Social Security Crisis?

[analog]

the almost certain confiscation of said funds in the next few years so the federal government can give me a guaranteed "annuity".

that Ghilarducci crowd has been eerily quiet of late.

I share your apprehension .

a.


.

[piqaboo]

Time to dig holes in the back yard. Blech

[jamiebk]

Time to dig holes in the back yard. Blech

mattresses....I like the mattress option

[Shapley]

Part of the Democrats next 'stimulus' involved borrowing from the Social Security 'trust fund', to be paid back at an unspecified time with funds from an unspecified source.

I take it they've never looked inside the 'trust fund' and noticed that it's already full of IOU's...

[Haggis@wk]

Part of the Democrats next 'stimulus' involved borrowing from the Social Security 'trust fund', to be paid back at an unspecified time with funds from an unspecified source.

I take it they've never looked inside the 'trust fund' and noticed that it's already full of IOU's...

Yup.

For the first time, the Social Security Administration will start cashing in its IOUs from the Treasury in order to meet its benefits obligations. Unfortunately, the Treasury doesn’t have the cash, either:

The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.
It’s time to start cashing them in. … Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security’s shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program’s finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there’s concern that the looming crisis will lead to reduced benefits.

The IOUs won’t last. Technically, they’re worthless now. The Treasury doesn’t have the cash to reimburse Social Security, and we’ll have to sell more debt on the lending markets in order to finance the benefits in the short run.

Moody’s sees the pressure on the debt as a risk to the US’s AAA credit rating:

A rise in the proportion of its revenue that the U.S. government spends servicing its debt over the next 10-years, as outlined in the federal budget in February, would see the U.S. government’s AAA rating come under pressure, Moody’s Investors Service said Monday.

Federal debt affordability has “for the time being” not deteriorated, despite the U.S.’s rising deficit, and is not yet at a level that threatens the rating, Moody’s said in its latest quarterly report on AAA-rated sovereigns. …

And the 10-year outlook in the budget shows a continuous rise in the debt to GDP ratio and in the debt affordability ratio. The outlook shows the ratio of interest to revenue deteriorating to around 18%, which was roughly the peak level when interest rates were high in the 1980s.

“If such a trajectory were to materialize, there would at some point be downward pressure on the AAA rating of the federal government,” Moody’s said. .

A downgrade in our credit rating would mean that we would have to offer higher return rates on our debt. That would cost us more to service in the short run and make retiring the debt an ever-increasing improbability. The debt cycle would continue to escalate as we keep paying benefits with cash we don’t have, adding to the debt and putting our credit at even greater risk.

The wheels have begun to fly off the entitlement juggernaut.

[Shapley]

But Nancy Pelosi assured us in leading the charge to defeat President Bush's 'risky scheme' to take part of Social Security out of the hand of the government that Social Security was solvent for the next 40 years, at least.

The GOP needs to be running clips of those statements before the next election. But, even more important, they need to have a plan to resolve the problems. It won't do to replace Democrats with Republicans if the Republicans don't have something tangible to offer.

[Haggis@wk]

It won't do to replace Democrats with Republicans if the Republicans don't have something tangible to offer.

Unfortunately, tangible=painful. The closer we get to ground zero, sometime between 2020 - 2030 the worse it will be.

[Shapley]

It won't do to replace Democrats with Republicans if the Republicans don't have something tangible to offer.

Unfortunately, tangible=painful. The closer we get to ground zero, sometime between 2020 - 2030 the worse it will be.

It could be resolved, though painfully. It would require telling Social Security recipients that they cannot have an increase, and may even have to have a cut. I see few, if any, congressmen with that kind of guts, but it will have to be done.

They will have to write off a large part of the Senior Citizen vote, at least in the short term, but hard times demand hard choices, and these are hard times.

A well-orchestrated campaign could point out how the current congress has squandered the Social Security 'trust fund', that Republicans did fight for a 'lock box', that Republicans under President Bush predicted this, and were thwared by the Democrats. Methinks it will take a Ross Perot-esque television spot to lay it all out on the line. And they will need to get the Republicans on board to ensure that it gets to the floor for a vote, ala the Contract for America.

It's time for action.

[Haggis@wk]

Wow, thank goodness we have Al Gore's "lock box" to fall back on...oh, wait. This happen 10 years earlier than any Dem said it would.

[Haggis@wk]

Not unexpected.

The Congressional Budget Office said Wednesday that Social Security will pay out $45 billion more in benefits this year than it will collect in payroll taxes, further straining the nation’s finances. The deficits will continue until the Social Security trust funds are eventually drained, in about 2037.

Previously, CBO said Social Security would start running permanent deficits in 2016. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.

If you are over 50 I think you are screwed. I planned to wait until I'm 70 (I'm 62 now) before I started taking SS. I need to re-think that

[Haggis@wk]

The Social Security trust fund will start going bankrupt in 2013

Disturbing new information on a misleading statement in the newest Social Security Trustee report on the future of the program:

The 2012 Social Security Trustees Report—the authoritative source on the program’s finances—states that the program’s “trust fund assets” will “continue to grow” through 2020, a claim that has been repeated by numerous sources as varied as US News & World Report, the AFL-CIO, and the American Academy of Actuaries. However, as revealed by data buried deeper in the 252-page Trustees Report, this assertion disregards the effects of inflation, which are projected to overrun any expected trust fund gains and contribute to an accelerating decline that will start in 2013.

[Giant Communist Robot]

The Social Security trust fund will start going bankrupt in 2013

I think this is typical of a certain type of political theater. Since Social Security is a program of the government it never has to go bankrupt (because the Federal Government never has to go bankrupt). Payroll taxes, the current source of funds, might be inadequate in the future, but that doesn't mean Congress can't change the SS Act to provide funds. Seriously, does anyone really believe Congress would let SS go bankrupt?

[Shapley]

Congress can change the payouts as well as the revenue. That is what the argument has been about for decades. The result has been stagnation - the current system of automatically-calculated COLAs with a fixed revenue rate (disregarding the current reduction made by Mr. Obama as part of the Stimulus Bill, which has reduced the revenue since its being enacted) shields Congress from having to risk a vote which will enrage side or the other.

Eventually, changes will have to be made, but neither side wants to be on record as voting for the changes. Raising taxes will irk the folks that pay them, cutting benefits will irk the folks that receive them. The logical thing would be to raise taxes on those who will receive the benefits in the future, but that will anger the employers that have to match those funds. Few politicians are willing to risk any of those constituencies, so stagnation on the issue continues...