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Social Security Versus CBO - Who Do You Trust?
The 2014 Social Security report to Congress is finally out (Link). The report was released four-months later than permitted by law; this is the sixth year in a row that the Report has been late. The word 'sloppy' comes to mind; Treasury Secretary Lew gets a 'D' for timeliness.
I'm blow out by this year's report! It was just 13 days ago that the Congressional Budget Office released its numbers for SS (Link). There are very significant variances on key metrics for SS. The inescapable conclusion comparing the two reports is that either; (1) CBO is misrepresenting numbers with some kind of political agenda in mind, or (2) SS is sand bagging its numbers for reasons that have to be political as well.
There are few key metrics to consider. The first is the Immediate and Permanent (I&P) payroll tax increase necessary to 'fix' SS for the next 75 years. CBO says that the I&P is 4%, while SS claims it is only 2.88%. One might look at the two numbers and say, "What's the big dif?, the two #s are only 1.12% different!" Actually, the 1.12% comes to very big bucks. Over the 75 year period it comes to trillions of dollars. For 2015 the difference in the I&P calculation comes to $75B. That's a lot of Billions.
Another data point is the estimate for the year in which the SS Trust Funds become depleted. CBO has this date as 2030 while SS thinks it will be delayed until 2033. One could drive a truck through the different estimates.
A critical milestone for SS will be the year in which the SSTFs top-out and begin the rundown to zero. CBO has this happening in 2017, while SS says it will not happen until three years later in 2020. A three year difference in something that is only 2 1/2 year away? How could the models differ so widely?
It's my opinion that SS has warped its numbers. What SS has provided is:
Ho Hum, nothing has changed from last year. No needed to think about SS today, and certainly do not to make this an election issue. We wouldn't want Conservative folks to have something to talk about this fall.
CBO, on the other hand, is saying:
Red Alert! America's biggest single expense is a running amok. In less than 15 years there will be a crisis, and it will be very expensive to 'fix' it. For heaven's sake, please, let's have a dialog about this before it's too late!
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I've been paying into it for over 25 years, and I would LEAP at the option to opt out.
At least the corrupt and fraudulent banking system is fully funded......
In multiple ways.
1) Fractional Reserve banking
2) Federal Reserve Monetary Policy, buying treasuries, ZIRP, NIRP, and discount window
3) Fiscal Spending By current Admin
Stipulation:
1) most people ain't getting any money since they are not Dealers for the US Federal Reserve
2) And they chose the safest investments, highest Yield, things that can be hedged, and in shrinking manufacturing base OR high relative labor rates (related to education costs)
3) Capital Flight is safe, off shoring is safe, Inverted Corporatism is safe, Lobbying for lower taxes & monopolies are safe
4) Buying US regulators is safe
5) Secret Cartels are Safe
6) Being Fascist is Safe, even fir Journalist.
Bruce Krasting
Sorry just cutting to the chase here. How do I know you are not funded by a Financial Lobby Group that wants to Run SS into the Ground or ELSE PRIVATIZE it to make huge fees, Fix Prices of Funds, Screw Middle Class people Up the ass, and put your Tucker in a Foreign Bank Account.
Not to Insult you, but maybe this Website is a CIA or NSA Operation.
US Citizens are more Trusting than all of North America, Central America, and South America. Duh.
This Website is subjected to Propaganda and Conditioning.
I know old timers that believe in the Bible & Guns and if you take their SS & Medicare away they will hire assassins and seek you out to kill you. But my imagination is only slightly exaggerated. Old Timers (who) lost Pensions in the 1980s and 1990s. What the hell do they have to lose??
Have you heard of Third Group? It is a lobby to destroy SS & MEDICARE.
Now I will go back to read the article above.
Bruce Krasting;
Good Job.
I follow you to a point. But you fail to protect anybody.
You don't recognize the Cash/Revenue Flow from Income Tax Payers (Individual) and I don't sense that you have humanity. Not to say you don't, but you are a writer.
Is CBO in the Ball Park or is SS? You don't say. You don't say if Government stole the Funds and put the Fund at Risk. You don't say that Fund was Absconded by Congress for War. Sounds pretty Sterile. Censured.
Are you Censured, Bruce Krasting???
Is Someone Editing this Content, Bruce Krasting? Is it Zerohedge.com?
I like Zerohedge.com for putting stuff out there for competition and for a roguish whistle-blower type quality.
US Media publishes Government Bullets. Fact
Are you emulating the State-Media Style, Bruce? Perhaps you feel no Background is needed, no Power-players Revealed, No Interest Groups Identified, No Reveiw of current Government Programs needed to see how things went and if funding was appropriate or as in the Southern Wall if any Wall was build and why not?
All in all... I can see zerohedge as a place to just pass quick into to viewers. Let a secret release. So it is good.
Thanks for the Post. You may have posted something good, worthwhile, and honest here. A quick inside look.
Stipulation: I have been hitting the sauce.
Last year I started taking my SS. However I am still working a full time job so I continue to pay into the system. Im finally able to make a decent middle income wage combining my SS with my weekly pays. Im a welder, not some pencil pusher so I know what it means to work. I hope to work another year or two and who knows how long after. I just want to have enough put away so I won't need to go looking for a part time job like so many my age end up doing. I too think SS is fudging the numbers. With the work force at levels we haven seen since the 70s, I don't see how they can keep pushing out such lies. Also how much do folks working part time jobs actually contribute to SS? That should also be considered since the majority of jobs being created today are those lower paying part time jobs.
Im gunna have to call BULLSHIT on this story AND both reports...you see....it was about 18 months ago, that here HERE ON ZH, that we read articles about SS Taking in LESS money than it way paying out...so im very confused how its still 2-1/2 to 5 years away that it starts depleting...
Ho Hum...people have such SHORT memories...even on ZH.
No wonder they get away with al the shit they do...people wont even call out crap like this.
I might have been responsible for your confusion. I write about SS from time to time. I often focus on the cash flow side of the story.
Starting in 2010 SS began running Cash Flow deficits. Meaning it paid out more cash then it took in. SS also gets paid interest, but it does not get paid this interest in cash, it gets more paper (scrip).
As of today the scrip income is greater than the cash flow deficit, so on paper, the TF is still growing.
For 2014 SS will run a $75B cash flow deficit, but the TF will grow by $25B. The difference is the paper interest of $100B.
It's a goofy system. The reason it works this way is that the TF has no real assets, just scrip.
There it is middle class! The trust fund (it's actually a treasury fund account) has no real assets, just scrip. You have no assets. Please look away as China, Germany, Warren Buffet and the Koch Brothers cash in their very real assets (scrips).
Check out the comments below to see how many rubes have bought this tripe. Warning!!! It's not encouraging.
Truth is dead and this Krasting guy is preaching trust? What a riot!
The answer is clearly "C" -- neither.
It helps to put this story in perspective relative to "public" vs "private" retirement systems: Tale of Two Bribes, there are two great retirement systems in this country: one is known as “Public Employees Retirement Systems” (PERS); the other, the Social Security retirement system. With the first, grunt bureaucrats can retire after 20 years and collect $3,000 to $6,000 a month in retirement checks; department heads can take down $15,000 to $25,000 per month.. With the second system (SSA), private retirees are lucky to receive $1,500 per month. Of course, both systems are entirely financed by private workers. Something seems wrong here; maybe upside down?
And then, Who Owns City Hall? Several years ago I stumbled across CAFRs, Comprehensive Annual Financial Reports. These are issued by cities, counties, special districts, states, among others. Of all those I examined (several dozen), the entity in question had enough cash on hand to operate for up to six years without collecting a penny of taxes. I eventually learned that California governments (city, county, state et cetera) had amassed surpluses equal to $20,000 to $50,000 for every man, woman and child in the state, depending on whether you read the foot notes or not. Two questions eventually arose in my mind, “Why are they still collecting taxes?” and “When do I get my dividend?” Walter Burien and I are the pioneers that brought this topic out of darkness. When we did our work, CAFRs were comprised of about 120 pages of financial statements and foot notes; now these statements and foot notes are limited to about a quarter of a page.
I saw an article posted on yahoo a couple of days ago, urging folks to delay SS retirement until 70 to avoid a shortfall, and gain a larger benefit amount. Surely that means there will be plenty of dough in our accounts by then? sarc
HAHAHAHA!!! Yeah, right. I'm taking my share starting at age 62.......six months from now.
Far more important than the projections about the built up credits these funds have is the actual cash flow.
It does not matter how many treasuries the funds hold. They do not have ANY cash. When the flow into the funds becomes less than the payments out then new cash must be found. The USG will be forced to cut elsewhere or borrow thus creating new money.
Bruce is looking at the accounting of the SS 'lock box'. Big whoop if it hold trillions of bonds. To redeem those bonds either more bonds must be sold or benefits cut. The Fed will chose to create new money because of politics.
It is this new money on top of the already amazing amount of recently created money (QE ) that will stoke the fires of hyperinflation.
I want to see the figures for cash flow. Have we reached the point at which the SS system is redeeming some of the assets they hold? Are benficiaries getting out more than workers are putting In? If that is the case the fuse has been lit. There will only be more and more new benficiaries and it is obvious the number of new workers will decline. Many of the boomers expecting to collect have made the maxium contributions over the years and will be getting $2000+ a month. The new (largely part-time) workers will simply not be taxed enough to balance.
So far the general fund has had extra SS money to spend. When that dries up it will have to find another source to pay for those costs as they sure won't cut anything significant. Cash cash cash...follow the cash!!!
What the hell do you think happens everyday of the week with treasury notes??? Why is it some fucking catastrophe when those in the Social Security Treasury Fund Account need to be redeemed? When I cashed in those my grandmother gave me to help pay for college, or the Koch Brothers cash their notes in, nobody pisses themselves and makes absurd claims about insolvency or default.
Listen people! It's all pure bullshit propagated by the oligarchs to separate you from your assets.
SS project that the cash flow deficit will be $1.1T 2014-2023.
This is BS it will be much larger.
bk
Something other than a total collapse of the labor market (ongoing) probably wouldn't hurt either.
I think these carve outs from the ACA are going to gut that program as well.
I agree as much as I've been (quite unpopularly I might add) a big fan of Treasury's response to the total incompetence and sheer lunacy of Wall Street circa 2007-2008 (and their excellent move of dumping General Motors in December right at the market high) I've been really perplexed at "The Lew" for all his fear mongering over the treasury market and now (quite ironic) attack on "big business" which is now off loading their hundreds of billions in dollar profits by buying and setting up foreign subsidiaries.
I agree "Pfizer doesn't seem to be a team player here" but we need to be honest about the trillions being wasted by all this Federal Mularkey which truly has benefited on the "veriest" of few and resulted so far in...well, what would appear to be a recession!
In short "not even the entire might of treasury has saved us from disastrous public policies." One of those monsters is still alive I might add...namely the HAMP thingy...which everyone agrees was "Government sponsored banksterism"...something going on at the State and local level as 'mericans "vote with their feet" and leave the unsustainable welfare "States within the States" in droves.
I still don't see a solvency crisis in Social Security so long as this energy boom keeps roaring ahead.
I think the world is only now discovering just how hard it is to compete with "War Machine USA." The Bucky is scandalously worthless and even to
my amazement USA Inc has responded with a truly stupendous production boom of pretty much everything.
Agricultural prices have gotten hammered...food and energy could see some dramatic DECLINES in both price and cost in my view...and War with Russia, let alone War In Israel and Occupation Libya are all clearly moving Dortmund.
It's incredible that the USA is in a recession at all actually.
Vet: Roger that War Machine USA is right. Another one is World Reserve Currency. Tech Supremacy. Info Superiority via NSA. Also, of the countries that dont hate the US, the "Do you wanna kill your golden goose?" story works well. The little countries get the crumbs from the US gravy train.
By the honest numbers, the US economy should have failed long ago. I always wondered how it kept rollin. Now I know: reserve currency, military, skilled citizen base[till lately], farm and mineral wealth. Even marxism since 1961 has only given the US a minor flesh wound!
The Lie Game (played the same as the hate game)
Who is lying more, the SSA or the CBO?
Who is lying more, Haaretz or NYT?
Who is lying more, Porochenko or Borodai?
Who is lying more, Obama or Netanyahu?
Who is lying more, Exxon or BP?
Who is lying more Kim or Kris?
Who is lying more, Al Jazeera or PressTV?
Who is lying more CNN or MSNBC?
Who is lying more Krugman or Cramer?
I am for age and wealth based taxes including means testing and completely eliminating SS, public pensions and Medicare benefits for anyone with a net worth over a dollar. Hey, if you are going to go on public assistance, lets make sure you spend your own damn money first.
"Wealth" in the US and other developed nations is basically smoke and mirrors. There are net assets held privately, but net debt is held publicly. This has been the largest theft in human history. Baby boomers in particular have been living high on the hog by passing the US credit card bill on to future generations. The generation prior to them, same thing. Gen X Y and Z need to get their shit together and start fighting for their futures. These debts need to be taken care of before all these old bastards croak and pass it on to their stupid undeserving kids while those with no inheritance are left with a life of slave labor paying for taxes the prior generations should have paid down long ago.
Boomers have only been collecting SS for 2 years. You ain't een NOTHING yet! I'm a boomer, Fifty (fifty fukin) years of payments in. I was promised a certain benefit. I planned for that benefit. Now you would change the rules with no time for me to adjust?
Truthfully I do not expect to ever collect a dime but it is interesting the sense of fairness some folks display.
You will collect Social Security. Don't let these hacks scare you.
Change the rules. Who the FUCK cares about "rules" when the FUCKING MATH Doesnt add up. You "Planned" for what exactly? For a CORRUPT Government to make PROMISES to YOU and Me and everyone else for a METHEMATICAL LIE.
Now, one more thing there mr L.V. - You say youve paid in 50 fukn years...tell me kind sir...how many of those years did you pay in the currect FICA Tax rate? Was it 6.2% back in (2014 minus 50 = 1964) - NO, it was LESS! Not only that, but the ones before you from 1940's to 1964 Paid even LESS, and they ssold you on a LIE to pay more than THEY DID so the fucking SS adminn could pay them THEIR LIE!
I Want the money I paid n retuened to ME, and YOU can have WHATEVER you paid in returned to you - and FUCK EVERY LATS ONE OF YOU who think I should be paying SOMEONE ELSES fucking retirement.
SS is a fucking scam and a Lie and communism in stealth.
Next up: Rise my rates to pay for people who cry like you, and the other 50% of people who collect SS who never worked afucking day in ther life.
Personally I would go after private foundations and as I said institute a wealth based tax up to 100% on the buffets of the world but that still is not going to be enough. Realize that obama would have to confiscate the shares of the entire s&p 500 just to cover the $17 trillion national debt. Then there is at least another $85 trillion in unfunded liabilities that must be accounted for. Oh, and we havent even talked about debt at the state level. Again, a massive theft.
SS is a Ponzi scheme, and has been since the day of its creation. You can thank FDR and the Democrats for that.
For retirement planning, assume SS will pay you zero, and you won't be far off the mark.
Tim Geithner, is that you?
Means test? Ok, I'll go with that Marxian solution. Just refund all I have paid in so far, and allow me to opt out of the system.
Oh, and anyone else who wants to opt out should be allowed to keep their, and their employers present contributions, to be invested privately.
Can't have it both ways, by forcing me to pay in, but not receive, right?
"Can't have it both ways, by forcing me to pay in, but not receive, right?"
Wrong!!! LOL! I assume you were being sarcastic.
Opted out long ago.
"Can't have it both ways, by forcing me to pay in, but not receive, right?"
Yes, you describe a bailout.
Not to get technical. But if the government takes your ss benefit that would be a bail in. I agree with taking it, just saying...
Not a bail in. Your contributions have all been spent; they aren't saved up some where.
The Special Treasuries in the SS Trust Fund will be monetized. End of story. All SS promises will be met. All will be paid.
Never mind what the dollars will be worth "in the long run."
Right. So you'll get your $1500, or whatever, a month, while a loaf of Wonder bread will cost $5000.
At the worst point in Weimar Germany, a loaf of bread was over the modern equivalent of $330,000.00. So......that makes you an optimist.
+1
Lying apologists at the SS and CBO are both FOS (full of $#!+), as is anyone else who throws around dates past 2014.
The SS trust (cough) "fund" is bankrupt/insolvent NOW, with zero real assets, only IOUs from the same criminally-insane, bankrupt United State_ gubbermint. Accept the cruel reality that your elephant/jackass sock puppets already spent everything they stole from you for decades under threat of violence.
Like any mature Ponzi scheme, the gubbermint now must to steal more from millions of poor, debt-laden, part-time-employed sheeple each week to pay millions of earlier theft victims each month.
The first is the Immediate and Permanent (I&P) payroll tax increase necessary to 'fix' SS for the next 75 years. CBO says that the I&P is 4%, while SS claims it is only 2.88%.
Why is it, Bruce, that you only think in terms of raping the taxpayer?
Why not phase out benefits for any government retiree cough (parasite) cough who already gets a TAXPAYER SUPPORTED pension of over $50,000?
How about a little justice and equity for once?
The I&P number is just a yard stick to measure how out of kilter SS is. Another one is the NPV of the unfunded portion. In 2014 That is $11 Trillion. To 'fix' SS we could write a check for the 11T or we could pay 4% of taxable payrolls forever. It comes to the same thing.
So this is CBO/SS talking - not me. I'm just trying to compare apples to apples.
If it were up to me, I would means test the shit out of SS and do everything possible to cut payroll taxes. I think Payroll taxes are a terrible policy. I certainly don't want to see higher rates.
Means testing is one crime on top of the others. We live frugally and save diligently. So you say, cut my benefits so an idiot who had the same income but blew every dollar on Lotto tickets and ostentatious living gets paid more than me? Bullshit.
Preach it!
(But also learn how to look very poor by running up credit cards to buy things of value that you can hide in your cellar...foodstuffs, gold, silver, guns, maybe put a little fiat in the Bank of Serta, etc. Then when the time comes that the USD is meaningless, you have real wealth...and Uncle Scam knows nothing of it. Personally I ran up the debt on hookers and heroin. )
There is a book written many years ago entitled The Wealthiest Man In Babylon. The conclusion of the book is that in order to become wealthy and support ones self in the future they should set aside 10% of their income.
Fast forward to today and the combined payroll tax paid by employee and employer is over 15%. Well, given the size of the contribution, everyone should be in pretty damn good shape assuming they worked throughout their lifetime. But they are not. What does SS Administration say? SS was not designed to replace all of your income in retirement.
All branches of government, both political parties and their Cronys are responsible for destroying this program in what can only be described as an elaborate theft of people's money, labor and ultimately their freedom and dignity.
Thank you for bringing light to this topic and for recognizing the the solution to a ponzi scheme is NOT to add more money to the program. See my other comments on this string for my proposed solution.
Thanks Bruce, that's the most sensible thing I've heard on the subject for a while, but your piece certainly did not frame the discussion in those terms.
I think means testing is the obvious outcome, but it requires giving up any pretense that SS is a pension, that there is a trust fund, or there is any equity at all in the system. It is a welfare scheme for otherwise impoverished old folks. Nothing more.
Sorry professor, the pretense of Social Security being a pension is your burden to bare, as is your ignorance on Social Security in general. I'm sure you will collect it upon eligibility. We can pretend your comments didn't happen.
No business has a NPV amount saved for future expenses for the next 75 years - this idea is just bad accounting and bad business. The world does not work that way. People don't save up 75 years of expenses in advance.
Even the Chinese don't...
Therefore as everyone else does, including you, you pay out of what you earn. You pay as you go.
Did you save a lifetime's worth of food or rent or utility expenses before you left high school or university or moved out on your own? Of course not.
What will happen is a cut in benefits, a raising of the full retirement age from 66 to 72 or such, a fudging of the COLA, and a raise in the tax rate. All four will happen. The result will be the same as if the budget balanced tomorrow on current cashflow - your SS payment will be -28% to -40% of what you thought it would, when you take into account constant dollars.
I use this now. I mult my imputed payment (way too high, I did not earn that much) and use the reduced figure for planning purposes.
"No business has a NPV amount saved for future expenses for the next 75 years - this idea is just bad accounting and bad business. The world does not work that way. People don't save up 75 years of expenses in advance."
Unless you are talking about the post office. They are being required to prefund 75 years worth of benefits. It's the main reason they lose money each year.
You are correct the world does not work that way but it should. Why the fuck do you think it is ok for generations of people to vote themselves a bunch of benefits they can never pay for in their lifetime? Are those benefits free? Of course not. Future generations are burdened with the liability until you get to the point we are now where payroll and other taxes are so fucking high to support prior generations that they have no ability to support themselves in the current let alone save money for the future.
The whole concept of retirement is a nice feel good thing but look at history. Since fucking when did normal working class people end up being able to retire? Retire early? Retire as millionaires? Not until last century. Is it because these people are so smart? No! Did they work harder? No! Then why? Because they collectively have borrowed/stolen from future generations, that's how. It is totally disgusting and generations X Y and Z are staring at a life of debt and tax slavery if something is not done very soon.
I think you're saying you're planning for your Social Security benefit to be far less than what you are being told it will be.
I'm planning on not getting any SS benefit at all.
Take care of your health, because you're going to need it to WORK.
I say collect the money from the bastards that stole it before they croak.
In short, the solution is parallel ponzis. First, capture the balance sheet of current SS system in time for a specific demographic (age group). Spin-up the actuary tables. Issue a debt instrument for any outstanding balance to each citizen. Then while ending this current system, a new system is created running parallel. Of course no COLAs and the debt instruments would expire with the last person in that target audience.
We’re getting eaten alive right now with spare knees and hips alone!