Social Security Requires A Bailout That's 60x Greater Than The 2008 Emergency Bank Handout

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.

Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…

… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.

But that didn’t happen.

The story was hardly picked up.

It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.

That’s not hyperbole either– the numbers are very clear.

The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.

In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.

Fat chance.

That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.

Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008.

So this is a pretty big deal.

More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.

In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future.

What will interest rates be in the future?
What will the population growth rate be?
How high (or low) will inflation be?

These variables can dramatically impact the outcome for Social Security.

For example, Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year.

This is an important assumption: the higher US productivity growth, the faster the economy will grow. And this ultimately means more tax revenue (and more income) for the program.

But -actual- US productivity growth is WAY below their assumption.

Over the past ten years productivity growth has been about 25% below their expectations.

And in 2016 US productivity growth was actually NEGATIVE.

Here’s another one: Social Security is hoping for a fertility rate in the US of 2.2 children per woman.

This is important, because a higher population growth means more people entering the work force and paying in to the Social Security system.

But the actual fertility rate is nearly 20% lower than what they project.

And if course, the most important assumption for Social Security is interest rates.

100% of Social Security’s investment income is from their ownership of US government bonds.

So if interest rates are high, the program makes more money. If interest rates are low, the program doesn’t make money.

Where are interest rates now? Very low.

In fact, interest rates are still near the lowest levels they’ve been in US history.

Social Security hopes that ‘real’ interest rates, i.e. inflation-adjusted interest rates, will be at least 3.2%.

This means that they need interest rates to be 3.2% ABOVE the rate of inflation.

This is where their projections are WAY OFF… because real interest rates in the US are actually negative.

The 12-month US government bond currently yields 1.2%. Yet the official inflation rate in the Land of the Free is 1.7%.

In other words, the interest rate is LOWER than inflation, i.e. the ‘real’ interest rate is MINUS 0.5%.

Social Security is depending on +3.2%.

So their assumptions are totally wrong.

And it’s not just Social Security either.

According to the Center for Retirement Research at Boston Collage, US public pension funds at the state and local level are also underfunded by an average of 67.9%.

Additionally, most pension funds target an investment return of between 7.5% to 8% in order to stay solvent.

Yet in 2015 the average pension fund’s investment return was just 3.2%. And last year a pitiful 0.6%.

This is a nationwide problem. Social Security is running out of money. State and local pension funds are running out of money.

And even still their assumptions are wildly optimistic. So the problem is much worse than their already dismal forecasts.

Understandably everyone is preoccupied right now with whether or not World War III breaks out in Guam.

(I would respectfully admit that this is one of those times I am grateful to be living on a farm in the southern hemisphere.)

But long-term, these pension shortfalls are truly going to create an epic financial and social crisis.

It’s a ticking time bomb, and one with so much certainty that we can practically circle a date on a calendar for when it will hit.

There are solutions.

Waiting on politicians to fix the problem is not one of them.

The government does not have a spare $45 trillion lying around to re-fund Social Security.

So anyone who expects to retire with comfort and dignity is going to have to take matters into their own hands and start saving now.

Consider options like SEP IRAs and 401(k) plans that have MUCH higher contribution limits, as well as self-directed structures which give you greater influence over how your retirement savings are invested.

These flexible structures also allow investments in alternative asset classes like private equity, cashflowing royalties, secured lending, cryptocurrency, etc.

Education is also critical.

Learning how to be a better investor can increase your investment returns and (most importantly) reduce losses.

And increasing the long-term average investment return of your IRA or 401(k) by just 1% per year can have a PROFOUND (six figure) impact on your retirement.

These solutions make sense: there is ZERO downside in saving more money for retirement.

But it’s critical to start now. A little bit of effort and planning right now will pay enormous dividends in the future.

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Cluster_Frak's picture

and let Dems buy votes with it in South Chicago.

El Oregonian's picture

"If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ? Sun Tzu, The Art of War

All Risk No Reward's picture

"All war is deception."
~Sun Tzu

"The best warriors never need to fight."
~Sun Tzu

"Pretend inferiority."
~Sun Tzu

"If you must fight a war, end it quickly or it will BANKRUPT the nation."
~Sun Tzu

The corollary to the last quote is, "if you want to accelerate the BANKRUPTCY of a country through warfare, create a pretext for a never ending war (on terror)."

Looks to me like the Debt-Money Monopolists have read Sun Tzu's Art of War and are applying many of its principles...

===============================

Resources:

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton

"Power corrupts. Absolute power corrupts absolutely."
~Lord Acton

How To Be a Crook
https://www.youtube.com/watch?v=2oHbwdNcHbc

Poverty - Debt Is Not a Choice
https://www.youtube.com/watch?v=t7BTTB4tiEU

Renaissance 2.0 The Rise of [Debt-Money Monopolist] Financial Empire
https://www.youtube.com/watch?v=96c2wXcNA7A

Debunking Money
https://www.youtube.com/watch?v=5iBSBVew-3Y

Krugman (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.

Krugman to Lietaer: "Never touch the money system!"
https://www.youtube.com/watch?v=Q6nL9elK0EY

And don't think Steve Keen is any better. He was called to the carpet for not admitting the system is a fraud when it was explained EXACTLY HOW THAT FRAUD WORKED... and he tucked tail and ran away PRETENDING he was responsive...

The Principal And Interest On Debt Myth (technically correct, but practically reveals inherent fraud as exposed CLEARLY in the comments section)
https://www.forbes.com/sites/stevekeen/2015/03/30/the-principal-and-inte...

Bottom line - Steve Keen won't "touch the money system" either. He learned well from his Debt-Money Monopolist Overlords.

30 sheckels of silver over THE TRUTH.

"The best way to control the opposition is to lead it and/or finance it."
~Yours truly, based upon Vladimir Lenin's quote

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
by: Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

OpTwoMistic's picture

The gov stole the money beginning in 1965.  Pay it back with interest.  Other than that do not  bother me.  Thanks

crazzziecanuck's picture

This is what happen when workers let the government rob them to spend it all on wars for the one percent.  There were decades of Social Security surpluses?  Where did all that money go?

Raytheon, Lockheed Martin, Boeing, Bechtel, Halliburton and so on.

Catherine Austin Fitts made an excellent observation about how the one percent have looted the real economy and mispent the money.  Now, everyone is left with worthless debt.  One cannot even say they have "assets" to show for all this money.

poetic justice's picture

Just a suggestion, although no one is going to take it seriously. The people need to seize the assets of the Elite and redistribute their ill gotten gains, without hesitation... 

What are the alternatives? Either total impoverishment of the population, or the more likely eventual outcome of  a brutal civil war.

 

dogballs's picture

Pitch forks and stretching racks. Then feed them to the fish.

All Risk No Reward's picture

1. There is a reason the Debt-Money Monopolists have financed a surveillance / police state.

2. There is a reason why the US territory has been declared a war zone and the US military can be used on US soil.

3. There is a reason why judicial protections have been eliminated. The government claims to have the legal right to murder you and not even tell anyone they were involved.

The Banksters are smarter than us... that's why they surreptitiously enslave us (and most love it, BTW, they defend their masters), and we get enslaved.

yogibear's picture

Chitcago is a sanctuary city. The democrats just  register the illegals and have them vote.

They get welfare and medicaid.

earleflorida's picture

'Tear Down that Wall, Mr Gorbackev de`Trump!!!'

ya think offshore amnesty money for a better corporate rate--- raping the proletariet, is gonna want their hard earned money paying for widows and orphans!

i'm sure bush and all the politicians get a check--- double-dip has 'hoola-de`loop-hoops', specifically built-in for their retirement!

Ps. and get rid of the arcane/ anachronistic 'electoral college' that's becoming the normal entrance for the GOP,.. and perhaps the next DEM president!!!

Ps0.5. [and] the popular vote with the old fashion paper ballot should be mandated!!! 

yogibear's picture

More H1Bs from India to displace Americans.

So more Americans can go on Social Security Disability Insurance (SSDI).

That should solve it (sarc). That was the politican's solution.

Honey-Badger's picture

They won't print anything for the plebs, only banks and corps close to the spigot will get newly minted fiat.

Retired Guy's picture

"there is ZERO downside in saving more money for retirement"

Gotta call BS. The real inflation rate, if you count food and other real prices is much higher than government numbers. The real interest rate is much more negative than the article suggests. The .gov will have to inflate faster than ever to make up the SS underfunding so bigger inflation is baked in. Sadly, a penny saved is a penny stolen by the government. Young savers will be So Out of Luck under the current facts.

If you want better facts, start with a currency that can't be inflated because people can't be trusted with a printing press. That is the beauty of gold unless somebody brings an astroid of pure gold to Earth. That would screw the pooch.

Keyser's picture

Not to worry, the central planners have found a way around the business cycle and that nasty economic concept called capitalism... The answer is simple, let the plebs continue to believe that their reality is intact, along with their 401K's and print currency into infinity to support the failed system... What could go wrong? 

Cognitive Dissonance's picture

"Consider options like SEP IRAs and 401(k) plans that have MUCH higher contribution limits, as well as self-directed structures which give you greater influence over how your retirement savings are invested."

I am so tired of hearing how these government tax blessed investment structures (SEP IRAs, 401(k) etc) are part of the way forward when attempting to take charge of your own retirement. So you are assuming that as the 'government' becomes increasingly desperate to 'fix' the un-fixable SS/pension problem, they won't change the tax deferred rules or simply not make a grab for all that money just sitting around unmolested?

Tell me another story grandpa.

Scuba Steve's picture

Exactlu,

Take a look at the new 401k managers offerings ... neatly disguised govt debt instruments.

The sheep are getting ass-raped and they dont even know it ...

Anteater's picture

B-b-b -u-t my company said they were matching my investment!

OverTheHedge's picture

Is it your money, or the government's money?

Any retirement plan authorised by the government allows you tax benefits, but then tells you exactly how you are required to spend that money and when, and how you invest it during your working life, and then they get to raid the piggy bank should there ever be a "problem".

I say take the tax hit and keep YOUR money, to do what YOU want. I have no "pension", and no expectation of receiving any state aid in my dotage, but I have made some investments that will either be sold, or will produce an income (or food) when I am no longer able to work.

The good news is that I am already poor so I don't have to wait for retirement to be shocked

All Risk No Reward's picture

>>Is it your money, or the government's money?<<

Neither. Study the following resources...

================================

Resources:

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton

"Power corrupts. Absolute power corrupts absolutely."
~Lord Acton

How To Be a Crook
https://www.youtube.com/watch?v=2oHbwdNcHbc

Poverty - Debt Is Not a Choice
https://www.youtube.com/watch?v=t7BTTB4tiEU

Renaissance 2.0 The Rise of [Debt-Money Monopolist] Financial Empire
https://www.youtube.com/watch?v=96c2wXcNA7A

Debunking Money
https://www.youtube.com/watch?v=5iBSBVew-3Y

Krugman (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.

Krugman to Lietaer: "Never touch the money system!"
https://www.youtube.com/watch?v=Q6nL9elK0EY

And don't think Steve Keen is any better. He was called to the carpet for not admitting the system is a fraud when it was explained EXACTLY HOW THAT FRAUD WORKED... and he tucked tail and ran away PRETENDING he was responsive...

The Principal And Interest On Debt Myth (technically correct, but practically reveals inherent fraud as exposed CLEARLY in the comments section)
https://www.forbes.com/sites/stevekeen/2015/03/30/the-principal-and-inte...

Bottom line - Steve Keen won't "touch the money system" either. He learned well from his Debt-Money Monopolist Overlords.

30 sheckels of silver over THE TRUTH.

"The best way to control the opposition is to lead it and/or finance it."
~Yours truly, based upon Vladimir Lenin's quote

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
by: Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

"The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can ‘throw the rascals out’ at any election without leading to any profound or extensive shifts in policy”
(Georgetown University Professor Carroll Quigley, Tragedy and Hope, 1966.)

haha-clinton-dix's picture

That, or people's behavior changes, causing demand and prices to go down with debt inflating away with monetary supply inflation as well as lower cost.

Eat food that doesn't kill you, and the bills drop 70%, with zero spent on healthcare.

Consumer products get a free tier. The healthy essentials are free. Salted meats cost double.

No need for retirement. Everyone's healthy and pass away peacefully in their sleep at 120.

peopledontwanttruth's picture

The article said, "More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.

Yeah right after they took a hit off their crack pipe.

GUS100CORRINA's picture

More GOOD NEWS for the weekend.

Fed better crank up those printing presses. Turn those machines on. Maybe we can print our way out of the problem. We've been doing that operation for everything else, why NOT Social Security.

red1chief's picture

The problem is it's not a problem, just scare-mongering so the oligarchs can cut it and take more.

LyLo's picture

Because it would actually be felt.  Hyper-inflation, massive crash: all at the Fed's feet.

Sorry, but everybody seems to think this is going to end with the Fed making themselves look bad to save them.  That's friggin' hilarious: SSI is going away.  Get over it.

Once the Millenial-bashing made it into real life, it was obvious: they're setting this up, and SSI is going down.

ebworthen's picture

Exactly, print that shit.  No shortage of money for Wall Street and the banks/corporations/insurers.

I'm certain that the people that had their wages garnished for 30+ years deserve it.

Fuck the FED, end the FED, hang the money-changers.

crazzziecanuck's picture

Q: What does one call 100,000 bankers dead at the bottom of the ocean?

A: An unacceptably slow start.

factorypreset's picture

How the fuck does me being a better investor change the fact that social security is going broke and that the money I've paid into social security will likely not be there when I retire?

Hal n back's picture

explanation: we are on our own.

Bobrsta's picture

Not there when you retire? Its not there now...

Retirement - what a concept!

halcyon's picture

Print moar. This time it'll also fix the persistent low inflation problem. For a while anyway. 

j0nx's picture

One of the reasons they want all these illegal mexicans coming in and becoming citizens. Gotta prop up that pyramid base.

booboo's picture

I think the illegal mexicans have a differnet plan, their plan involves sucking as much social services and paying as little tax. the genius that come up with that plan is going to be in for a surprise.

BadSpybot's picture

And that concept is working so well for Germany bringing in hordes of Africans and Mohammedians who, like Mexifornians, pay soooo much into the retirement coffers.

Normalcy Bias's picture

This is just another reason they're going to nationalize private retirement accounts, all in the name of 'fairness' of course.

red1chief's picture

Nationalize so they can steal. They'd also like to privatize Social Security, to steal more.

GunnerySgtHartman's picture

They'd also like to privatize Social Security, to steal more.

It's already been stolen, i.e. the "special Treasury securities" issued to the SS trust fund - how can you steal it twice?

red1chief's picture

By handing our payroll taxes over to Wall Street's skimming operation. More direct route to the "hedge fund manager" pockets to buy more mansions.

GunnerySgtHartman's picture

By handing our payroll taxes over to Wall Street's skimming operation.

They already did - the bailouts of the banks, the insurance companies, and Fannie & Freddie.  And they will attempt to do it again in the next crash.

yogibear's picture

The banksters were at the Federal Reserve's feed trough in 2008.

This time the bankster criminals made it bigger.

So they'll steal again.

red1chief's picture

No, they didn't with Social Security. But that's the plan with privatization. The IOU's in the trust fund will need to be paid from future taxes, but privatization will put fees right in their pockets.

Pernicious Gold Phallusy's picture

Argentina got away with it. George Miller (D, California) called for it here.

wisehiney's picture

My granny had a squeeze box,

She'd wear on her chest,

And when SScheck come in,

Grandaddy'd get no rest.

Cause she's playing all night,

And the music's all right.

Granny had a squeeze box,

Grandaddy never sleep at night.

historian40's picture

The US regime set up a ponzi scheme, hoping you'd die before you got any money back.  The fact they spent the money proves they had no intention of paying it back out.

SAE6065's picture

I agree with you on this 100%. This Corrupt Government and it Pathological Lying Fucking Politicians could care less about us low life citizens in the Land of the UNFREE and home to the SLAVE. This Country is Pathetic.

Scuba Steve's picture

Time to pay back the bitches, right? for your kin that paid in, right?

Or are you a lil bitch that keeps whining?

Pickup the weapon and stand guard or better yet be pre-emptive and eliminate the cause.

red1chief's picture

They spend more in the empire than social security, but funny how these Simon Black Wall Street types don't notice that. Maybe because they profit off war but not Social Security?