent and liquid, it wouldn't matter - the government would just go on funding SS's deficit, or permanently re-allocate some part of its taxes to SS. If SSTF remained filthy rich while the federal government went illiquid and insolvent, Social Security would still get slashed.

 

RockyRacoon's picture

I'll confess to not knowing all the attributes of Social Security, but a few things strike me as weird.  Here is what I understand, correct me if wrong:

*"Survivors" get coverage or continuation of the payments after the original retiree dies.  Why don't payments simply STOP at that that point -- to anyone?

*There is some "disability" thingy attached to Social Security.  Why are there any gray areas or scales for payments?   You get what you get according to a fixed formula.

*How do persons under the retirement ages get any payments from Social Security?   What allows them to "deserve" payments relating to a retiree's paid in monies?   There are teenagers getting Social Security money?  How?

I guess the general question is, how come the system isn't rolled back to its original configuration.  You get a formulaic payout until you die.   Period.

(Where the hell is the spell-check button????)

Lonewar's picture

RockyRacoon,

Please, understand that I only deal with Social Security Income Type indirectly during my job; but here is my understanding of them.

The correct title for Social Security is RSDI, or Retirement, Survivors, and Disability Insurance.

Social Security Survivors benefits are a portion of a workers Social Security payments that they would have received, if they had retired, but are paid to their children under age 18 (22 if still in school), and spouse, or spouse only if the Spouse is over age 59 1/2. Think stay at home moms who have never worked losing only family bread winner. It is now paid if the deceased had over 20 quarters credits prior to death.

Social Security Disability is paid to those workers who have over 20 quarters credits in the last 10 years who become TOTALLY and PERMANENTLY disabled (For any reason). Qualifying for this benefit is an utter nightmare that usually takes from 6 to 36 months (Or Longer, longest I have seen is 12 years...) It can also be paid to the Dependants of Wage Earners when the wage earner becomes disabled (Dependant of a Disabled Wage Earner). Also, if a child, under the age of 22 becomes disabled, Social Security will look at their parents records to see if the parents have enough quarters that the child can "borrow" to allow the child to qualify for benefits (Disabled Dependant of a Wage Earner). Again EXTREMELY hard to qualify for.

Social Security Retirement can be paid to a person, based on their own, or a spouses record beginning at age 59 1/2 (based on Spouses Record) or 61? based on their own record. The earlier it is taken, the larger the deduction to benefits received. Also, if the retiree has dependant children under the age of 18 (22 if still in School)(Rare, but I have seen it happen), the children can also receive a portion of that benefit.

There is one other program within the Social Security System (Actually Medicare). If you are any stage, and suffering from End Stage Renal Disease, you will qualify for Medicare after 3 months with that diagnosis.

Also administered via the Social Security Administration is SSI (Supplemental Security Income). This is Welfare Social Security. This benefit is given to those people who would qualify for Social Security Disability, Blindness, or Aged (Retirement) benefits, but who have NOT paid in enough quarters to qualify to receive standard Social Security Income. SSI is means tested (STRICT Income and Property Limits), but it is much easier to qualify for SSI Disability Benefits AS A CHILD that it is to qualify regularly. SSI also comes with $0 SOC Medicaid to cover all medical expenses that a person may have with NO out of pocket expenses to them.

tom's picture

Very good points. I wonder how they are going to do this, by adjusting only the SS COLA or by actually mandating lower official inflation numbers?

They already de facto do a bit of the latter, you know. A lot of those methodology "improvements" that shadow stats complains about were largely motivated by the desire to reduce COLAs. It's a politically easy step because in reality there is no such thing as an objectively observable average inflation rate. The products of an economy are constantly and rapidly changing - new ones are always being introduced, old ones are being updated or just varied in their components and production methods, among services many products are custom-tailored to the client. It's not actually possible to directly compare this month's or this year's products to last month's or last year's products. If you buy a computer with a 10% faster CPU and all else equal, how much extra is that worth? It's always a guess. Inflation calculations are inherently arbitrary and it's no surprise that when prices increase statisticians tend to give the benefit of the doubt to product quality increases. I wouldn't be surprised if they've found some way to change how inflation is calculated in a way that will consistently bring it lower. I bet they have somebody working on possible ways to do that full time year round. Has the added "benefit" of increasing official "real GDP" numbers as well.

 

 

 

no2foreclosures's picture

The United States of Ponzi Schemes. SS is giant Ponzi Scheme where the young are enslaved to pay for their elders. The next phase of this PS is inflation manipulation like they do in Argentina where it is illegal for economists to public ally publish the true inflation rate of 25-30%. The gov't has it pegged officially at ~8% to prevent . . . the pension plans from exploding.

bugs_'s picture

I also think they won't make 10 years.  They have at the most two years.  It would be better if they were honest and simply stated what the payout cuts will be.  Truth be told they have already been monkeying with a false estimate of inflation for years.  There isn't really any low hanging fruit there - they've already consumed that.

 

moneymutt's picture

Just because it's big, I think it's ridiculous that the one program that was taxed sufficiently on appropriate population, wage earners, to pay for itself IN ADVANCE should be raid to now pay for rest of Fed budget, mostly Defense, instead of being allowed to take back it's trust fund money. Why must we now cut the one program that lived within its means? When Soc Sec was approaching insovlency 80s, rather than cutting benes, we taxed more and built upmhuge surplus. Now when the surplus is being spent on boomers, benes must be cut to pay for Defense and everything else that did not line within its means, was not taxed for or was not cut to be no more than Fed taxes would support?

Regardless of inflation, remove tha cap on FICA tax so those making wages over 100k continue to pay would make Soc Sec much more and could get us decades.

And if you really want to do something radical, for any working age rich people not reporting any wages, just dividends or gains, have the pay FICA on the first 50 or 100k of wages...

What about inflation in healthcare cost because we don't do as Canada and Britain...what about inflation in Defense cost?

RockyRacoon's picture

FDR Speech 1936 

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as      Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

"Here is an amazing paradox! The very employers and politicians and publishers who talk most loudly of class antagonism and the destruction of the American system now undermine that system by this attempt to coerce the votes of the wage earners of this country. It is the 1936 version of the old threat to close down the factory or the office if a particular candidate does not win. It is an old strategy of tyrants to delude their victims into fighting their battles for them.

Every message in a pay envelope, even if it is the truth, is a command to vote according to the will of the employer. But this propaganda is worse—it is deceit.

They tell the worker his wage will be reduced by a contribution to some vague form of old-age insurance. They carefully conceal from him the fact that for every dollar of premium he pays for that insurance, the employer pays another dollar. That omission is deceit.

They carefully conceal from him the fact that under the federal law, he receives another insurance policy to help him if he loses his job, and that the premium of that policy is paid 100 percent by the employer and not one cent by the worker. They do not tell him that the insurance policy that is bought for him is far more favorable to him than any policy that any private insurance company could afford to issue. That omission is deceit.

They imply to him that he pays all the cost of both forms of insurance. They carefully conceal from him the fact that for every dollar put up by him his employer puts up three dollars three for one. And that omission is deceit.

But they are guilty of more than deceit. When they imply that the reserves thus created against both these policies will be stolen by some future Congress, diverted to some wholly foreign purpose, they attack the integrity and honor of American Government itself. Those who suggest that, are already aliens to the spirit of American democracy. Let them emigrate and try their lot under some foreign flag in which they have more confidence.

The fraudulent nature of this attempt is well shown by the record of votes on the passage of the Social Security Act. In addition to an overwhelming majority of Democrats in both Houses, seventy-seven Republican Representatives voted for it and only eighteen against it and fifteen Republican Senators voted for it and only five against it. Where does this last-minute drive of the Republican leadership leave these Republican Representatives and Senators who helped enact this law?

I am sure the vast majority of law-abiding businessmen who are not parties to this propaganda fully appreciate the extent of the threat to honest business contained in this coercion."

http://jessescrossroadscafe.blogspot.com/2011/07/fdr-speech-1936.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29&utm_content=Google+Reader

moneymutt's picture

Just because it's big, I think it's ridiculous that the one program that was taxed sufficiently on appropriate population, wage earners, to pay for itself IN ADVANCE should be raid to now pay for rest of Fed budget, mostly Defense, instead of being allowed to take back it's trust fund money. Why must we now cut the one program that lived within its means? When Soc Sec was approaching insovlency 80s, rather than cutting benes, we taxed more and built upmhuge surplus. Now when the surplus is being spent on boomers, benes must be cut to pay for Defense and everything else that? everything else that did not live within its means, was not taxed for or was not cut, to be no more than Fed income/corporate taxes would support?

Regardless of inflation, remove tha cap on FICA tax so those making wages over 100k continue to pay would make Soc Sec much more and could get us decades.

And if you really want to do something radical, for any working age rich people not reporting any wages, just dividends or gains, have the pay FICA on the first 50 or 100k of earnings

What about inflation in healthcare cost because we don't do as Canada and Britain...what about inflation in Defense cost?

JuicedGamma's picture

See my later post as to why SS is not living within it's means.  It's an ever increasing burden on everybody that earns a wage.  The proper thing to do is to wind it down over time and allow people to manage their own nest egg.

I can hear the howls of protest already, but G Bush was correct in his sentiment that letting people manage their own funds instead of letting the government squander them would in the long run make more sense.

moneymutt's picture

You conflates two things, each individual managing acount in private market and Soc Sec trust fund solvency in long run.....if you believ Soc insolvent, we disagree on this but for sake of argument I'll give it to you, that does not mean individual plans bought on free market are solution or are better.

Rather then my 401k individual account, I would be very happy to buy into a large pooled non-profit or govt run independent trust fund define benefit pension/insurance system. No dollars spent more that what is put, benes determine by democratically controlled board.

I want to pool my risk and with an indivdual account, I get none of that and I have to buy byzantine mix of private insurance plans to even get close to what traditional employer provided defined benefit pension plans did automatically and efficiently. Have read anything about all the middlemen, inefficiencies, fees, and financial parasites that suck huge percentages out of people's 401ks? And what if you live to 90?

Just give me the option to buy into a locked away trust fund that clerkly shows the benes range it will pay depending on performance, pools the risk or early and late death, disability etc in one efficient low admin cost org, I'll individually buy into with my own money and live or die by it, but our current privatensystem of individual 401ks is a first class rip off and pools no risks

disabledvet's picture

Social Security is still solvent. "Looking out" of course it's "doom alone that counts." What must be admitted is that Social Security is the ONLY solvent institution currently in existence at the Federal level. More to the point if there's a sudden burst of inflation that does in fact make this institution more solvent not less. the fact of the matter is we have every opportunity to fix "what ails us"--what it takes of course is a Collective Soul in order to rise above our nothingness. If we fail it will not be a surprise. What is more human than upon the chance to rise to the occasion and do what needs to be done to see only one's self in the picture? For the record I prefer success. For the record I do not expect it. Especially with what I know now. How can success even be possible if the only road taken is the lowest road available?
http://www.youtube.com/watch?v=nrsWUY9HA-Y&feature=player_detailpage
Hat-tip: Amy Winehouse.

Tortfeasor's picture

SS is only solvent if we mark the treasury bonds within the fund at par.  If those bonds default, SS is as insolvent as the rest of the system.