This page has been archived and commenting is disabled.
The 2015 Untrustworthies Report - Why Social Security Could Be Bankrupt In 12 Years
Submitted by David Stockman via Contra Corner blog,
The so-called “trustees” of the social security system issued their annual report last week and the stenographers of the financial press dutifully reported that the day of reckoning when the trust funds run dry has been put off another year—-until 2034.
So take a breath and kick the can. That’s five Presidential elections away!
Except that is not what the report really says. On a cash basis, the OASDI (retirement and disability) funds spent $859 billion during 2014 but took in only $786 billion in taxes, thereby generating $73 billion in red ink. And by the trustees’ own reckoning, the OASDI funds will spew a cumulative cash deficit of $1.6 trillion during the 12-years covering 2015-2026.
So measured by the only thing that matters—-hard cash income and outgo—-the social security system has already gone bust. What’s more, even under the White House’s rosy scenario budget forecasts, general fund outlays will exceed general revenues ex-payroll taxes by $8 trillion over the next twelve years.
Needless to say, this means there will be no general fund surplus to pay the OASDI shortfall. Uncle Sam will finance the entire $1.6 trillion cash deficit by adding to the public debt. That is, Washington plans to make social security ends meet by burying unborn taxpayers even deeper in national debt in order to fund unaffordable entitlements for the current generation of retirees.
The question thus recurs. How did the untrustworthies led by Treasury Secretary Jacob Lew, who signed the 2015 report, manage to turn today’s river of red ink into another 20 years of respite for our cowardly beltway politicians?
They did it, in a word, by redeeming phony assets; booking phony interest income on those non-existent assets; and projecting implausible GDP growth and phantom payroll tax revenues.
And that’s only the half of it!
The fact is, the whole rigmarole of trust fund accounting enables these phony assumptions to compound one another, thereby obfuscating the fast approaching bankruptcy of the system. And, as will be demonstrated below, that’s what’s really happening—–even if you give credit to the $2.79 trillion of so-called “assets” which were in the OASDI funds at the end of 2014.
Stated differently, the OASDI trust funds could be empty as soon as 2026, thereby triggering a devastating 33% across the board cut in benefits to affluent duffers living on Florida golf courses and destitute widows alike. Needless to say, the army of beneficiaries projected for the middle of the next decade—what will amount to the 8th largest nation on the planet—- would not take that lying down.
There would be blood in the streets in Washington and eventually staggering tax increases to fund the shortfall. Such desperate measures, of course, would sink once and for all whatever faint impulse of economic growth and job creation that remained alive in the US economy at the time.
In short, this year’s untrustworthies report amounts to an accounting and forecasting house of cards that is camouflaging an impending social, political and economic crisis of a magnitude not seen since the Great Depression or even the Civil War. So here follows an unpacking of the phony accounting edifice that obscures the imminent danger.
The place to start is with the one data series in the report that is rock solid. Namely, the projected cost of $15.5 trillion over the next 12 years to pay for retirement and disability benefits and the related (minor) administrative costs.
This staggering figure is derived from the fact that the number of beneficiaries will grow from 59 million to 79 million over the next twelve years, and that each and every one of these citizens has a payroll record that entitles them to an exact monthly benefit as a matter of law. Even the assumed COLA adjustment between 2-3% each year is pretty hard to argue with—-since it is nearly dead-on the actual CPI increase average since the year 2000.
By contrast, the funny money aspect comes in on the funding side. The latter starts with the $2.79 trillion of “assets” sitting in the OASDI trust funds at the end of 2014.
In truth, there is nothing there except government accounting confetti. This figure allegedly represents the accumulated excess of trust fund income over outgo historically, but every dime of that was spent long ago on aircraft carriers, cotton subsidies, green energy boondoggles, prison facilities for pot smokers, education grants, NSA’s cellphone monitors, space launches and the rest of Washington’s general government spending machine.
So when the untrustworthies claim that that social security is “solvent” until 2034 the only thing they are really saying is that this $2.79 trillion accounting artifact has not yet been liquidated according to the rules of trust fund arithmetic. And under those “rules” its pretty hard to actually accomplish that—-not the least due to the compounding of phantom interest on these phantom assets.
To wit, the 2015 report says that the OASDI funds will earn $1.2 trillion of interest income during the next twelve years. To be sure, the nation’s retirees and savers might well ask how Washington’s bookkeepers could manage to get the assumed 3.5% interest rate on the government’s assets compared to the 0.3% ordinary citizens earn on a bank account or even 2.2% on a 10-year treasury bond.
But that’s not the real scam. The skunk in the woodpile is actually an utterly arbitrary and unjustifiable assumption about the rate of nominal GDP growth and therefore the associated gain in projected payroll tax revenues coming into the trust fund.
What the untrustworthies have done here is indulge in the perfidious game of goal-seeked forecasting. That is, they have backed into a GDP growth rate sufficient to keep payroll tax revenues close to the level of benefit payouts, thereby minimizing the annual cash deficit.
This, in turn, ensures that the trust fund asset balance stays close to its current $2.7 trillion level in the years just ahead, and, mirabile dictu, permits it to earn upwards of $100 billion of “interest” each year. Too be sure, beneficiaries could not actually pay for their groceries and rent with this sort of trust fund “income”, but it does keep the asset balance high and the solvency can bouncing down the road a few more years.
But here’s the thing. Plug in a realistic figure for GDP growth and payroll tax revenue increases and the whole trust fund accounting scheme collapses; the bouncing can runs smack dab into a wall of trust fund insolvency.
To wit, the untrustworthies who wrote the report assumed that nominal GDP would grow at a 5.1% annual rate for the next 12 years. Yet the actual growth rate has never come close to that during the entire 21st century to date. At best these people are dreaming, but the truth is they are either lying or stupid.
Given the self-evident headwinds everywhere in the world, and year after year of failed “escape velocity” at home, no one paying a modicum of attention would expect US GDP to suddenly get up on its hind legs and race forward as far as the eye can see. Yet that’s exactly what the social security untrustworthies have done by assuming nominal GDP growth 35% higher than the actual 3.8% compound growth rate since the year 2000.
But its actually worse. Since reaching peak debt just prior to the financial crisis, the US rate of GDP growth has decelerated even more. And going forward, there is no meaningful prospect of recovery in the face of the growing deflationary tide in the global economy and the unavoidable necessity for the Fed and other central banks to normalize interest rates in the decade ahead. Failing that they will literally blow-up the world’s monetary system in a devastating currency race to the bottom.
Thus, during Q1 2008, which marked the end of the domestic credit binge, nominal GDP posted at $14.67 trillion, and during the most recent quarter it came in at $17.69 trillion. That amounts to an seven-year gain of just $3 trillion and an annual growth rate of 2.7%.
Now surely there will be another recession before 2026. If not, we will end up with 200 straight quarters of business cycle expansion—-a preposterous prospect never remotely experienced previously. Indeed, in our modern central bank driven world, where both recessions this century have resulted from the bursting of financial bubbles, the proposition is even starker. Namely, no bursting bubbles or market crashes for 18 years!
No, the historical business cycle expansions depicted below make clear that there will be another business cycle downturn. After all, contrary to the untrustworthies assumption that the current business cycle will last forever, and, in the analysis at hand for 200 months through the end of 2026, the average expansion has lasted just 39 months and the longest ever was only 119 months.
During the last business cycle contraction, in fact, nominal GDP declined by 3.4% between Q3 2008 and Q2 2009. And when you average that in with the 3.3% nominal GDP growth rate which we have had during the so-called recovery of the last four years, you not only get the aforementioned 2.7% trend rate of nominal GDP growth, but you are also hard-pressed to say how it can be bested in the years ahead.
Indeed, there is a now an unprecedented deflationary tide rolling through the world economy owing to the last 15 years of rampant money printing and financial repression by the central banks. By collectively monetizing upwards of $20 trillion of public debt and other existing securities and driving interest rates toward the zero bound in nominal terms and deep into negative territory in real terms, they have generated two massive, deflationary distortions that have now sunk deep roots in the world economy.
First, credit market debt outstanding has soared from $85 trillion to $200 trillion. This means future economic growth practically everywhere on the planet will be freighted-down by unprecedented, debilitating debt service costs.
At the same time, massive overinvestment in mining, energy, shipping and manufacturing spurred by central bank enabled cheap capital has generated a huge overhang of excess capacity. This is already fueling a downward spiral of commodity and industrial prices and profit margins, and there is no end in sight.
Iron ore prices which peaked at $200 per ton a few years back, for example, are now under $50 and heading for $30. Likewise, met coal prices which peaked at $400 per ton are heading under $100, while crude oil is heading for a retest of the $35 level hit during the financial crisis, and copper is on track to plunge from its recent peak of $4/pound toward $1.
These deflationary currents will suppress nominal income growth for a decade or longer owing to a now commencing counter-trend of low capital investment, shrinking industrial profits, tepid wage growth and falling prices for tradable goods and services. Accordingly, even maintaining the average nominal GDP growth rate of 2.7% realized over the last seven years will be a tall order for the US economy.
Needless to say, the law of compound arithmetic can be a brutal thing if you start with a delusional hockey stick and seek to bend it back to earth. In this case, the trustee report’s 5.1% GDP growth rate assumption results in $31 trillion of GDP by 2026. Stated differently, compared to only $3 trillion of nominal GDP growth in the last 7 years we are purportedly going to get $14 trillion in the next 12 years.
But let’s see. If we stay on the current 2.7% growth track, then GDP will come in at $24 trillion in 2026. Since OASDI payroll taxes amount to about 4.5% of GDP, it doesn’t take a lot of figuring to see that trust fund income would be dramatically lower in a $7 trillion smaller economy.
To be exact, the untrustworthies have goal-seeked their report to generate $1.425 trillion of payroll tax revenue 12-years from now. Yet based on a simple continuation of the deeply embedded GDP growth trend of the last seven years, payroll revenue would come in at only $1.1 trillion in 2026 or $325 billion lower in that year alone.
And here’s where the self-feeding illusion of trust fund accounting rears its ugly head. What counts is not simply the end-year delta, but the entire area of difference under the curve. That’s because every cumulative dollar of payroll tax shortfall not only reduces the reserve asset balance, but also the phantom interest income earned on it.
So what happens under a scenario of lower payroll tax revenues is that the $2.7 trillion of current trust fund “assets” begins circling the accounting drain with increasing velocity as time passes. In effect, the permission granted to Washington to kick the can by this year’s untrustworthies report gets revoked, and right fast.
To wit, instead of a cumulative total of $13.2 trillion of payroll tax revenue over the next 12 years, the actual, demonstrated GDP growth path of the present era would generate only $11.2 trillion during that period. That $2 trillion revenue difference not only ionizes most of the so-called trust fund assets, but also reduces the ending balance so rapidly that by the final year interest income computes to only $25 billion, not $100 billion as under the current report.
In short, by 2026 trust fund revenue would be $400 billion per year lower owing to lower taxes and less phantom interest. Accordingly, the current modest projected trust fund deficit of $150 billion would explode to upwards of $600 billion after the last of the phony interest income was booked.
Needless to say, that massive shortfall would amount to nearly 33% of the projected OASDI outgo of $1.8 trillion for 2026. More importantly, instead of a healthy cushion of $2.4 trillion of assets (or two year’s outgo) as the untrustworthies projected last week, the fund balance would be down to just $80 billion at year-end 2026.
Now that’s about 15 days of the next year’s OASDI outlays. The system would go tilt. Benefits would be automatically cut back to the level of tax revenue or by 33%. The greatest social crisis of the century would be storming out of every hill and dale in the land.
Yes, Jacob Lew is a Washington-Wall Street apparatchik who wouldn’t grasp the self-destructing flaws of trust fund accounting if they smacked him in the forehead. And the same is apparently true for the other trustees.
But here’s where the venality comes in. In order to goal-seek to 5% nominal GDP growth, the trustees report assumes that real GDP will average 3.1% per year through the year 2020.
Now, c’mon folks. Since the pre-crisis peak in late 2007, real GDP growth has averaged only 1.2% annually, and only 1.8% per year during the entire 15-years of this century.
Anybody who signed up for 3.1% real growth through 2020——that is, for scorching growth during month 67 through month 140 of a tepid business cycle expansion which is already long-in-the-tooth by historical standards—-is flat-out irresponsible and dishonest.
Calling their mendacious handiwork the “untrustworthies report” is actually more flattering than they deserve.
»
- 25284 reads
- Printer-friendly version
- Send to friend
- advertisements -
US is bankrupt today. Debt of over $1,720,000 per taxpayer versus $65,000 per taxpayer in Greece. Medicare will be bankrupt much before Social Security:
The U.S. has a $210 trillion “fiscal gap” and “may well be in worse fiscal shape than any developed country, including Greece,” Boston University economist Laurence Kotlikoff told members of the Senate Budget Committee in written and oral testimony on Feb. 25, 2015.
“The first point I want to get across is that our nation is broke,” Kotlikoff testified. “Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.
"Indeed, it may well be in worse fiscal shape than any developed country, including Greece," he said.
http://cnsnews.com/news/article/barbara-hollingsworth/economist-tells-co...
This is one of the things you get when you wipe out the white collar workers. Empty offices!
https://www.youtube.com/watch?v=_0R3zL_BFU8&feature=youtu.be
The Never Ending Train Wreck That Is Social Security...
http://econimica.blogspot.com/2015/07/all-things-social-security.html
No worries, the FED will provide. (sarcasm)
Was this article written back in 2006?
It's all broke now. There is a filing cabinet full of congressional IOU's and that's what they call the trust fund. Congress is already quietly having to spend general funds to cover them and it's only going to get bigger and more obvious as time goes on......
here's da shrub checking out the trust fund (snicker)
https://www.justfacts.com/images/socialsecurity/gwb.jpg
Not to worry. Importing more illegals and refugees will fix everything. And the lower skill the better. The fact that these people are net consumers of benefits need not be considered. Pay no attention to the man behind the curtain.
Uh, about those illegals...they're coming into short supply...
http://econimica.blogspot.com/2015/07/headwaters-of-us-population-growth.html
Sure the Mexican supplies have already peaked, but the US can easily carpet bomb some Third World country to produce waves of fresh meat.
Right now a quarter of all migration to EU originates in Syria, courtesy to the military-industrial-Congressional complex.
Yes, yes. Pay no attention to me....keep moving, there's nothing here for you to see.
Maybe we should put in in a lock box.
Ah, the days of Al Gore.
Ranks right up there with politicians claiming they can "save daylight" time
"Maybe we should put in in a lock box."
...That's kept under Hilary's bed.
Do you happen to know what happened to Bruce Kasting. He used to track Social Security on a quarterly basis and he called this a couple of years ago.
Krasting, actually. Has a web site. Seems inactive. Nail gunned?
Thanks Cal
The whole thing is one monumental scam. There are no SS assets, just IOUs. It's like someone claiming his credit card bill as an asset in order to borrow more. Eventually the fraud is exposed and the beneficiaries get hosed.
Like everything else the government touches, the New Deal forced savings program is a steaming pile of shit based on lies and accounting fraud. End it already.
"...is a steaming pile of shit based on lies and accounting fraud"...
and present accounting schemes are so much better! lol.
SS was intended to be a retirement assistance program due to many leaving the farm (and Granny) to work in the big city. People of the time were actually worried about their parents, unlike today.
When someone fraudulently bilks a private insurance company causing it to fail do we blame the contributors? No, we put them in jail,,, or at least used to.
When someone fraudulently bilks a public insurance plan they get re-elected to office for most of their lives and/or retire on a generous retirement program where they and their wives each collect a pension and 100% medical with every doctor in the world wanting their business.
all paid by the same people indignant granny is collecting $600 per month and a Medicare system with few participation doctors.
The height of hypocrisy...
So who ever wrote this crap story and I mean story. Little Timmy started to write monthly IOU's for SS a few years ago. Which means Its already bankrupt so stop writing stupid shit.
Actually, the SS IOUs started with Stockman's old boss, Ronald Reagan, and the looting of the fund has continued unabated.
http://www.fedsmith.com/2013/10/11/ronald-reagan-and-the-great-social-security-heist/
The looting started in 1965. Your point being, the point of no return hitting under the Reagan Presidency. In any case, both parties have decided to loot in since 1965.
" SS IOUs started with Stockman's old boss, Ronald Reagan, and the looting of the fund has continued unabated."
Nope, LBJ. "Guns and Butter" & "the great american" society programs began the looting.
Reagan/greenspan propped up SS & medicare, when the increased the payroll tax back in 1986. (This was before Greenspan became Fed Chief and was working on the SS budget issue). SS was going to bust in the 1990's, but they raised the Payroll tax to delay it for about another 25-30 years.
I suppose they could raise the payroll tax rate to delay it some more. Currently they been raising the cap about $1500 per year. However since fewer and fewer people earn more than the cap (~ 119K this year), revenue increases are diminishing. They will have to raise the payroll tax rate soon. My guess is they will start by raising it half a percent or more everytime it gets out of balance.
"WE RAPED THE HORSES AND RODE OFF ON THE WOMEN!"
A lot of today's very high earners who are so against raising the amount of their income that is subject to SS taxes will go bust themselves at sometime during their working careers and will be looking forward to receiving SS benefits if they can hang on until age 62, nevermind age 67. A lot of SS contributors pass away through accidents or illnesses before receiving any or very little benefits, but lets always have a scare story for the oldsters.
"A lot of today's very high earners who are so against raising the amount of their income that is subject to SS taxes will go bust themselves at sometime during their working careers and will be looking forward to receiving SS benefits if they can hang on until age 62, nevermind age 67. A lot of SS contributors pass away through accidents or illnesses before receiving any or very little benefits, but lets always have a scare story for the oldsters."
A lot of high wage earners will never see a dime of SS or medicare. Those under 55 will never see a dime. I am one of those people. I pay into a retirement system that I will not be a beneficiary. I would be better off taking the money I pay in to SS, and invest in long term tangible assets (property, PMs, resources, etc).
The Major of Boomers are still alive. Currently, 10K a day are retiring and collecting SS. We are still in the early years of boomer retirement, with the bulge of boomers born the the mid to late 1950s. When this group of boomers start retiring at the tune of 15K to 20K a day, then SS and Medicare will be close to the brink. To remedy the problem, The gov't will start raising the payroll taxes again. Already workers pay 15.3% of thier income in payroll taxes (on top of Federal, state, local & sales taxes). As taxes rise, jobs will disappear, forcing more frequent tax increases. Its a going to be a death spiral for sure.
SS is a text book Ponzi scheme. The earliest investeors get their money and have good returns. The last investors get absolutely nothing.
All insurance programs are a Ponzi.
In case a person thinks SS is not an insurance scheme.
FICA == Federal Insurance Contributions Act.
What people do not understand is the simple fact that what we have today is a pay as you go system for Both SS and Medicare. It was not designed that way, but starting with 1965 the Feds have used these funds for general obligation spending.
Many retirement systems throughotu the developed world ARE NOT managed this way, including our neighbor the the North - CANADA.
The US Congress and Govt decided long ago, to take their chances with funding on many things icluding all the ponzis in place currently paid by either tax revenues and or FED borrowings.
This is where we are today, and this is where we will remain unthill something major and negative happens. There is no other way and the governing elite know this well.
Benefits would be automatically cut back to the level of tax revenue or by 33%.
No problem, Americans are fine with it. After being paid nothing for their savings for the past 7 years, allowing the fed to monetize marginally credible MBS from commercial banks (clearly against the fed charter) they haven't protested a peep other than a fake attempt by a fake tea party.
The accounting will just have to lie more, and Americans are fine with that as well. We lie to ourselves, our neighbors and our clients what's more lies regarding our future as well? Lying is alive and well in the US today, it is what we do best.
Nailed it!!!!
+1000
Bingo. America's #1 product isn't goods or services, it's BULLSHIT.
"Benefits would be automatically cut back to the level of tax revenue or by 33%."
More likely taxes will go up and their will be more money printing to make up. Boomers are the biggest voting block in the US. They will outvote the younger generations and will demand thier entitlements are paid in full! Almost all members of congress and the senate are boomers. That should alone tell you how this will play out.
"Boomers are the biggest voting block in the US"
They are also the largest by far contributor,,, more than all the younger generations combined.
What the younger gens need to do is to somehow stop all the nefarious payouts. The SS was set up as a retirement assistance program,,, not a daddy to 1/3 of the population.
"They are also the largest by far contributor,,, more than all the younger generations combined."
Its pretty hard to contribute, when your job has been outsource, eliminated, and having been run through a "boomer" developed "dumbed down" education system. Boomers are the parents that raised their children as "My little Princess, my son is special he learned to read at the age of 11". ie lets focus on making school easier and avoid all that hard stuff like math and science.
Yep, FED is screwing Federal Interest on their Trust Funds (or whatever they should be called invested in US Treasuries)... as well as Screwing Americans with Savings that could draw Interest.
I say Fire Janet Yellen, for making Federal Budgets Weaker and Shafting Savers and Shafting normal Business Cycles.
"After being paid nothing for their savings for the past 7 years"
OH THE HUMANITY! of not being able to export fully 100% of your inflation to your global reserve currency debt colonies the world over and continue manifest destiny by trading inked linen and electrons for real goods and services. Now they won't even pay us to hold their money for us! Are we to be spared nothing!?!? We deserve that interest, dammit, we're Americans; as for everyone else who has been on the receiving end of our half century long inflation scam, fuck 'em.
Comedy and farce.
During the "Boomer Years" there were many more contributing than collecting that a huge surplus was built up in the fund.
The government promptly confiscated the monies and replaced it with useless IOU Treasuries in order to pay the FSA and the MIC for all the Democracy wars. No saving and no investing.
Many of the younger generation today was raised on that free money. If a SS eligible person dies his widow will get $1700 per month if she/he has young children and the children will receive $1700 each to boot.(Maximun 2)
A widow with two children will collect $61,200 per year in todays FRN.
More of the monies was diverted to free food and housing subsidies which tripled during the great job giveaways to China and Asia in general during the 1990's,,, still ongoing today.
Now, many of those that received/receiving monies for this and that are appalled that they may have to pay some of it back. Many don't even realize they were raised on this money. Mummy just kept getting these checks from some Uncle Sugar.
Problem now is the geese that funded all this are retiring and dying, and not fast enough for some. lol.
A new fleecing IRA retirement plan is coming from the government called MyIra. Absolutely no different than SS. Government collects, spends, creates IOU,s and taxes the younger workers of that time.
With production gone and few good paying jobs available many will be left to fend for themselves that didn't contribute enough. By then troops will be patrolling the streets and Detroit of today will look like a mecca compared to future cities.
Crap. I turn 62 in December, and even though I paid a paltry $5311 into SS (no lie, it took some doing because I never trusted the system), I am to receive about $390 a month if I start in January 2016.
I think the system will be completely busted in less than five years, which is why, even though every asshat financial advisor says "wait until you're 66 to start collecting," I will take the 25% haircut forever just to get mine before it's all gone.
Simple math says that if you wait 48 months longer to get your "100% benefit," it will take you 12 years to make up for the four years in which you received nothing. So, even if you think you'll live to be 78 (seriously?) what about inflation and the idea that you might invest some of that early money to "make up" the difference.
The real catch for those wishing to take "early" benefits is income. You can only make $15,500 per year. After that they take back $1 of SS for every $2 you earn. What a fucking scam. They purposely keep you poor.
What the scumbags in DC didn't count on is people like me, gaming the system until the day I die.
Fuck em. I personally can't wait until I'm 62 to see how much of that $5311 I loaned the government interest-free is returned to me. Pretty sure they'll find a way to fuck me over, like bankrupting the whole system just in time to screw yours truly.
Just an FYI if you weren't aware.
Failure to sign up for medicare @ 65 will leave you paying a penalty for the REST of your life.
Lemme know if you figure out how to game that.
It is not worth gaming. For $100 a month, you get good insurance coverage. For the price it cannot be beat.
The medicare premium is very cheap, no doubt. For that premium you get a Promise of good insurance coverage. The only problem is in finding a doc who will accept it. Where is the promised coverage if there is no provider at the Medicare price reimbursement?
That is not my experience. I live in the suburb of a large Metro area. My doctors are part of a medium sized practice with every specialty imaginable. ALL accept Medicare as well as my supplemental. Hospitals that we need are in the top 5 of the area. For me there are no issues. In many doctor offices within the specialties the offices are packed with retirees.
The program many not last, but for now there are no issues that I can see.
I think as long as you have the supplemental coverage, most any doc will take Medicare. It's only when you have Medicare alone that some docs start to balk. And if you have MediCal (the California low income insurance coverage), you're pretty much screwed. I don't know of many docs who will take that on its own.
Where?
With the employers part you can double that... Even at that you will break even in 30 months.
In my case the totel comes in at about $220,000. At $2000 (guessing) per month I will break even in about 110 months.
Sometimes less is more and sometimes more is less!
"Crap. I turn 62 in December, and even though I paid a paltry $5311 into SS (no lie, it took some doing because I never trusted the system), I am to receive about $390 a month if I start in January 2016."
Thats all? for your entire working career you only paid $5311 in SS? I've paid over $12K last year alone! So far I think I paid over $250K into SS over my working career.
Also don't forget the employer contribution. Even though your employer "pays" half, you still really pay it since they deduct the payroll tax from your net wages.
"Simple math says that if you wait 48 months longer to get your "100% benefit," it will take you 12 years to make up for the four years in which you received nothing. So, even if you think you'll live to be 78 (seriously?) what about inflation and the idea that you might invest some of that early money to "make up" the difference."
Well, your not really factoring in if your working to at least 65. if you continue to work beyond 62, and you save that money, you be better off than retiring at 62. Most people I know are delaying collecting until 65 or 67 but plan to work until at least 70. 60+ boomers now have a employeer advantage now, since, they can use medicare which save them money on healthcare expendures. Younger workers now more expensive than 60+ workers because of Obamacare.
"I personally can't wait until I'm 62 to see how much of that $5311 I loaned the government interest-free is returned to me. Pretty sure they'll find a way to fuck me over, like bankrupting the whole system just in time to screw yours truly."
FWIW: You would be better off delaying until your 65, unless your unemployeed. I don't think SS is going bust in the next five years. The gov't will do what its done in the past: raise taxes and print money.
Yep, and when I call for more personal control over my retirement portion of SSC, I'm always told "you'd mess it up".
Here is how the behavior of the average sheeple sees all of this.
1. They do not believe that the US Government is bankrupt or that it can ever become bankrupt.
2. Government money has always been there and it will alwasys be there.
3. I deserve it (retire no later than 65, maintain current lifestyle, live another 20 years doing whatever I want, collecting every form of benny imaginable, my grandkids, pardon, Medicare will pay for my exorbitant medical bills which will prolong my miserable life at a cost of $10,000s per month because I simply refuse to die with a shred of dignity) because I'm an American, period.
"Needless to say, the army of beneficiaries projected for the middle of the next decade—what will amount to the 8th largest nation on the planet—- would not take that lying down"
They don't call us Boomers fer nuthin.
That is why the Social Security Administration ordered 240 million rounds of hollow tip bullets.
"in order to fund unaffordable entitlements for the current generation of retirees"
It is always interesting to me that the "unaffordable" entitlements is always dragged out without examining whether these "entitlements" were unaffordable in the first place.
Let's not even discuss the entitlements given to the .01% to the tune of 23 trillion dollars by the Federal Reserve or the six trillion dollars being spent on wars to benefit the .01%
Let's focus on that most noble of Presidents Ronald Reagan and his phony baloney Social Security Lock box, which meant that any pork project could extract funds from Social Security and as long as they left an IOU, the money was considered still in Social Security. Of course, none of the IOUs were ever paid back and over time this bankrupted Social Security. As for as SS entitlement, it never was an entitlement but an insurance policy. I paid premiums to this insurance policy for 50 years. Now, I'm guilty of expecting an entitlement.
In the 1980s, Alan Greenspan made a one time payment adjustment to Social Security. The funds from that adjustment, if left untouched would have Social Security in surplus of over two trillion dollars. I think it is worth studying how Social Security got to where it is rather than blathering on about "entitlements"
Alan Greenspan announced in a recent economic forum that there is no longer a Social Security Trust Fund and that all payments are coming out of current accounts and being added to the current deficit.
I know that I'm going to get massively nuked for this comment, but what the heck, here goes:
Maybe, just maybe, there are some things that are better done by the private sector, and some things that are better done by the public sector. Furthermore, there are some things that actually seem to do best when they are served by both sectors, mail delivery and parcel service comes to mind.
I submit that there are some things that are simply not at all well served by the private sector, such as prisons for example. I think that private prisons are an abomination, a screaming affront to common decency and an obvious danger to human rights, and need to be abolished.
By the same token, how many private pension funds have ended up going broke, or were raided, or used as leverage in some LBO manuever that ends up with Grandpa losing out on all of his hard earned benefits so that Wall Street can make a buck? The truth is the history of private pension plans is spotty at best, and rife with examples of people who worked hard for decades and were screwed out of their promised benefits. The history of private prisons, private pensions, private roads and private fire departments all show why there are some things best left to the public sector.
What is going to replace Social Security if you end it, have you seen the legions of homeless people already out on the streets? Now imagine that number multipled by ten, imagine the sheer desperation and utterly degradation of those people out on the streets, totally and completely overwhelming every single private charity available by an order of magnitude. Imagine the impact on public safety, public sanitation, quality of life and crime, do we really want to return to the England of Dickens' time, with pickpockets and robbers lurking in every single alleyway?
I'm sorry this isn't some quick, snarky comment, or some kind of witty defense of a Ragnar Redbeard ideology, but the fact remains that for all its faults Social Security doesn't do too bad of a job. Without it our nation would face a humanitarian disaster, please don't tell me with a straight face that the almighty "free market" is going to soak up all of those disabled and elderly people into the workforce when employers don't even want to hire able-bodied people over 50. Arguments against the cost don't really make sense when you consider that we were quite able to cough up $50Bn a month for years on end to bail out Wall Street, you mean to tell me we can afford trillions and trillions of dollars for that but we have to throw grandma out on the street? Seriously?
Here's a simple truth for all of you to consider: There simply are not enough jobs to go around any longer, so what are you going to do with all of those people who don't have jobs? Tell them to die quietly and not bother the rest of us? Oh yeah, that's going to work out real well, I guess it's been too long since we've seen what happens when people get totally and completely desperate and marginalized, so here's yet another lesson that we are going to need to learn all over again.
Downvote away! Let's see if we can get to 100!
"I submit that there are some things that are simply not at all well served by the private sector, such as prisons for example. I think that private prisons are an abomination, a screaming affront to common decency and an obvious danger to human rights, and need to be abolished."
Gov't prision are the same sh*t holes and privatized prisons. People are people. Doesn't matter if they are gov't employeed or not. The private sector offers competition which provides consumers alternatives. Companies that complete for market share are forced to be innovative, efficient and cost competitve. Gov't run/controlled businesses have a monopoly which causes corruption, stagnation, and inefficiencies. Personally I see no reason to hold +2M people in prisions. The US has only about 5% of the worlds population but has about 80% of world's incarcerated population. What about gov't education? Do you think that was a good idea? We have two generations of under educated americans who can't complete. the US now has to import foriegn engineers since Public schools have dumbed down americans.
"What is going to replace Social Security if you end it, have you seen the legions of homeless people already out on the streets? "
Well, theare are already legions of homeless people. The difference is its now mostly younger generations forced to live in tents since they can't find jobs and are buried under mountains of student debt. SS created generations of sloths and irresponsible people. People avoided saving money because of SS. The majority of people were educated to believe they can rely on gov't entitlements, which means instead of saving for retirement, the blew thier money, of SUVs, McMansions, pricey vacations, hookers, drugs, you name it. The average boomer has less than $50K saved which should hammer this point in your head.
"Without it our nation would face a humanitarian disaster, please don't tell me with a straight face that the almighty "free market" is going to soak up all of those disabled and elderly people into the workforce when employers don't even want to hire able-bodied people over 50."
SS has create a nation of humanitarian disaster as generations have been educated to be dependant on gov't entitlements that are unsustainable. All of the SS surplus was spent on Gov't pork (spent for the now, instead of holding for the future). As far as employment, those over 50 are holding jobs. those under 50 are getting laid off and/or losing hours (going from a +40 hour week to a 20+ hour week). You got it completely ass-backwards. Go look up the employement statistic by age group. The only age group that saw increases was the +50 age group.
"There simply are not enough jobs to go around any longer, so what are you going to do with all of those people who don't have jobs? "
You mean all those younger workers that have seen thier jobs outsourced/eliminated? Boomers hold the management jobs who are doing the outsourcing. Instead of managing younger American workers, they are managing overseas operations. Boomer control everything. Almost every politican in the Federal gov't is a boomer. Boomers are the largest voter block. The Younger generations have ZIP and are forced to pay for the boomers poor mis-management of the gov't and the economy. Boomers swandered the ecomony starting in the 1960's with thier Hippy movement. the Boomers are also referred as the "Me" generation, as the most self-centered, entitled generation of all time! The only payback is that because the boomers have mis-managed the US economy and have outsourced any job that wasn't nailed down, their won't be anyone to pay for thier "promised" entitlements: Payback or Karma's a Bitch! F* You and your entire generation of mis-fits!
"You mean all those younger workers that have seen thier jobs outsourced/eliminated? Boomers hold the management jobs who are doing the outsourcing. Instead of managing younger American workers, they are managing overseas operations."
Just for the record, I've been against so-called "free trade" from day one, was burning up the phone lines against NAFTA, GATT, CAFTA and all of the other atrocities that have been perpetrated by BOTH parties and BOTH ideologies against the American people. I sent faxes, I wrote letters, I made phone calls and I talked to my friends and neighbors against it. Just FYI.
By the way, I'm not a boomer, I'm a member of Generation X. Again, just FYI.
No downvote. You should be commended for using complete sentences to layout a full opinion. I am a libertarian, private sector kind of guy 90% of the time, but that other 10% they should execute well. Of course they do not. Private hospitals and public hospitals and private prisons and public prisons and private airline security and public airline security are all shit. I have to agree with your comment, however, "we were quite able to cough up $50Bn a month for years on end... but we have to throw grandma out on the street". If we are going to funnel money to the oligarchs, we could at least provide better care for we cattle. Sadly, it is not to be. Patronage will not end. Money will continue to be printed. Our buying power will continue to be eroded. All you can do is prepare to take care of yourself if all this goes to shit.
Moo.
Hi Elliott, I'm not going to vote for your comment. However I want you to answer some questions for me concerning so-called Social Security. Before I ask my questions, I want to tell you a story that happened to me in the past. One day at the house that belonged to my mother's friend, her boyfriend was talking to me about his retirement. He said that I was important to his retirement because my career, my wages, my fica "contributions" paid for his social security. I responded by telling him that the demographic changes in this country where altering the ratio of contributors to recipients to three or two to one. After saying that he had a dejected look on his face.
I have no idea who you are or where you come from but the Dickens reference indicates that you have had some college education and you came of age before at least 1990. The demographics in our nation are changing and making it difficult to finance National Social Pensions with the FICA taxation scheme. Hw much of my income do I have to scarifice for your happiness? Tell me? Back in the past retirement was financed by personal savings and reliance on family, friends and community. If you do not believe me, take a look at the Amish. They are able to support themselves even in the 21st century without the help of the government.
Now for my questions from your post:
1.) "I submit that there are some things that are simply not at all well served by the private sector, such as prisons for example. I think that private prisons are an abomination, a screaming affront to common decency and an obvious danger to human rights, and need to be abolished." Why are you addressing the subject of private prisons in this post? What relevance does that have here? If you want to close down the private prisons, will those prisoners go and live in your neighborhood?
2.) "By the same token, how many private pension funds have ended up going broke, or were raided, or used as leverage in some LBO manuever that ends up with Grandpa losing out on all of his hard earned benefits so that Wall Street can make a buck?" Um, have you been paying attention to the state of the municipal and state pension funds in our nation? They do not look so great at all. As a matter of fact, it seems that all of the properties in this country are appreciating faster than their actual value. This seems to me that the local governments are doing this in order to bring in more revenue than they can with taxation rate increases. Oh and why did they need to increased the fica tax? If Social security is self-financing, then couldn't we go back to the original 2% of income? That would help out the economy.
3.) "What is going to replace Social Security if you end it, have you seen the legions of homeless people already out on the streets?" Oh dear, you where not watching the news. Back a long time ago the insane asylums where opened up and all the crazies were let go. We already have generous Welfare benefits for those that do not want to work. Just last night I witnessed two, grown, cacausian men purchasing groceries at my local supermarket. One of them had purchased three, t-bone steaks, each valued at $10.00 a piece. They used their EBT cards to complete the purchase. Oh I guess we can all let the indigent stay on the dole until the bank breaks.
4.) " Imagine the impact on public safety, public sanitation, quality of life and crime, do we really want to return to the England of Dickens' time, with pickpockets and robbers lurking in every single alleyway?" This sentence is from your fourth paragraph. I guess you are trying to convey a sense of fear and foreboding with a loss of National Social Pensions. Um, if that's the case, why do we have gangs running our cities? Just a year ago, I found out that one of my coworkers had a grown child that was killed by a gang-banger. The co-workers son was walking down a street and passed by a house that was in use by a gang in the city that I live in. As he passed by, he was seen by one of the gang members and this gang member was undergoing his initiation rite, decided to kill the guy. Yeah that's right, the gang banger decided to kill my colleagues' son just to prove he was a member of the group. Well, I guess that is not a freightening as pickpockets and thieves in every alleyway but having someone run out of their house and kill you for no-good reason is freightening to me. How about you? Would you want to be killed in a mannner like this? Or would you want your children killed like this?
5.)"Here's a simple truth for all of you to consider: There simply are not enough jobs to go around any longer, so what are you going to do with all of those people who don't have jobs?" So some of us will work and the rest will stay home and play, surf the net or compose poetry? Uh to my knowledge the fundamental premise of the Social Secuirty Act of 1933 was that eligibility was through fourty quarters of employment where the contributor had made a minimum contribution to the fund and when retirement came, would be eligibile to receive benefits because they had made an original contribution to the fund. In other words, they paid into it, they could receive payment out of it. In our nice, new Obama New World, where will the money come from? Who will pay for the money to disburse the benefits for OASDI?
I have met tooo many people like you Elliott. You will not give me a straight answer - intead you will accuse me of Racism, Sexism, Specism or what ever cause is fashionable at this time. Go ahead, you live in a country where you can say what you want, for the moment. Just wait until the technicals from ISIS come in and begin to eat your neighbors kids in front of everyone. Don't say I did not warn you.
It's an honor to have my pay significantly reduced every pay period so that I can "contribute" to the retirement of the generations that largely built this country into the 'shining light on a hill' that it is.
Of course, my generation (X) will be lovingly cared for by the industrious Gen Y and those that follow...
It pays more than it has in cash, and the difference is made by trading around what amount to IOUs from future taxpayers.
Fucking things is bankrupt now - if economists don't understand that, maybe they should be prevented from analyzing the economy and we can have mathematicians and accountants do it instead.
"Fucking things is bankrupt now - if economists don't understand that, maybe they should be prevented from analyzing the economy and we can have mathematicians and accountants do it instead."
Correction: EVERYTHING is bankrupt now, for one simple reason: When you have a debt-based fiat currency system in place, all new money is created as debt, meaning it must be repaid in full with interest. When you have a system like that in place you ensure that everyone is always and forever indebted, and they can never ever get out of debt, because if all of the debt everywhere were to be repaid there would be no money in circulation.
The solution is simple, revoke the power to create money from the central bankers and return it to the Treasury where it belongs. Once that has been done all of these other problems will quickly resolve themselves, without doing this there will never be a resolution to the problem of endless infinite debt.
Take the cap off SS.
Why should someone making lots of bucks not pay SS?
The so-called "war on drugs" and the the wars for empire
have blowback.
Massive upward wealth transfer has blowback.
Neglected infrastructure issues, such as
pollution, health, working conditions, education, transportation, job outsourcing,
trade policies, ... all have blowback.
Instead of addressing and fixing the problems,
the "solution" has been to patch over the immediate costs on to the working classes.
How? By lower general wages mixed with payoffs to select groups (e.g. police) and empty, divisive "pie in the sky" promises for others.
And by using retirement taxes to pay for a corrupt medical system to marginally treat the disabilities generated by the neglect and the "wars" of a corrupt social order.
Any surplus taxes and payments collected annually have been used to pay for wars and graft, and thereby threaten future bankruptcy to worker retirement systems, both private and public.
Yeah, here is the War on the Middle Class. And Governors can play at it as well as Congress, US President, Neocons, and the FED Central Bank. They don't give a crap about adding expenses to you or even people on fixed income. 15 Years of Manipulated Interest Rates isn't it?
"To wit, the 2015 report says that the OASDI funds will earn $1.2 trillion of interest income during the next twelve years. To be sure, the nation’s retirees and savers might well ask how Washington’s bookkeepers could manage to get the assumed 3.5% interest rate on the government’s assets compared to the 0.3% ordinary citizens earn on a bank account or even 2.2% on a 10-year treasury bond."
That Stockman Quote is worth reposting.
But look Federal Budget is like $3.5 Trillion or has been. All of that goes into the Economy & GDP (Official GDP).
Funny thing the Measures of Money Stock Velocity and Multiplier Effect have been nose diving for like 20 years... even with this huge Federal Budget Increases (Fiscal Policy).
Stockman points out GDP has been terrible during this time since 2008... In Effect without Federal Spending Economy is Negative GDP Growth.
Rape is now Complete and it goes with the COUP that takes place every Presidential Election and every session of the US Congress.
If we had any small time farmers in great numbers they would be carrying pitchforks since there is no way the Farmers that did okay are not hurt by Low Interest Rates.
CBO, US Treasury, Jack Lew, GAO, IG, members of Congress, Janet Yellen... they should all be ashamed of the Damage to the Federal Budget, Our Trust Funds, Our Public & Private Pension Funds, our elderly and infirm, and those who were near retirement...
The Debt Burden, Off Shoring, Free Trade, Trade Imbalance, Balance of Payments, Capital Flight, Brain Drain from Industry, Mal-Investment, Looting of Corporations, Stagnant Capital are Economic/Monetary Leakage, Velocity is dampened.
In the USA we see Velocity steady decline in all measure of Money stock, M1, M2, MZM.
http://research.stlouisfed.org/fred2/series/M1V (Top was 2007 Q4 at 10.7, now down to 6.3)
http://research.stlouisfed.org/fred2/series/M2V (Top was 1997 Q3 at 2.2, now down to 1.5)
http://research.stlouisfed.org/fred2/series/MZMV (Top was 1981 Q1 at 3.5, now down to 1.4)
http://research.stlouisfed.org/fred2/series/Mult (Top was January 1987 at 3.1, now down to .7)
And the Top Employment for Manufacturing was 1979, Right?
But none of these guys takes responsibility for anything not in their In-Box:
Treasury, Jack Lew
SEC, Mary Jo White
CFTC, Timothy Massad
Fed, Janet Yellen
OCC, Thomas J. Curry
CFPB, Richard Cordray
FDIC, Martin Gruenberg
FHFA, Mel Watt
NCUA, Debbie Matz
Insurance, S. Roy Woodall, Jr.
Fukushima radiation will ensure that most will die of cancer by 2050; problem solved. Just take a look at the radiation counts for US cities at netc.net. Under the old EPA warnings (pre-Fukushima) a CPM of 50+ meant evacuation.
Because there are no assets in the trust.
Only IOU's.
What ever happened to Bruce Kasting? He called this a couple of years ago.
Maybe government employees should start contributing and depend on SS instead of their own pension plan.
That is why we have open borders and financial lock down except for black market labor and consumption... since the demographics are not strong enough to keep OASDI solvent.
But the power of the wealthy, the power of gift giving and Lobbying keeps congress from being able to get OASDI from the high earners... or to locate their true income.
Status Quo.
Nothing Changes except higher debt and higher taxes... certainly don't see turn over in Congress or a Term Limit Law.
Status Quo. Kick the Can. Come on you can join in, kick the can.
How about a Little Gerrymandering this year?
How about a new Trade Agreement or maybe a little more soft money to set new records in Lobbying.
How about some more inflation in banking fees, insurance, housing costs, education, health care... 100% sure Public and Private Executives have seen Wages and compensation Inflated this year.
The Song Remains the Same. Nothing New Under the Sun.
Status Quo.
Eliminate the income cap for SS taxes and open it up to capital gains as well. Problem solved. Demographic shifts in time will fix the rest.
Can you expand this a little bit? I'm trying to figure out what you mean (and how this would work).
It seems like you mean you want to tax the .01's income and capital gains income as well. True?
Wow. Seems like a pretty good idea. That means it would never fly.