The Heritage Foundation – Sayonara Social Security Surpluses:
Darren Gersh finds that due to slower projected payroll tax receipts combined with higher payments for early retirements and cost of living adjustments, “the era of large Social Security surpluses is over.” According to the Congressional Budget Office, the Social Security surplus will only be $16 billion this year, and only $3 billion next year. In total the recession will shave $150 billion off of the surplus over next three years.
Last year the trustees estimated that Social Security would have a negative cash flow by 2017. But analysts expect that number to move up significantly in this year’s trustees’ report. Gersh then talked to National Committee to Preserve Social Security and Medicare President Barbara Kennelly who claimed there is $2.5 trillion in the Social Security trust fund, and that there is therefore nothing to worry about. Problem is, as Heritage scholars David John and Brian Riedl explain that $2.5 trillion is pure fantasy:
Follow the link for the full explanation, but here’s the short version. Decades of surpluses weren’t saved. They were loaned to other parts of the government. The other parts of the government wrote IOUs to Social Security.
The Past: Social Security generates a surplus in the budget.
The Future: those surpluses will soon be gone. Instead of generating a surplus in the general budget, Social Security will create a deficit in the general budget.
We’re going to be forced to reform Social Security very soon. In the next administration if not in this one.
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I highly recommend reading the Social Security write-ups here (http://www.angrybear.blogspot.com/) by Bruce Webb (here’s a good, recent post of his: http://angrybear.blogspot.com/2009/03/social-security-101-arming-for-battle.html).
Essentially, there is no SS shortfall nor is there an impending point in the near future where SS will be ‘bankrupt’ in the true definition of the word.
You are correct in that the general fund deposited IOU’s into the trust and thus removed those funds from appreciation for future use, but beyond the doom & gloom portrayed by that wonderfully clear-thinking group The Heritage Foundation *gag* we have nearly always come in under the Trustee’s cost projections for payouts.
Read Bruce’s articles – he provides hard numbers and appropriate analysis of not only the Trustee’s report but assists in understanding why there really is no “Future SS Insolvency”.
The elephant in the room is Medicare which I note none of our ‘esteemed politicians’ are discussing other than with Obama’s budget proposal that includes ‘healthcare reform’. And I don’t even wanna jump into that topic…
TinMan
Not bankrupt, but putting much greater pressure on the budget. We’ll either have to make the spending cuts necessary across the entire federal budget or raise revenues (in terms of SS or general taxes or both) to keep the overall federal budget sustainable. Something’s going to have to give. Lots of things, probably.
Things are getting worse for SS every year in terms of the ratio of workers to retirees. There’s no easy fix for that. You can tinker with it slightly by raising the retirement age. (Again. It’s 65 now for the people about to retire and 67.5 for people like me.)
You could also make the benefits means-tested, which is a quick fix and one that we may see (for Medicare, too). You could raise the rates, but that’s painful. Younger workers will really hate it – the farther away you are from retirement the less certain it is you’ll get your money back out of SS.
But I agree that SS is salvageable. I also totally agree that Medicare is the bigger monster (see that same link. People are willing to talk about deficits. Sometimes they’ll even discuss Social Security. Talking about Medicare is almost taboo.
sorry to tell you TinMan, but your link leads to a delusional guy (angrybear) that will not accept any trouble with SS even after his own checks stop coming. i’ve seen that type of people 1st hand, there’s kind of a religious fanaticism based on reciting the same line over and over again, even when it’s not accurate.
I’ll attempt to reply without directly targeting and/or attacking you NYCYoung but, you’re reply shows you doing exactly what you’ve implied we shouldn’t do: “reciting the same line over and over again, even when it’s not accurate.”
Have you read any of Bruce’s posts or read the data he’s analyzed/presented and arrived at your own conclusion? Or are you parroting what’s being fed to everyone tuning in to MSM? Heck! There are even what I’d consider ‘stalwart Democrat supporters’ in MSM that are still regurgitating the same line about SS is in need of “fixing” before too much longer.
*boggle*
I’ve done what I can to understand how the Trustee’s report is built and how the data is presented using the 3 cost basis levels but Bruce has managed to put it all together rather well.
His conclusion is essentially we’ve projected our future needs based on the median cost from practially the beginning of these analyses/reports yet the actual costs we’re bearing to continue the program have come somewhere between median and low. Thus by showing all three needs projections for future commitments we can safely and comfortably come to the conslusion that SS will not run out of funds (or even be paying out more than paying in – which has been the canard some on the right have been trying to use**) for a very long time.
Though I suspect Les may be more right than he thinks by pointing to SS’s impact to the overall budget. If you can ‘somehow’ reduce the largest percentage portion of spending even a little bit that does amount to real savings overall. But is that really our goal to “cut spending, regardless” or just to put the money we do spend to better work for the country overall?
TinMan
** This is the GOP’s method (and others – it’s not an exclusive domain of the GOP I’ll grant you) of duping the simpler folks into believing we’ll have SS running “deficits” because we’re paying more in benefits than we’re receiving in withholdings. But what those dupe-ers fail to inform the dupe-ee is that our general fund has been raiding the coffers of SS for a very long time and replaced that “cash on hand” with IOUs. So once (if ever) SS reaches the point of needing to call-in those IOUs THAT’S when the general fund may have some ‘issues’.
Tinman, where in the heck to do think this extra money is coming from so that the government can pay back the IOUs? The IOUs ARE the problem. Baby boomers are just about to begin to retire with their hands out wanting their money. Oh yea, we get to raise taxes to pay off government health care, cap and trade and now SS. This is not going to sit real well with the small pool of taxpayers that are paying too much as it is right now.
Willie
the money so the government can PAY BACK the iou’s??
are you saying the government shouldn’t have to repay the money it borrowed? the money can come back from taxes. they won’t be high.
i am shocked at the innumeracy i see here. jones and young… need to stop reciting CATO talking points and do the real math. while you are visiting Bruce Webb’s website, take the time to read Coberly.
it is almost beyond belief that people who claim to be interested in finance would say that the money in the trust fund “wasn’t saved.” What the hell do you folks think happens to the money you put in the bank?
HInt for you. It isn’t “saved.” It’s lent at interest to reliable borrowers. Used to be there was no more reliable borrower than The United States of America. You folks are letting heritage convince you that we are too poor to pay our bills, so the only thing we can do is steal the money from the workers who paid their social security tax.
There seems to be some direct leaps from logic here. There is no actual money in the SS fund. It is loaned out to the Feds general fund if I understand correctly. All that has to be done is the government pay that money back, well that is where I have problem , we are running huge deficient this year and the next and so on. We don’t have the money . I believe China and Japan hold about One and a half Trillion of our debt at last glance. Where do you think money comes from? A money tree or something? I alond with anybody I talk to are sick of paying taxes to support more insane deficient spending, so any increased taxes are like swallowing poison pills . I am amazed at people whose solution is to keep raising taxes. I chose to live in reality, not in some imaginative dream world of never ending money and insane spending.
Holy ancient thread Batman(tm)!
Seriously now. With the recent report that Reuters has gladly regurgitated (and Yahoo cross-posted with attribution) compliments of the AP, this thread/post has reanimated itself.
Steve, I would never argue that paying taxes is a pain and paying more in taxes just makes it feel burdensome but I’d rather pay taxes than have to; secure my own home, fight my own fire breakouts, distill/purify my own well water, pave & maintain the paths I take to earn a living, hire a lawyer to ensure I’m not being taken advantage of in the workplace, hire an accountant to ensure I’m not only being paid accurately but that my wage is commensurate to my employment…I think (hope) you see where I’m going with this.
You can only reduce the level of taxation downward to the lowest level the unanimous body consents to not being governed by themselves. If that means someone wants to pay for fire & police protection then somehow I think simple math would prove it best to go along with the Joneses (my apologies for the double whatever
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Now, I’ll go back to my first comment and ask that anyone who desires to have a rational and educated discussion/debate over SS and it’s funding I’d be more than happy to do that with you. Provided you’ve at least read and understood what Webb has so nicely packaged up in an easy to read and understand format.
Excluding that, I’ll then ask those who wish to see the end of the SSA and what (who) it was built for to right now look at one number and one number only:
Your current total value in ALL of the retirement vehicles you may have in place now.
Does that total equal what you will need to live off of until the day you die?
I’d rather doubt it short of you ‘arriving’ into established wealth (aka – inherited/independently wealthy).
And will that wealth appreciate at least with the level of inflation AND continue to pay out until your dead?
Same answer – probably not.
So where else in the world of capital investment can you find a way to save roughly 3% of your income for the future, earn “interest” on it relative to the rate of inflation, and receive it’s benefits from the age of 67 1/2 until the day you die?
Those are usually called annuities. And they’re both expensive to start and fixed in duration. Not the sort of thing you want when it comes to retirement.
P.S. To assuage your concerns about never ending tax increases, the rough numbers Webb has put together seems to indicate an increase of under 2% over the next 20 years would be enough to cover any identified (by the Trust Fund Report) and perceived (by anyone else who doesn’t like SS) shortfall in perpetuity.
I think I could live without that extra <$1 in my paycheck each month.