Thursday, March 25, 2010

It's Official--Social Security Is In The Red

Who says so? The New York Times.

The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.


It's taken 70+ years, but the chickens are coming home to roost. We cannot continue to have, and continue to enlarge, entitlement programs that are not sustainable. Social security, Medicare, and our new socialized medical program are not sustainable, and the consequences for the country will be disastrous when the IOU's come due.

22 comments:

MikeAT said...

Darren,

I recall the words of a female leader with courage, vision and capability.

I speak of course of Lady Margaret Thatcher.

"The problem with socialism is eventually you run out of other people's money"

Darren said...

Except for that whole Trans-Siberian Pipeline bit, she was awesome.

maxutils said...

I was wondering if you'd seen that. It's almost like it was a pyramid scheme, or something.

Mr. W said...

where's mazenko?

is this being reported anywhere else but the times?

mazenko said...

70 years - not bad for a very successful government program that has accomplished everything it was supposed to do.

Had Americans actually maintained personal fiscal responsibility and the Congress had the guts to simply means test it, maintaining it as social insurance plan and not the predominant form of retirement savings for most Americans, it'd be in great shape.

And, as the conservative - but non-partisan - Concord Coalition and Peterson Group have explained, it could be again.

Darren said...

I've read, but cannot find/link, that Roosevelt intended social security to be temporary. It seems implausible, though.

MikeAT said...

Mazenko, you ignorant slut! :<)

If you call Social Security a success is like calling “Green Energy“ a success…it only needs my money to show a “profit”

Can I point out one minor point from the GAO

“According to the Trustees’ intermediate estimates, the combined Social Security Trust Funds will be solvent until 2041.10 However, our long-termmodel shows that well before that time program spending will constitute a rapidly growing share of the budget and the economy. Ultimately, the critical question is not how much a trust fund has in assets, but whether the government as a whole can afford the promised benefits in the future and at what cost to other claims on scarce resources. As I have said before, the
future sustainability of programs is the key issue policymakers should address—i.e., the capacity of the economy and budget to afford the commitment. Fund solvency can help, but only if promoting solvency improves the future sustainability of the program.

Social Security’s Cash Flow Is Expected to Turn Negative in 2017

Today, the Social Security Trust Funds take in more in taxes than they spend. Largely because of the known demographic trends I have described, this situation will change. Under the Trustees’ intermediate assumptions, annual cash surpluses begin to shrink in 2006, and combined program outlays begin to exceed dedicated tax receipts in 2017, a year after Medicare’s Hospital Insurance Trust Fund (HI) outlays are first expected to exceed program tax revenues. At that time, both programs will become net
claimants on the rest of the federal budget. “

Source: http://www.gao.gov/new.items/d02845t.pdf

That is a report from 2002…Social Security was not supposed to start bleeding cash until 2016…now it’s broke in 2010…

Social Security is a failed design. You put money in Washington and expect Congress to not spend it. You don’t adjust the retirment age although average life span has gone from mid 60s to early 80s. The “trust fund” is now being used to give “disablity” to 20 year olds with “depression” ….and your surprised that it’s bankrupt. All told Social Security, Medicare and Medicade have unfunded liabilites of over 50trillion dollars in the next 50 years…and that’s without B Hussein Obama’s plan to put us all on Medicade.

Sorry it don’t sound like a successful program to me.

mazenko said...

Social Security was designed to insure senior citizens from a life of poverty.

Since its adoption, American seniors - in many ways our most vulnerable population once they are no longer able to work - have been protected from the sort of destitute conditions that were the shame of the Gilded Age and led to its adoption. It is immensely popular with the American people - that's why it became the "third rail" of American politics. It is what the American people want, and it is what they are willing to pay for.

Neither Ronald Reagan for eight years, nor George W. Bush for eight years while controlling both houses of Congress, was ever able to "privatize" Social Security. However, Reagan negotiated a solid reform of it (one that included him instituting one of the biggest tax increases in history) that shored it up for nearly sixty years. So, how about some practical discussion for "reforming" Social Security and shoring it up for the long term, providing a basic insurance, while encouraging all Americans to more effectively save for their retirement. David Walker's "Comeback America" addresses the issue exactly as it should be.

Provide a basic insurance policy for a consistent retirement income? Yep, a success.

Anonymous said...

There is a fairly famous FDR quote that he had designed Social Security (I'm guessing the tax bit ... where it kinda looks like a pension rather than welfare) so that "no damn politician can ever scrap my social security program."

The source is murky/questionable. But, if true, this suggests that it was not intended to be temporary.

-Mark Roulo

Brian Rude said...

I think it was about ten years ago that I had a discussion after church with a friend who worked for social security. I explained my perspective that the public sometimes thinks of social security as an investment, sometimes as insurance, and sometimes as welfare. My point was that these three perspectives conflict, and that causes problems. What seems right under the insurance perspective does not at all fit with what seems right under the investment perspective. What seems right under the welfare perspective might not at all seem right under the insurance perspective, and so on. Therefore, it seemed to me, it would be awfully hard to satisfy everyone, and therefore social security would be awfully hard to fix.

My friend didn't let me go very far. He insisted that social security was not an investment, never was intended to be, and nobody expects it to be. I didn't know enough to argue about original intent, but I felt I had some idea of what the public thought. I maintained, and still maintain, that in the popular mind the investment perspective is prominent. "It's my money", people think. Evidence of this, it seems to me, is the political traction some factions have gotten by pointing out that there is nothing like a bank account for one's contributions, only a record. You don't receive money from your account when you retire, you receive the money that coming in from current workers. Your "account" is only a record of contributions. There's no money stored up anywhere.

I think the welfare perspective of social security is second in people's minds. We understand that, and are willing to pay for it. Some of our contributions go to people who have never paid in, because they can't, and that's okay.

But I don't think most people think of social security as insurance. Insurance is what you might collect, such as when your house burns down, and when you do collect it, it is vastly larger than the total of your contributions.

My friend would have none of the investment argument. He insisted that no one thinks of social security contributions as an investment. Maybe he's right about that in some technical sense. But I think he's dead wrong in thinking that the public does not consider it at all as an investment.

It seems to me that between the 1930's and perhaps the 50's, the expectation arose that social security should be enough to live on in retirement. Indeed I think that for a few decades that was exactly the case. Perhaps it was never enough to support many luxuries, but I wonder if it was not enough to support the necessities for many retirees. Whether it was enough or not, I think the realization began to set in in succeeding decades that it was not enough any more, that if social security was all you had you better plan to move in with your kids, or go on welfare, or something.

My point in all of this is that public perception is very important. But do we even have a clear picture of what that public perception is? The ultimate "fix" for social security, in my humble opinion, is to convince the general public that social security will decline in importance with every passing decade, than nothing can be done about that, and everyone should make their plans accordingly.

Ellen K said...

Social Security started to fizzle when entitlements other than retirement were paid for out of the fund. When it was started eight workers paid in for every single retiree. Now it is just over two workers per employee meaning that deductions would go up anyway. But when you add the cost of healthcare on top of that, it's not a pretty scenario for kids just out of college.

allen (in Michigan) said...

So to synopsize your story about social security Mike, we jumped off a tall building in the 1930's and so far everything is just fine so what's the beef?

As Ellen's already observed the population of people paying into the system versus those drawing on the system has shrunk drastically. If you're drawing right now well lucky you because this particular gravy train is headed for a derailment. So what's the secret plan for that inevitably eventuality? I mean besides shutting your eyes tightly and refusing to believe the obvious?

MikeAT said...

1/2

Mazenko, let’s talk about governing, not government.

From a right wing propaganda rag….the Social Security Administration.

“In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a ‘unified budget.’ This is likewise sometimes described by saying that Social Security was placed ‘on-budget.’”
Source: http://www.ssa.gov/history/BudgetTreatment.html

In English, Johnson put the billions taken in by the payroll tax into the budget to hide the cost of the Great Society (which has really worked hasn’t it) and Vietnam. Politicians of both parties have raided the trust fund and now the trillions taken in by Social Security are in T Bills in two safes in Virginia…don’t you feel like your financially secure now.

When Social Security was passed it was supposed to be a supplement to you own assets…it was assumed you would make some previsions for your declining years. Over the years it’s also been used to provide a minimal paycheck for people who are unfortunately unable to work (e.g. paralyzed by an accident) or more the case now, unwilling to work (e.g. a 20 year old on disability for “depression”.)

“Neither Ronald Reagan for eight years, nor George W. Bush for eight years while controlling both houses of Congress, was ever able to "privatize" Social Security. “

Neither one tried. Bush’s plan was to allow younger workers to put 2 % of the 6.2% payroll tax into a private account while allowing older workers to stay on Social Security full time. I would call that a good first step. We need to allow older generations (the screwed up Baby Boomers, the Gen Xs and maybe Gen Next or whatever the hell the people born in the late 80s calls themselves) to retire and allow follow on people to transition to a “mandated” 401k. Before you go berserk, the terms are this: You can either put your 4% of payroll into a person retirement account or the money goes into the Social Security fund and at your retirement you get your few dollars a month. As any competent account can show you Social Security pays a negative return over the years you can make more money over your working life time by putting the money in CDs. Over the years we would have we can keep the 2.2% for legitimate disability issues. We do need to crack down on abuse of disability payments such as that dead lazy 20 year old piece of excrement I mentioned earlier (I booked him for assault…good to know his depression doesn’t stop him from getting into fights at the club) This is reform, not putting more payroll taxes on an already overburdened populace. Where do we get the money for the transition? Well it seems to me B Hussein Obama has been wasting money like a drunken Democrat (I refuse to insult the sailors…they spend their own money) since early in his administration. TARP…the “Stimulus Bill”, aka Pork Bill.

MikeAT said...

2/2

“However, Reagan negotiated a solid reform of it (one that included him instituting one of the biggest tax increases in history) that shored it up for nearly sixty years.”

Bigger that the tax rate increase was the slow movement of the age for full retirement benefits from 65 to 67. We need to keep that up….like to 75. When Social Security was passed, most people died in their mid 60s. Now it’s around 80. We need to make adjustments for that.

“So, how about some practical discussion for "reforming" Social Security and shoring it up for the long term, providing a basic insurance, while encouraging all Americans to more effectively save for their retirement. David Walker's "Comeback America" addresses the issue exactly as it should be.”

I think I just have. Now if you want to bring Mr. Walker’s ideas into the debate, please put them out here. But the thing I think (correct me if I’m wrong) is you want the government to control the retirement plan. I want the feds as far away as possible. You allow politicians (both parties, Democrats but their nature, and even Republicans, especially RINOs like Lindsey Graham and McCain) to supervise other people’s money is an invitation to trillions being wasted. Case in point. The three “3rd Rails” of Social Security, Medicare and Medicaid and the “success” they have shown. Per the then Comptroller of the US David Walker, these have unfunded liabilities in today’s dollars of 53 trillion. That is approximately 175000 for every person in the US. That is addition to the multi trillion dollar federal debt Barry Obama is building up. (Source, http://gao.gov/new.items/d08411t.pdf)

Forgive me…but when three programs alone can put unfunded liabilities of fifteen times the annual budget I cannot call that success….I call it madness.

mazenko said...

I agree with raising the retirement age and means testing payouts. I agree with reforming the plan to "stop the madness."

Social Security should be a program for one part consistent part of anyone's retirement plan - not the retirement plan.

That's basically Walker's point.

NOTE: As a teacher I don't pay into, nor will I draw from SS.

MikeAT said...

mazenko

“I agree with raising the retirement age and means testing payouts. I agree with reforming the plan to ‘stop the madness.’”

We agree on raising the retirement age but means testing payouts…there it is once more. Money was taken from people by force of law and they were told this lie about getting a return on it. Again, it’s not for some government bureaucrat to say if you can have the money or not because it’s not the government’s money in the first place.

On reforming the plan, were you supportive of President Bush’s plan to reform Social Security plan in 2005?

Also, I’m in both programs. As a cop I have a pension but I’ve paid payroll taxes for almost 30 years with the Army so naturally I will be entitled to reduced benefits. Then again, half nothing is still nothing.

mazenko said...

Everyone takes out of social security more than they pay in, so as a basic insurance program, means testing makes perfect sense.

Bush's plan was a financial disaster, as is Ryan's, because it begins cutting revenue for existing obligations before cutting payouts. A deficit fiscal nightmare that only someone who had no basic math skills could have ever proposed or taken seriously.

I support the conservative Concord Coalition and Peterson Groups plans. They are non-partisan and don't have an ideological agenda.

MikeAT said...

“Everyone takes out of social security more than they pay in, so as a basic insurance program, means testing makes perfect sense.”

It’s an insurance program? How? My insurance company is required by law to keep assets to pay its debts. USAA or HMO Blue are not in debt for trillions of dollars. Social Security is a slush fund which has been raided by Congresses and President’s (both parties) for other government programs…and yes, the bill has come due.

BTY, a little history. FDR said in answer to questions of the payroll tax being regressive, “We put those payroll taxes so as to give THE CONTRIBUTOR (my emphasis) a legal, moral and political right to collect their pensions and their unemployment benefits. With those taxes in place no dammed politician can ever scrap my social security program.” Source: Arthur Schesinger, “The Coming of the New Deal”, page 308.

“Bush's plan was a financial disaster, as is Ryan's, because it begins cutting revenue for existing obligations before cutting payouts. A deficit fiscal nightmare that only someone who had no basic math skills could have ever proposed or taken seriously.”

Many people have basic math skills look at the federal fiscal outlook and say it’s a disaster, or madness. I also know that in the real world if you put money in the federal treasury it will be spent…there will be some emergency or great plan or great leap forward needing funding. Bush’s plan was actual reform because in the long run it would put financial assets in people’s hands and away from Congress’ and the bureaucracy. . Would it cost hundreds of billions or trillions to fund the transition? Yes. But in the long run it would be self supporting, something Social Security is not. I refer you to my comment on Congress finding needs to fund. On the subject of financials disasters have you been watching the federal budget over the last 14 months? B Hussein Obama, et all have “found” trillions to fund the federalization of health care in this country…and over eight hundred billion for a slush pot call the Stimulus Fund (Orwell would have loved it) I think it would be better spent on real reform of Social Security.

“I support the conservative Concord Coalition and Peterson Groups plans. They are non-partisan and don't have an ideological agenda.”

Isn’t conservatism an ideology?
If they are conservative, aren’t they ideological? So the Peterson Groups plans are conservative, but their “plans” are not an agenda? I’m a little confused. BTY, what are their plans?

mazenko said...

Read the book. It's not that complicated. It's also available at those socialists organizations known as the library.

MikeAT said...

I take it you mean Walker's "Comeback America"…sorry, in the middle of Rove’s “Courage and Consequences” and will start “The Shootist” after that. But you brought it into the debate….you could put out the major points that you agree with. I’ve made my points and when needed sourced them…..

mazenko said...

Just offering an opportunity to learn something. Nothing in your posts reveals you to be open to anything other than your preconceived notions. And it doesn't matter to me one way of the other.

Don't want to read it? Don't read it.

I'll keep seeking information from all sides of the issue, never accepting that I have it all figured out and can't learn something, especially from those who challenge my own ideas.

Of course, that's why I post here. Always trying to learn and improve. I appreciate the links and always check them out.

Thanks for playing.

MikeAT said...

“Just offering an opportunity to learn something. Nothing in your posts reveals you to be open to anything other than your preconceived notions. And it doesn't matter to me one way of the other.”

I’m open to other points of view…but I won’t take them at face value. I will demand sources to back it up. If it’s “doesn’t matter to” you, why did you debate?

“I'll keep seeking information from all sides of the issue, never accepting that I have it all figured out and can't learn something, especially from those who challenge my own ideas.”

You could have fooled me. I’ve been challenging your ideas in this deliberation and backing up my points with specific sources…you don’t want to engage in debate, so be it.

Oh well….until the next issue. :)