Social Security’s Implosion Continues
An indicator of just how seriously the federal government’s financial situation has deteriorated (combined of course with the establishment press’s clear desire to emphasize “news” which might assist Dear Leader’s reelection effort) is that the dismal 2012 report released by the Social Security system’s trustees on April 23 received little attention. Viewed through that perverse prism, cash deficits which “will average about $66 billion between 2012 and 2018 before rising steeply,” even before considering the $110 billion or so taken from “general (non-existent) revenues” during 2011 and 2012 to make up for the payroll tax cut, pale in comparison to the importance of higher priorities — like working up a 5,400-word report riddled with errors and distortions on what Mitt Romney was doing when he was a teenager.
The sad, under-reported truth is that three years into an alleged “recovery,” the long-term outlook for Social Security continues to crumble at an accelerating rate.
It’s a crackup which was decades in the making. That’s because the government has scandalously used Social Security’s annual surpluses to fund the rest of its operations since President Lyndon Johnson began “including Social Security and all other trust funds in a ‘unified budget’” in the 1960s. Social Security’s so-called “Trust Funds” consist of nothing more than stacks of IOUs from the rest of a dangerously indebted government.
During fiscal 2007, a mere five years ago, the system ran a cash surplus, as tax collections exceeded benefits paid and administrative costs by $186 billion. With the wave of baby boomer retirements looming on the horizon, everyone knew that these large annual surpluses couldn’t and wouldn’t last. In their 2008 report covering calendar 2007, the trustees projected that the system would begin paying out more in benefits than it collected in taxes in 2017; at that point, the rest of the government would have to start making up the difference.
Instead, annual surpluses virtually vanished just two years later, thanks to the onset of the POR (Pelosi-Obama-Reid) economy in roughly June of 2008. The Democratic Party’s permissive home lending-driven, securities fraud-enabled recession, followed by the Obama administration’s failure to choose policies which would have hastened a genuine recovery and acceptably grown the economy, brought things to a head with Social Security that much sooner. In the 2010 Trustees Report on 2009 results, tax collections were only $3 billion greater than benefits paid. 2010 went into the red by $49 billion, while 2011, after taking the payroll tax-cut reimbursements into account, had a deficit of $45 billion. After the 2012-2018 shorfalls cited earlier, annual cash deficits are projected to head quickly into the land of triple digits. If the economy doesn’t start generating significant growth and job creation, they might even arrive as quickly as the first cash deficits.





Who are these trustees doing the solvency projections? I could be more accurate with a dart board and a bottle of Crown Royal.
And besides, it isn’t important whether the whole system crashes or not. The important thing is to be able to blame Republicans when it does.
It’s all fun and games until you accidentally swallow the darts and throw the Crown Royal across the room.
If you do, blame it on Bush©
Fantastic. The only source of income I have is about to go away. They sure took enough of my paychecks over the decades for it.
And somehow it’s all those darn republicans fault for not supporting a turtle’s right to gay marriage in vitro or whatever lunacy they can come up with this week to distract from the horror show that is the Obama presidency.
Thumbs up. Same boat. After losing pensions to 401ks and then having 401ks earn worthless returns with heavy taxes on top, there is nothing left. Add to that, the unemployment rate. By the time someone in their 50′s finds a substitute job at 1/10 of what they were earning, there is no time to stash that miserable income away. The aggavating real inflation of 7-9% eats away at what is saved.
All this in exchange for $40 a month “Largest tax break in Americna History” which bankrupts the system. Even if one were to recieve SS payments in the future, that $40 equates to $200 taken off the SS check.
If the elderly, the people about to retire and the military knew the details of their situation including the rape and murder of Medicare/aid and military Tricare, they would get their pitchforks and torches out.
“If the elderly, the people about to retire and the military knew the details of their situation including the rape and murder of Medicare/aid and military Tricare, they would get their pitchforks and torches out.”
I’ve always thought that if the youth of today ever realized how badly they were being shortchanged in their education, they’d be dragging their teachers bodies through the streets. Maybe we can all team up.
We are continuing with our plans to emigrate. We expect to work until the day we die, but at least where we plan to go, we will have the opportunity to earn (and keep) enough to survive on, which we can’t do here.
I wish they would stop calling them ‘baby boomers’ and refer to them as ‘investors’. I am not an actuary but I’m sure the numbers do not add up when it comes to Social Security. You state that other government departments ‘borrowed’ from the Fund but do not follow the money. Where was it spent? The more babies that were born in the post-war era, the more people there were paying into the system. Of those, a percentage died early, without ever realizing any benefits from their ‘insurance’ and their imput rolled over into the Fund.
Across the pond in Britain they are saying just the same. The chickens have come home to roost and its payday. Blame the old and infirm. How dare they demand some return for their lifelong investment. They are of no further use.
How do the corrupticrats save themselves after creating all this funny money to buy or seize power?
Easy. Kill the people you owe money to by attrition,
import younger ‘voters’ loyal to the Party, not the country.
Problem is that Social Security’s IOU’s are a “charge” on future taxpayers to redeem. We could have done much better if we’d used the assets we once had to purchase a good bond package similar to those offered by Vanguard. Instead what we have done is to impose a very heavy “tax” upon the next generation to cover the cost of redeeming the “special notes” held by Social Security. What is worse yet is our uncontrolled rise in health care costs which will bankrupt Medicare sometime in this decade. There is a solution for this, but it involves moving to a free market health care system where people are free to purchase for themselves what medicine they want without first getting “permission” from a doctor… Which will be strongly opposed by the AMA because prescription laws are one of the reasons doctors earn the incomes that they do. Proving that at least some people actually benefit from government laws economically. The licensed professions people most of all.
There is a silver lining in this Social Security fiasco. To begin with, it is a welfare entitlement, not a paid-for pension in a separate account. Even FDR admitted that. It’s all accounting and all in one basket of federal tax and borrowing pools. FICA and SECA all go into the general funds and always have.
Now, when the FUND exhausts in 5, 10, 15 years, here is what happens (assuming there is no sensible intervention): Social Security welfare payments to all senior and the disabled will continue to be paid out, but based upon the FICA and SECA that comes in.
According to the Administrators and Trustees, there will be a decrease of some 25% in these payouts. But they will be paid. That is the social contract between the citizen and government. It will not stop. Here are a couple of examples of what to expect:
1. Citizen One currently receives $1700/mo. When the system exhausts, this citizen continues to receive check, but in the amount of some $1275/mo.
2. Citizen Two currently receives $900/mo. This will become $675 or so then. That will really hurt, especially if that is all that is being received.
To finish this simplified conversation, interventions, cost-of-living increases, issues with the national budget deficit/nation debt itself, Congressional fixes, general economic betterments, and other factors, could change this outcome. All I can say is: stay tuned……
…..And don’t forget the cost of Medicare, (Parts A & B that is taken out of your SS now), that will increase in the years ahead.
Can somebody tell me of a good dog food?
dog food was good till they started importing glycol contaminated ingredients. I only buy american made dog foods if I need to. but I have a good food bank near by…
Perhaps it’s welfare for some, but not for me. I’ve calculated how much I contributed with matching funds from my employers (which was sometimes myself.) The benefits I’d receive if I hold out until age 70 give me an approximately 3% return. How is that a welfare benefit?
Those numbers work fine, Joe, if you are only calculating your social security contributions and weighing them against your estimated payments. But you must also calculate the value of all medicare you will potentially use during your retirement. When both social security payments and medicare value is calculated, most retirees receive far more than paid in with interest. Usually to the tune of hundreds of thousands of dollars.
“It’s far more probable that Obama and his inner circle know full well that they are wrecking the very entitlement programs they profess to love so dearly. They have convinced themselves that when it all falls apart and after the dust settles, they’ll have their hands more firmly on the levers of power, which to them seems to be all that really matters.”
THAT is the whole point of what Obama and his minions are doing. It is all designed to make the people even more dependent on government, so that people will keep voting in far-left politicians who will promise them more and more “benefits.” It is exactly the way the European socialists work and we can all see how well things turn out when the government finally runs out of money, as in Greece. This is a disaster waiting to happen and what makes it worse is that we keep paying a lot of money into this system for Social Security and the people in Washington keep squandering it on programs we don’t really need, such as the Department of Energy. I’m not really sure how Americans will react when we turn into Greece, but I get this feeling it will be far worse than what the Europeans are experiencing now. Hopefully, we will not have to find out because we’ll be getting a new president in November. If not, we really will find out what it’s like to be Greece. Or France. Or Portuagal. Or Ireland. Or Spain. Or Italy.
The real problem is that while Europe has been failing, they have had us and our strong financial situation to bail them out. When our system collapses, who’s going to bail us out?
Cloward Piven on a grand scale.
Why do you think they are trying so hard to disarm us?
A war on math? Is that the leftist intention?
With all due respect, demographics doomed Social Security a long time ago. When it was created, the worker-to-retiree ratio was 35 workers to 1 retiree. When the boomers all retire (thank you Roe v Wade for badly exacerbating the problem), generations X and Millennial will be about 1.5 or 2 workers for 1 eligible recipient.
There is nothing conservative about living in denial about the reality of how badly the demographic crisis has set up Medicare and Social Security. They will collapse, no matter how we structure our economy and regulations because the basic math is not sound.
If most boomers were smart (which they aren’t), they would insist on reforming these programs by pegging them to percentages of the federal budget. 50% for Social Security and 20-25% for Medicare and it might be somewhat maintainable for another 30-40 years.
What is going to happen is the younger generations will be forced to pay into it even as they are being crushed under debt, reduce opportunity, etc. Appealing to us about how you paid into the system only entitles you to the saddest song on the world’s smallest violin. We’re paying into a system where we know with certainty we will never see a return. Any “conservative” who talks about Social Security as though it is fixable is either delusional or needs to turn in their card because they have a typical liberal’s understanding of economics.
They will just print and borrow more money and go merrily along until our retirement savings dollars are worth next to nothing. Once nobody cares about Social Security anymore, because the checks won’t be worth anything anyway, they will kill the program entirely. The good news is that, by then, we will all be wards of the State. Social Security, Liberty, private property, and Republic will be quaint little notions found in the the United Nations comic books we will be reading instead of history books. ABO2012
When you’re done reading this, take a look at the Vanguard web site. Look for their two index bond funds. Note how these have both grown over the past decade, how they rode out the “crash” and how they have grown since. You’ll also note that both have been consistantly growing, doubling in value over the past decade. Compare the return on these to those of Social Security. Also consider this fact. Our health care costs are far higher than they could be if “government” hadn’t turned health care into a very profitable monopoly where every aspect of the free market has been eliminated in favor of government enforced monopoly. Driving the cost of health care far higher than otherwise.
Demographics “doom” your 401k or other stock market investments the same way. Whereas there were 35 working people who could save money and purchase the stock shares each retiree wanted to sell to fund his or her retirement in the 1930s, when the baby boomers retire there will be only 1.5 or 2 productive younger people earning and seeking to purchase stock shares as boomers liquidate their 401ks to fund retirement. Relying on social security is no more flawed than relying on stocks. The fact is that both succeed only if there are young productive working people who are sufficiently productive to fund each scheme. Either the young people need to earn enough to pay social security tax, or the young people need to earn enough to buy the stock that you sell out of the 401k. It is a fiction concocted by Wall Street (and seekers of brokerage commissions) that private retirement schemes can be any more successful than social security when boomers all retire at once.
This is just nonsense. Perhaps if you leave your 401k or IRA in certain stocks this could happen. But you can beat this effect by paying off your mortgage if you have one, buying houses for your children and letting them pay you back, getting a good car that will last a long time and, if there is anything left over, sticking with income preserving investments. I don’t know your political predilection but your statement sounds like a typical Progressive response to any sound argument against their ideology, i.e. mildly suggestive of something that could be true but unable to survive any level of intelligent scrutiny.
The real problem here is that most people cannot save enough over their working lifetime due to taxes and fees and government regulations that cause unnecessary destruction in the economy. If you are self employed you can put away $5,000 per year before taxes – big deal. That will allow you to save enough for your first year or two of retirement. Meanwhile, the typical government employee gets to go through life without fear of losing their job and without having to save much for a retirement that is many times larger than maximum social security and with gold plated benefits to boot. And wait and see which breaks first – social security or the unfunded government pension and benefit liabilities. Anyone want to guess.
Imagine, if you will, a bunch of retirees sitting around with envelopes, labeled “401(k).” Imagine a much smaller bunch of strong, young people, with crates of food, barrels of oil, cars, bus rides, TV’s, etc.
Each of the large group of retirees will want some of the goods from the young group. In order to ensure that they get the goods that they want, the retirees will each, individually, be willing to exchange a larger portion of their envelopes for a share in the goods held by the young group.
Call it inflation, call it devaluation, the reality is the same. More people chasing a smaller portion of production = sadness and catfood.
But retirees have a potentially big advantage over younger people if they can get rid of housing costs. Yes there will be inflation and yes, if you are on a fixed income you will be hurt by that. But I pity more the young people who got scammed into paying for an education that produces little of real value to society. They will try to raise a family and build a life but millions will find this to be all but impossible. They will look with envy upon retirees who own a home outright, don’t have to pay for children anymore, are content to sit at the coffee shop during the day and play bingo at night – and can use their meager social security or 401k residue to buy edible food for themselves and cat food for their cats
“A profoundly far-left Democratic administration, and a supportive and at least as far-left establishment press.”
That sentence in the author’s column best identifies the horrible mess that America finds itself in. Column after column on the PJM pages reports on the train wreck coming toward us and accurately places the political blame on the present administration and its and most of its predecessors going back several decades. But what is most worrisome is the fact that it really isn’t the “profoundly far-left Democratic administration” or its predecessors that are the reason and cause of our demise. The root of the problem lies almost exclusively with the “far-left establishment press”. We can try in vain to prevent our rendezvous with disaster by trying to get the right folks elected to higher office. But our attempts will remain in vain so long as we fail to find a way for our fellow citizens to become properly informed. The author uses the expression “dumber than a box of rocks” as a potential description of the current administration. That description more aptly describes much of our otherwise bright voting class. An honest and professional popular media would have prevented most of the negatives that we are currently enduring. The unscrupulous political class is simply the beneficiary of the unscrupulous media. Until we address and correct that relationship we are going nowhere. But how do we do that?
“Not showing up to riot”
is a failed conservative policy.
(Small Dead Animals)
I have paid for all this crap for 40 years.
Johnson’s (D) War on Poverty-Medicaid-Social Security Disability-Vietnam War.
Our tax money is their money.
Sending trillions of dollars all over the world supporting governments that would love to destroy us.
Iraq War-Afghanistan War- Iran with no end in sight.
Now we get ready to retire and the ponzi Social Security scheme is broke,
along with the big bailout hedge fund banks gambling trillions of our pension dollars like a drunk shooting craps.
“SEVEN COME ELEVEN” – “HICCUP”
“MAMA NEEDS A NEW PAIR OF SHOES”
Our ancestors would have revolted and hung most of these thieving bastards from lampposts all over Washington DC.
As Mike pointed out, Roe (and the Pill, imo) exacerbated the problem in that you “run out of other people’s money” more quickly when you run out of other people, but Social Security itself encouraged people to stop depending on their own children for their retirement, and start depending on Other People’s Children because you know, it’s difficult and expensive to raise your own. (I’m afraid I can’t find the article I read about this; I do know it was linked from PJM’s sidebar a while back).
BTW, it also occurs to me that there would be very few children raised to be Occupoopers, if parents knew they were going to have to rely on their own children in their dotage.
“but Social Security itself encouraged people to stop depending on their own children for their retirement,” But that is exactly what it was intended to do at the time it was conceived. By the ’30s, even without the Great Depression, the US had a tremendous problem with a surplus of agricultural labor and with rural proverty, especially in the South and Appalachia. The Fair Labor Standards Act was designed to end the death spiral in manufacturing wages in The South caused by endemic racism there provoking wage competition between whites and blacks that knew no bottom. Social Security was intended to allow younger people to leave the farms to work in the towns and cities without having to leave someone behind on the farm to take care of aging parents when they were no longer able to live off a subsistence farm. The whole progression in rural America was from the single family subsistence farm or ranch to ever larger farms and ranches as the kids left for town and when the “old folks” could no longer work the farm, they sold it to a larger, younger farmer or subdivided it and lived off the proceeds of the farm and off social security. That, in fact, is precisely what my grandparents and parents did, as did most of the farming families I grew up with in rural Georgia. It was only by giving up farming and subdividing the farm to provide housing for newly arriving industrial workers and managers that we were able by the early ’60s to actually participate in the US consumer economy in any meaningful way. So long as we were engaged in subsistance agriculure, we subsisted and that was it. In a further evolution of the rural South, the homes and lots that we sold in the early and mid ’60s to Yankee plant managers are now being occupied by usually their second or third owner who is likely to be a black college professor, immigrant doctor, or a government worker as the plants are mostly long gone to the Third World, leaving behind only SuperFund Sites.
But of course! Despite its designed-in flaws — and what Ponzi scheme has none? — Social Security remains a popular program. It provides cash to seniors and partialy relieves their progeny from having to worry about them. Americans are fighting a huge case of cognitive dissonance over it: its contribution to federal fiscal instability versus its popularity and seemingly impeccable mission.
So: let a Republican be elected, and the tenor of the press coverage will change at once. At that point, the supposedly nonaligned Legacy Media will be eager to pit the Romney Administration’s fiscal sense against its political sense. The Right will face the disagreeable prospect of reminding the nation that SSI is among the reasons we can’t pay our bills. Even restoring the original payroll tax rate would be a severe uphill struggle.
Expect a lot of burnings-in-effigy of Republicans in federal office, no matter what they choose to do.
- Social Security remains a popular program
That might change if someone pointed out how double taxation is now required to sustain it, and will be the norm for the foreseeable future.
I think SS remains popular because the electorate is so completely ignorant regarding how it “works” and is utterly disinterested in learning, as long as they “get theirs”. That’s what needs to change and I believe it’s incumbent upon someone like Romney, as a candidate, to start talking about it.
Vast numbers of those I’ve encountered on- and off-line STILL believe there’s a pot of money somewhere labeled “Social Security Trust Fund” that contains trillions of actual dollars, to cover any revenue shortfall needed to fund benefits. NO one I communicate with on this subject seems to understand how we’re now taxed ONCE, via payroll tax, to cover current benefits payments and taxed AGAIN – money stolen from the general treasury (comprised of income tax, excise tax, cap. gains tax, etc.) – when the SS Treasury Bonds are cashed in to cover the SS revenue deficit.
Even the payroll tax “cut” legislation made accommodations to cover the resulting shortfall by extracting money from the general treasury – and that’s BEFORE we start talking about the deficit we’d be seeing WITHOUT the payroll tax cut. So government “stopped” taking quite so much in payroll taxes, only to reach around into the Taxpayers’ other pocket to make up the difference.
No “likely voter” I know seems to understand any of this. As long as that remains the case, the implosion of SS remains a mathematical certainty.
Unfortunately, the “lock box,” “trust fund” mythology is pervasive, even among people who should know better. A huge percentage of the people who understand their taxes at all, and I’m not sure that is even a majority, think that the government has some savings account into which it puts SS contributions.
For all its faults, the system did work to make possible the transition from subsistence agriculture to an industrialized consumer economy and it should have been ended after WWII. It was sound enough when its objective was to support those who’d been living on subsistence farms without much of a cash income as they lived out their relatively short days after they were no longer able to farm. I could never hope to be adequate to meet the needs of someone in the consumer economy and certainly not keep up with escalating medical costs for “end of life care.” Even well-managed pension schemes aren’t able to do that anymore.
Good analysis.
Too bad FDR’s intention with the New Deal and SS was to cast the thing into concrete so that it would become impossible to repeal.
As I mentioned above, we are putting together our plans to emigrate.
The payroll tax cut of late 2010 was nothing more than installment I of the coming and much larger Blue State Bailout. Illinois, for example, went on to raise its income tax from 3 to 5% after the federal payroll tax was cut by 2%. This type of logic would actually make sense for Transportation (motor fuel tax) funding so as to lessen federal influence and not have so many donor/donee state disparities.
And they say, “Just pay back the money borrowed from Social Security and we’ll be fine,” utterly failing to understand that the 2033 date is when we run out of money AFTER THE LOANS ARE PAID BACK, WITH INTEREST.
Years ago the Libertarian party offered the only solution: close down all federal departments and agencies not specifically used to perform the core Constitutional duties of government, sell off all federal assets, including national parks etc. that meet the same criteria, then use the proceeds to pay off social security obligations and refund payments to those not already retired.
Socialism isn’t medicine, it’s poison, SS is and always was a vote buying Ponzi scheme by the socialists. It should be killed and nothing like it ever allowed to be born again.
Right on the money.
“JustAL”;
That’s the fire sale our enemies would love.
Who else could afford to buy the most precious assets?
And who, pray tell, do you think owns the mortgage? Pay now, or pay more later.
“JustAL”;
Here’s a little slide show you will enjoy.
Notice China is not included, and Obama said he was IRISH! That may be the only thing Obama’s ever uttered that may contain a tinge of truth.
http://www.cnbc.com/id/30308959/The_World_s_Biggest_Debtor_Nations?slide=2
It’s not fair to put the blame solely on Democrats because the “go along to get along” crowd boldly “reached across the aisle” to feed the leviathan. And let’s not forget the GOP’s spending spree in the 00′s… how much economic growth would that annual $1 trillion they took out of the economy be generating now? The biggest problem with government spending is that it destroys the compounding impact of investment in the private sector. The private sector is a wealth creation machine, the public sector is a wealth destruction machine. Money spent in the private sector is like money added to your savings account, it will generate future profits while money spent in the public sector only generates future costs.
When you listen to the campaigning GOPers do you hear “balance the budget” or “cut the budget”? Most say “balance the budget” which means the economy will never recover because that solution requires more taxes, which takes more money out of the private sector, thereby destroying both current and future economic growth. You always hear cries for “greedy corporations to give back” – isn’t it time for the greediest corporation, Government, to give back? Isn’t it time to admit that Big Government has failed? Sadly, that won’t happen because those in power gained their power by spending your money and they won’t willingly give up that power.
Besides, once all the IRAs are nationalized then Social Security will be flush with cash until the next election.
Hello Chris,
Conservatives have been screaming for many years about the amount of money the US Gvmt wastes. Currently I’m personally involved in “technology transfer” programs that spend enormous amounts of your tax dollars for absolutely no benefit to the US economy. It seems that foreign governments also lobby the US govt for handouts of US tax dollars.
I should also remind you that BHO pledged to reign in Medicare/Medicaid fraud when he was running. I read somewhere that nearly 50% of all tax dollars spent on Medicare/Medicaid are fraudulent. I also can’t find any indication that Obama’s made any effort to control the fraud.
Be you D or R, we should be able to agree that sending US tax dollars to foreign governments for dubious projects is unnecessary. We should also be able to agree that Medicare/Medicaid funds should go to those in actual need, not to those who seek to defraud the system.
This seems simple to me. But our current administration sure seems to be spending our tax dollars on everything they can think of…
I agree that the Bush repubs were not that fiscally responsible either. But the dems of that era were no better and often worse. One big difference though, with the advent of the tea party, the repub party is finally being purged of their fiscally irresponsible wing, and have mostly repented and seen the light. But the dems under Obama took the Bush era financial irresponsibility and made it about twice as bad, taking spending as a % of gdp and jacking it up about 25%, thereby jacking up the deficit about 100%. They have also choked off all economic growth with idiotic environmental and labor regulation, and wasted huge amounts on handouts to cronies. And even worse, the dems now have no fiscally responsible wing like the tea party. The entire dem party, from Obama on down is financially clueless, and does nothing but demagague anybody, like Ryan, who even remotely suggests anything fiscally responsible.
The dems need to lose badly now, and keep losing badly until the majority of the dem party gets desperate enough to finally embrace some real fiscal reform, like the repubs have finally done. We need to see see a dem equavalent of the tea party, that insists on responsible spending for their members. If a dem tea party equavalent ever did arise, I would expect them to be liberal on social issues and foreign policy, insist on significant reform of entitlements and spending cuts, some regulatory releif, with some added revenue obtained by closing special interest tax loopholes, similar to Simpson Bowles. Basically have a return of the Bill Clinton style new democrats, similar to Tony Blairs new labor. But I see no sign of that ever happening now under Obama/Pelosi/Reid. The only thing they know how to do is demagague and devide the country, and promise handouts and favors to every special interest that can give then either money or votes. The fiscally irresponsible socialist wing of the dems, starting with Obama/Reid/Pelosi, needs to be completely purged before I would ever trust them with the purse strings again.
One more point. If a dem tea party ever did arise, and I saw enough fiscally responsible dems, I might actually switch parties and start voting dem, since I am moderate/liberal on social policy. I actually did that in my own state when we got a fiscally responsible dem governor. I think lots of other americans would as well, especially young people. Of course at the moment, with Obama, there is zero possibility of that ever happening.
The fallacy of Social Security is really when there were surpluses what should have been done with them? If they had not been “loaned” to the general fund, and exchanged for IOUs, what should have happened? Stuff the money into a big mattress earning zero interest, and actually decreasing in value because inflation? Or did we want the government investing in the stock market, warping the market with politically influenced investments.
Because there is nothing rational that can be done with those surpluses one can only conclude that for many years the people were being overtaxed in respect to their social security taxes.
The only other scenario that would have worked would be to let the people invest their own money as George Bush suggested. But the true solution would be to phase out Social Security as quickly as possible because it can not function long term.
Actually, I was thinking along your lines, and did come up with something that could have been done. Suppose the SS surplus was used to find orphans born oversees, take them into the US, and then support them in giant orphanages while they were growing up to become US citizens. When they grow up, there become the extra young workers needed to keep SS solvent. In effect the SS surplus would be used to raise future US citizens that current US citizens didn’t want to. It would be a way of outsourcing human reproduction, and would work for a generation or two until the rest of the world became prosperous enough to start having fewer children.
It still might not be too late to start up this sort of government program, because it’s one of the few ways I can imagine a government using its coercive power to tax to arrange a real increase in wealth (short of the spoil and plunder attendant on oversees military conquest and empire building, of course). Unfortunately there’s no more SS surplus to make it easy and obvious how to fund it.
Oh, goody. Another government program to fix everything!
That worked so well in the past, we certainly want to keep doing it!
And orphanages run by the federal government! Why, what could possibly go wrong with THAT plan?
Where’s the “rolling eyes” smiley when you really need it?
lol. But it’s a good beginning to the conversation. Young people do understand that SS is a very bad idea and probably won’t be around when they retire. Heck, we Boomer/Gen X borderliners have known that all along; that’s why 401(k)s and IRAs have been so popular. The problem is, by the time young people start voting in large numbers, they’ve already put so much money in, that it’s hard to walk away so that they’re then willing to throw good money after bad.
We could do what the state governments do: hire investors who are only accountable for generating returns within legal parameters that govern all other pension funds.
What should have been done with the SS surplus is it should have been used to pay down the non trust fund national debt, until at the point when payouts exceed receipts the only national debt left was to the SS trust fund. Then, since we would not have had to pay interest on non- trust fund debt, and would have had penty of borrowing capacity, we could have afforded to borrow more to cover the shortfall, until the boomers finally died off and the recepts vs payouts came back into balance. As it is, past overspending and non trust fund borrowing has ensured that our budget is not even balanced with regular expenditures, so the extra that needs to be spent as the trust fund is drawn down is a real strain.
Hogwash. It’s a crackup that was guaranteed from DAY ONE. It’s a Ponzi scheme, doomed to collapse, and always has been.
Every maneuver, program, plan, and gimmick to “save” Social Security has been merely a trick to shift the disaster down the road for the next poor sucker to deal with.
When Republicans stop worshiping this sacred cow and set about seriously to kill and barbecue it, they just might start making some progress towards restoring the Rule of Law (the FIRST priority) and sound fiscal policy.
No, it is NOT the federal government’s job to provide a “safety net”.
Here’s how to solve the Social Security issue in two easy steps:
1 – Slightly modify the retirement age …. say to 94 years old.
2 – Hire a proven, competent financial administrator with a successful track record
- – - – - – Bernie Madoff comes to mind.
the “pelosi-obama-reid” POR economy. That is a rich.
Washington has Greeced the skids (again.)
Social Security can no more mysteriously run out of money than the Pentagon. It would require a deliberate political decision to let this happen.
Technically you might be right but only because we can print money. You will still receive your check… it just won’t be worth anything. Prepare. Accordingly.
No, political inaction would suffice to that end in both cases. According to the Constitution, the default condition is nothing gets funded, and Congress has to proactively pass legislation to fund things.
The author’s statement that “Social Security’s so-called “Trust Funds” consist of nothing more than stacks of IOUs from the rest of a dangerously indebted government.” is foolishness on a dangerous level. Those IOUs are so safe that the bonds are bought up by nations around the world as one of the safest possible investments. So popular that America only needs to pay a very low interest rate. Plus, solving Social Security would be easy if congress was just a little sane for awhile. First, remove the cap so that whatever your income, from whatever source, you paid into SS. (the rate could be lowered by half) Second, to draw out benefits would depend on need. Romney would not be able to draw it but would still have to pay into it. Problem solved.
SSgtDave, That used to be true, but starting last year the Fed has had to buy several Trillion$ in Treasury bond offerings to make up for the shortfall in general demand. Foreign holders are liquidating, not adding to their holding. This trend has slowed as the EU crisis worsened, but if it ever restabilizes the trend will reassert because our government is making no attempt to be fiscally prudent.
The author’s statement that “Social Security’s so-called “Trust Funds” consist of nothing more than stacks of IOUs from the rest of a dangerously indebted government.” is cold sober truth.
Means testing = socialism. There’s no other way to describe it.
???
Social Security = socialism!
As do Medicare/Medicaid.
The problem is that the programs EXIST.
Why quibble about how they are implemented?
You’d have a point but for the fact that those IOUs are self-dealt. The means to pay them off is the same as the funding source for Social Security.
SS bonds are not available to be purchased. They are accounting devices, like the manager writing a check from your empty account for the a thousand dollars to cash, sealing it in an envelope, writing ‘count as $1000.00 and putting it in the cash register of the 7-11 you work at after removing $1000 from the till. It may fool the rubes for a while, but if you are not a rube, you know what is going on.
Of course if you or I were caught doing that, we would be fired and prosecuted. Government, not so much.
“It’s a crackup that was guaranteed from DAY ONE. It’s a Ponzi scheme, doomed to collapse, and always has been.”
Probably so.
“1 – Slightly modify the retirement age …. say to 94 years old.
2 – Hire a proven, competent financial administrator with a successful track record
– – – – – – Bernie Madoff comes to mind.
A slight modification of the retirement age to 94. Hmmmm . . . . so the government would take from us for essentially 72 years (assuming a working life from age 22-94) and the ones who don’t make it that far, well, they’re just out of luck – they keep on being worker bees until they die. And those who do can’t pass on what they’ve paid in to their heirs, can’t borrow against it, can’t collect any of it until age 94, with Bernie M as manager. Sounds like a government program made in liberal heaven.
The whole Socialist Insecurity abomination was a scam from before the beginning. They knew it was a fiscally unsound scam, but they didn’t care. The focus was on political leverage.
It’s interesting that the actions have led us to the unavoidable question; either they are incompetent or they are evil. I think that’s a fair question and not unique to our country. The same thing has happened throughout Europe. Perhaps all politicians are alike.
When you continue to take from a fund without replenishing that fund, it will eventually run dry. As part of obama’s and congresses stimulus to the economy via the payroll tax for the last two years, what else was expected? Never let a crisis go uncreated.
We have some liberal newpaper outlets that may well be chumming up to the Democrats hoping that when the economy collapses, they be considered as their propaganda outlet under their socialist ideals.
Excellent article, Tom. Even if it were solvent it would still be a ponzi scheme of industrial proportions:
http://fiscalwars.wordpress.com/2012/05/15/some-perspective-on-social-security-for-30-somethings/
That is unfair to Ponzi. Ponzi never forced people to ‘invest’ with him. Ponzi never put people in jail for not paying him.
BRAZOS !
Can they tell me how long I have before abject poverty sets in for me?
Many years ago a friend and I decided to have a lemonade stand. It was hot in July and August in our little town, and millworkers would stop for a glass. We charged 5 cents and gave a refill. We borrowed the first money to buy the lemons and sugar. After that we bought it from our “profits.” We were nine and seven years old. Eighty-one years later we both watch government experts who can’t do the math we used; without computers, college educations, or even adult
supervision. Tea, anyone ??
To summarize the post and subsequent responses: “Let’s get rid of Social Security, it is an irreparable Ponzi scheme”. Could not agree more. If people are so irresponsible as to not save enough for their retirement they can either keep working or suffer the consequences. Why should I pay my taxes to support old people? Too bad, so sad. Stop whining, old people.
I suppose you’ve had this same conversation with your parents.
I fully expect, in fact demand, Congress repay the ‘loans’ they’ve taken and spent – they owe Social Security at least 2 trillion dollars, if not more. Social Security is not broke, its been raided by thieves who think those paper I.O.U’s are worthless and we’ll just sit back and take it.
WE WON’T!
And this is an example of what I posted upthread. The day the Social Security Trust Fund runs out of money is the day all the money borrowed from the Fund has been repaid in full, with interest, and Social Security continues to have more payments coming due than FICA taxes coming in.
The government owns a lot of land and should sell it to pay for SSI. Of course it should end all contributions to SSI at the same time and cap the program. Younger workers keep their money instead of being sold into debt slavery from the day of their first paying job.
Social Security:
Traditional: Have children and raise them in such a way that they will be willing and able to support you in your old age.
Modern: Coerce, via the political process, other’s people’s children into supporting you in your old age.
With the modern version, there’s no incentive to have children (cf. greying populations in Europe and Japan), resulting in an ever greater financial burden on the ever fewer young, who, due to their dismal finances, delay marriage and child-bearing, exacerbating the problem even further. In a word: unsustainable.
So, over decades successive administration borrowed SS surpluses and we now no longer have surpluses. So for decades we have been using regressive payroll taxes to partially fund the government. This just means that payroll taxes have been too high for decades! So now the government will have to honor those IOU”s! Why is this bad?
NOooooooooo! It cannot BEeeeeeeeee! AlGore hisownself told me it was in a lock box and all the Dems said “Yea, verily!”
They lied to me?? I can’t believe it!
IOUs since FDR at least that I could find reference to.
http://books.google.com/books?id=lk0EAAAAMBAJ&lpg=PP1&pg=PA20#v=onepage&q=social%20security&f=false
Article on raising Social Security taxes in 1939!!! Where SS Tax was 1% of wages, would then go to 1 1/2% in a year, 2% in 1942, and 3% in 1949. If only….
Yeah, so, and the FBI wants to investigate JPMorgan for losing a mere $2 Billion. How about looking into this? Or the USPS? It just boggles the mind. Skewed priorities everywhere.
Their “solution” is plane to see: if you have it, they will take it. In other words, your 401K will DQ you from SS; you stupid little chumps! You, being the same ones that actually pay your mortgage. I don’t know what they’ll eat after they’ve eaten all of us.
They will cannibalize one another and our poor country will finally get to start over again. Communism cannot work at any level beyond a family clan or very small tribe. Communists know this, but they will be dead long before they have reduced us to a nation of small tribes, so what do they care as long as they get to be the ones carving up the last of our nations wealth?
Leave the old guys alone and let them have what they have already paid for. Raise the retirement age(again) for people under 55 by 1 year, under 50 by 2 years, under 45 by 3 years, under 40 by 4 years, under 35 by 5 years, under 30 by 6 years, under 25 by 7 years, and under 20 by 10 years. Let anyone under 50 opt out of the whole mess if they choose to do so, but they lose what they have already paid in. If they choose not to, they get to keep paying in and collect their SS checks later. Most people over 35 would choose to stay in and virtually all people over 45 would stay in. Only really dumb asses under 20 would ever join this ridiculous system and the whole thing would be phased out in about 50 years. Oh yeah, and get the Communist out of our White House THIS year. ABO2012
Obama, when we retired Baby Boomers are cheated out of social security, which we have paid into for 50 years and your profligacy has imperiled, we’re going after your bank accounts via the ballot box.
Count on it, Mr. Community Organizer.
Apparently the $186 Billion surplus was Corzined by the Pelosi-Reid Congress.
The AFP had an article that said the figure since the 1930s is 2.24 trillion put into th general fund from Social Security. cute.
Administration has found reasons for funds to be pulled away from Social Security toward other ends, but this may prove dangerous for a number of reasons. The borrowing that has taken place from Social Security has created a substantial government liability to the fund. Many point to the enormous general deficits and argue, justifiably, that the federal government may not be able to honor its commitment to Social Security.
Even if the government is able to repay what it has borrowed, however, this does not address the true danger. As the government continues to shift money between the two funds, the delineation between Social Security and other programs will become muddled and distort funding priorities. This was not the intention of the creators of Social Security when they made provision for a distinct trust fund and a separate revenue form in the payroll tax.
Should the government wish to continue to ignore the intended autonomy of the Social Security trust fund, it should take this policy stance to its natural end: Social Security revenues and liabilities should be pooled into the general budget (http://bit.ly/y5hMvv).
The 2012 Trustee’s Report details the exhaustion of trust fund reserves in 2033, three years earlier than projected last year (http://1.usa.gov/Kg5KuF). Yes, it is true that even after the fund is exhausted Social Security will be able to pay 75% of benefits, but how is being able to meet only three quarters of its obligations acceptable?
Clearly, something needs to be done and reform must take place: either by raising the wage cap, by increasing the retirement age to keep pace with longevity, by means-testing and eliminating benefits for very high income seniors, or by some combination of these proposals.