Social Security

[DRSmith]

Why am I always hearing this needs to be cut when from everything I read it has a 2.6 trillion dollar surplus?

[Burgold]

I think there are two reasons... one) conservatives have always hated it. Two) some forecasts make it look unsustainable in the future.

[DRSmith]

I think there are two reasons... one) conservatives have always hated it. Two) some forecasts make it look unsustainable in the future.

More than 25 years from now

I think panic is done so that those who want to turn the money over to their friends in the private sector can get support to do so.

Again this is another program I see needs reforming not cutting

[JMS]

Why am I always hearing this needs to be cut when from everything I read it has a 2.6 trillion dollar surplus?

It's part of the conservative message to roll back the new deal and return us to the dawn of the industrial age policies before the hated labor movement enpowered workers....

Here is how the conservative logic runs.

Social Security is no longer profitable and the nation can't afford to run it indefinitely. Everybody who puts money into SS today is going to loose it because eventually the governemnt will be forced to shut it down. Ideally it would be best to privatize it so young people today will have some security.

The obvious flaws in their logic are

(1) Social Security made a profit from 1933-2011. This is the first year when it merely broke even.

(2) Social Security profits were spent / loaned to the federal governemnt.

(3) The Bush Tax Cuts extended over the next 10 years will cost more than the social security deficite over the next 70 years... ( That's from moving the top tax rate from 38% to 35%.)

(4) Privatizing Social Security effectively ends it. The money we put in today pays for the people recieving cash today, just like their money paid for the previous generation.

Thus the basis of the argument against social security is FUD. Fear Uncertainty and Doubt. Panic the population and get them to act against their own interests to advance the concervative agenda.

[Homercles82]

History professor the other night said that when SS first began we had 10 people paying SS taxes for every 1 person on it. Now we are down to 4 for every 1. Can anyone refute or prove that? I cannot find the information.

[Burgold]

I've certainly heard that before. I don't have stats to confirm it, but with the aging population and the baby boomers aging and many about to go into retirement it's not that hard to believe.

[chipwhich]

Why would anyone in their right mind want to give retirement $$$ to the Government to invest for you?

[TimmySmith]

There are different forecasts for the date that it will become unsustainable, but no one is denying that the day is coming. Especially since the baby boomers were the main contributors, now they are the main beneficiaries (exactly why the "surplus" is turning). More than likely the Federal government is just going to keep pushing back the age to receive full benefits. It has become a highly flawed system.

[Popeman38]

Why am I always hearing this needs to be cut when from everything I read it has a 2.6 trillion dollar surplus?

It has a $2.6T surplus, but the majority of that is IOUs from the govt borrowing from the trust fund. There is no $2.6T savings account anywhere. It is not real money. The govt has repeatedly gone to this well to cover other expenses.

[Teller]

4%

..........

[Fergasun]

I think it is currently running a deficit. The problem is, Republicans say it holds "worthless IOUs". These "worthless IOUs" are Treasury bills that need to be sold in the open market. Since Republicans believe we are broke as a country, those IOUs are worthless right now. Even though there's no problem running the government or selling these IOUs into the market right now. We are close to a fiscal issue with public debt however, I don't think its as dire as some Republicans say; I don' t think its something to be ignored. I like the fiscal commission recommendations.

Everyone likes to look at Reagan and Tip O'Neil's deal as "saving" social security. Reagan raised social security taxes; then Congress raided that money and spent it on things other than social security. The benefit of having cash in there now instead of IOUs is that we can simply spend the cash, but the IOUs we'll have to find buyers for.

[Henry]

Social Security will need to be tweaked, to be sure, but it's not the gorilla in the room.

That's Medicare, in my opinion.

[Fergasun]

Social Security will need to be tweaked, to be sure, but it's not the gorilla in the room.

That's Medicare, in my opinion.

Money for doctors is sacred. Money for the poor and elderly is not. I don't think the medical industry is going to allow a medicare tweak without getting concessions at some point. Our political system in action!

[Thiebear]

http://www.usatoday.com/news/washington/2007-10-08-boomers_N.htm

Right Wingnuts or the Nations Comptroller?

Casey-Kirschling — generally recognized as the nation's first boomer (born in Philadelphia on Jan. 1, 1946, at 12:00:01 a.m.) — won't bankrupt the Social Security system by taking early retirement at 62. But after her, the deluge: 80 million Americans born from 1946 to 1964 who could qualify for Social Security and Medicare during the next 22 years.

The first wave of 3.2 million baby boomers turns 62 next year — 365 an hour. About 49% of the men and 53% of the women are projected to choose early retirement and begin drawing monthly Social Security checks representing 75% of the benefit they'd be entitled to receive if they waited four more years to retire.

In 2011, they'll turn 65 and be eligible for Medicare. In 2012, those who didn't take early retirement benefits will turn 66 and qualify for their full share.

"Once it starts to happen, and it's going to start in January, you're going to see millions of baby boomers starting to take it," says Casey-Kirschling, a retired seventh-grade teacher and nutrition consultant.

By 2030, Social Security's caseload will be 84 million people, up from 50 million today. Medicare will go from 44 million beneficiaries to 79 million. That will leave barely more than two workers paying payroll taxes for every retiree.

It's a coming financial implosion that Washington hasn't mustered the will to confront.

Fixing Social Security solely with higher taxes or cuts in spending would mean a 16% increase in the payroll tax or a 13% cut in benefits.

Medicare's needs would be far greater: a 122% payroll tax hike or a 51% reduction in spending, just for hospital care.

Each year action isn't taken, the prognosis gets worse and the cure more expensive. It's "the power of compounding," says David Walker, the nation's comptroller general. "Right now, it's working against us."

This is CNBC in Feb 2010:

http://www.cnbc.com/id/34941334/Will_Baby_Boomers_Bankrupt_Social_Security

Notice in the article (in 2010) They State payouts will be more in 2017:

http://www.nytimes.com/2010/03/25/business/economy/25social.html?_r=1

This is NYtimes in March 2010: 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.

My comments:

So in 2010 CNBC was using data that said Yes, its bad but we have till 2017 and then 2035.

A month later NYTimes points out 2017 was 2016 and 2016 is really today.

(So what does that mean to the 2035 number again)?

My two cents: you can't have the worst recession ever with housing and 401k and jobs and not expect every Babyboomer that isn't trust funded to not take it early. And the accounting is way off based on the last 3 years of misery index that is probably going to get better at some point. The housing is not, the jobs will not ALL return and we are going to 'cut' to the bone.

(Please, Please Please) and don't quote this text below.

Do not use Newsmax, Daily KOS, Fox News, Washington Examiner or Daily Beast as a news source. You'll just make this discussion worse. i said don't quote this ninja text

NYTimes, Usatoday, Salon.com, Huffington Post, Abc/Cbs/Nbc, GAO, Msnbc, Social Security.org (would be great)

If you feel you have and want to derail the conversation back to Left vs. Right: Cato/WSJ/Heritage would do it.

thank you, it will cut back on the horrible bomb throwing.

/end do not quote this.

[Larry]

I may be able to clarify things. (Or maybe simply muddy them some more.)

I assume that the 10-1, nor 4-1 ratios are correct. As I understand it, when SS first started, the vast majority never collected a dime. Most people died before reaching 65.

For all of it's life, SS has been taking in more than it pays out. This money is accounted for in a "trust fund". By law, SS is only allowed to invest in US Government securities. (The theory was that anything else was too risky.) So what happens every year is:

SS has money left over.

The federal government overspends.

SS buys treasury bills from the government. (Sending cash to the feds in exchange for t-bills.)

The feds then spend the money. SS has t-bills.

However, SS doesn't show up at the Fed's t-bill auctions and buy t-bills on the open market. Instead it's simply done as an internal matter. The result of this is that when the government announces how many t-bills they sold, and the total amount outstanding, they don't list the t-bills they sold to SS.

To make up some numbers: SS has $100 left over. The feds are $400 overspent. The feds give a $100 t-bill to SS, take the $100, and then they sell $300 of t-bills on the open market. The feds then announce that the government had a $300 deficit.

Now, as to the current situation: SS is approaching the time where, if nothing changes, SS is going to stop running a surplus, and start running a deficit. Now, SS has enough money in the "trust fund" to cover this deficit for some time. (Like 50 years or so, most forecasts.) If nothing changes by then, then in 50 years, SS is either going to have to start taking money from general revenue, or gut the amount they're paying out by like 25%, or something equally drastic.

Now, there's a lot of pressure to get rid of SS. (I'll avoid giving my personal opinions as to the motives behind this, because motives are both speculation and irrelevant.) but the things they'll say, to try to support their position include:

They'll claim that the trust fund doesn't exist. There's lots of variations of this. All sorts of scary claims. "It doesn't exist". "It's full of IOU's to ourselves". And there is a smidgen of truth, here. Yes, t-bills do, in fact, exist. And they do, in fact, have value. But, even if you don't deny reality, having SS shift from loaning money to the feds, to demanding that the money they loaned be paid back, will have an effect.

For example, the feds don't have the money to give back. If SS goes to the teller window and says "I want to cash in this t-bill now", then "the bank" is just going to have to borrow the money from China or somebody, so they can give SS her money.

So, if SS "cashes in some bonds", it's still going to cause the (official) deficit to go up. (The feds are going to have to sell t-bills on the open market, and account for them, so that they can pay back the t-bills that they haven't been accounting for.)

They (the folks who want to get rid of SS) will claim that "any time you spend more than your income, you're bankrupt". (That's because they desperately want to pretend that SS doesn't have any assets. My parents have been spending $3-4,000 a month more than their income, since they retired, 15 years ago. But they had over two million dollars worth of assets in various places. They're spending more than their income, but they're nowhere near bankrupt.)

They'll claim that SS is "a ponzi scheme". And again, there's a smidgen of truth. When the government takes SS out of your paycheck, they don't set that money aside and hold it for your later use. Instead, almost all of what they take in, goes to pay people who are retired. OTOH, those people paid into SS, too. (And their money went to pay their parents. And so forth.)

As an aside, I wouldn't mind a bit is we could come up with a way of transitioning SS from it's current "tax people and give the money to their parents" system to a "tax people and save it for later" scheme. Problem with trying to do that is: If the government decides, today, that they're gonna take my money and not spend it till I retire, then who pays for my parent's SS? The only way to transition to a "paid in advance" system would be for the government to pay for all of SS benefits out of general revenue, for the next 40 years.

(The people who want to get rid of SS won't mention that any

other

plan to get rid of SS, or transition SS to some other system, like a private one, has exactly the same problem.)

Some information that might affect the discussion:

There are a few things which can be done that would greatly extend the date at which the SS trust fund runs out. For example, I've read that eliminating the "ceiling" on SS taxes (currently, SS taxes only apply to the first $100K of income, and above that, there's no tax) would mean that the SS trust fund won't run out of money for 75 years. (They don't do forecasts beyond 75 years.)

So would raising the retirement age to 70.

Many people have said that SS went bankrupt in 09. Offhand, I'm not finding 09 data, but in 10, SS took in $570B (I assume that this site is listing amounts in billions, but I don't see where they say so.), and paid out $564B. But, the trust fund earned $108B in interest. The amount of the trust fund went up over $100B.

[Spec138]

I was reading a bit on this and found an interesting forecast:

2010–2020 Social Security spends more than it collects in taxes during eight of these 11 years, but the trust fund grows every year because it collects interest from the federal government.

2021-2037 Social Security spends more than it collects in taxes, and the trust fund shrinks every year. The federal government pays back the money that the Social Security program has loaned to it with interest, and the trust fund ends this period with a balance of zero.

2037-2084 The Social Security program runs annual deficits that accumulate to $44 trillion, which could be covered by (a) adding $5.4 trillion to the trust fund today, or ( increasing payroll taxes by 28% starting in 2037, rising to a 33% increase by 2084, or © reducing benefits by 22% starting in 2037, rising to a 25% reduction by 2084.

2085and beyond The Social Security Program runs deficits that could be covered by adding $10.7 trillion to the trust fund today

http://www.justfacts.com/socialsecurity.asp #89-125

[Elessar78]

The amusing thing about Conservatives opposing social security is that it was originally a "conservative" construct when it was first introduced in Great Britain (or Germany). When those countries finally had modern, free elections the ruling (I'll call it "Conservative" class) quickly realized they did not have the votes to stay in power. What they did have was money to essentially pay people who could no longer work (old age or infirmity), so essentially it was a move to buy the votes of the lower classes.

Read this in either Ascent of Money by Niall Ferguson or History of Money by Jack Weatherford. Both great reads by the way.

Currently, it's a huge problem facing the country and government. As mentioned the government (both republican and democrat) keeps dipping in there to fund their projects. Young people like myself are more than likely going to end up with the short end of the stick. Not that I'm relying on social security for retirement, but the implicit idea is I pay into it so my parents can have something in retirement. But when it comes my turn to retire there will be no money in there for me.

Politicians refer to SS as the third rail of American politics. Grab it if you wanna die, kinda thing. It's tough because one of the strongest (if not the strongest) lobby in the country is the AARP.

[Mursilis]

I may be able to clarify things. (Or maybe simply muddy them some more.)

Actually, that summary was pretty clear and honest - thanks.

There are a few things which can be done that would greatly extend the date at which the SS trust fund runs out. For example, I've read that eliminating the "ceiling" on SS taxes (currently, SS taxes only apply to the first $100K of income, and above that, there's no tax) would mean that the SS trust fund won't run out of money for 75 years. (They don't do forecasts beyond 75 years.)

Yes, raising the cap would help, but only if you don't correspondingly raise future benefits to reflect an earner's increased contribution. For example, as it currently stands (and as I understand it), assume I earn the cap amount this year (~$110K), and Albert Haynesworth earns much, much more. Yet both of us pay the same amount of SS taxes, because of the cap. When we go to collect SS, both AH would get roughly the same benefit, because benefits are also capped - AH wouldn't get a larger benefit for being the $100M man, because he didn't pay SS on most of that money. So assume we lift the cap, and AH pays SS taxes on all his income, not just up to ~$110K annually or whatever. Does his benefit also rise in the future, or is that still capped, so that he gets the same benefit as me, who earned much less? If so, how does that save the system money? And if his benefit is capped but his contribution to the fund isn't, how is that fair?

So would raising the retirement age to 70.

Many people have said that SS went bankrupt in 09. Offhand, I'm not finding 09 data, but in 10, SS took in $570B (I assume that this site is listing amounts in billions, but I don't see where they say so.), and paid out $564B. But, the trust fund earned $108B in interest. The amount of the trust fund went up over $100B.

Again though, as you noted, the federal gov't is going to have make good on those bonds (plus interest) eventually. That's going to be very, very soon, and it's going to make a bad budget problem much worse.

[88Comrade2000]

.

NYTimes, Usatoday, Salon.com, Huffington Post, Abc/Cbs/Nbc, GAO, Msnbc, Social Security.org (would be great)

If you feel you have and want to derail the conversation back to Left vs. Right: Cato/WSJ/Heritage would do it.

.

You do know some will view the NYT, Salon, Huffington Post, MSNBC in the same vein.

As for SS, anyone who's in their 40's or younger honestly think SS will be there when you retire; are dreaming.

Even if they find a solution, they will spend that money now; like they always do.

[DRSmith]

So it seems that immigration reform where you get lots of new legal people paying taxes and SS would be an improvement to long term fiscal issues, couple with a real healthcare plan that fixes medicare and medicaid

[JMS]

History professor the other night said that when SS first began we had 10 people paying SS taxes for every 1 person on it. Now we are down to 4 for every 1. Can anyone refute or prove that? I cannot find the information.

Did your history professor also tell you that the folks who initially recieved social security payments had never paid into the system? That for them it was basically a gift? Or that when Social Security was established 80% of the elderly lived in poverty and that social security was responsible for lifting the majority of those folks out of poverty?

But who cares... Seriously why is that even relivant...

All you have to know is some time around 2040 about 110 years after social security was created, it will begin to loose money if we don't tweek it. ( Reality is we always tweek it.) Up the retirement age 5 or 6 months and whallah... it's profitable again.

If the bush tax cuts are extended as republicans want to do for an additional 10 years it will cost as much as the next 70 years of social securities deficites. We have money for tax breaks for the wealthiest Americans even though taxes on the wealthiest Americans are at historic lows... but not enough money to fund Social Security? It's just idiotic.

[The Sisko]

It's part of the conservative message to roll back the new deal and return us to the dawn of the industrial age policies before the hated labor movement enpowered workers....

What are you, some kinda commie? Didn't you hear? Feudalism is the new American capitalism. Now get with the program.

[JMS]

So it seems that immigration reform where you get lots of new legal people paying taxes and SS would be an improvement to long term fiscal issues, couple with a real healthcare plan that fixes medicare and medicaid

Not really. Most illegal immigrants would be poor people. The federal government really doesn't make much money by taxing poor folks. Poor folks actually cost the federal government money in the form of services; they are not a revenue generator....

This is the reason why the McCain amnest bill focused immigration incentives not on Mexico's poor who make up the vast majority of illegal immigants but rathr Mexico's middle class.

[ACW]

Social Security is a Ponzi Scheme :mad:

[JMS]

What are you, some kinda commie? Didn't you hear? Feudalism is the new American capitalism. Now get with the program.

Oh Feudalism, I thought you said Freudalism...

I'm not sure if the conservative agenda actually goes back to serfs and castles. But it certainly empowers people to stock pile weapons and move that direction if they so choose...

I think the real message is American workers are the new red menace. We need to keep an eye on those greedy teachers, janators, and blue colar workers who for some reason want to make a living wage for their service.

Think of what a wonderful society we would have if teachers who spend the majority of the time with our young were paid say 20-30k, rather than 40-50k. Let's focus on that shall we, rather than focus on the wall street crowd which recently cost us several trillion dollars or the Haliburtons which cost us tens of billions... Let's focus societies problems on the least among us rather than actually talk about something serious.

---------- Post added March-28th-2011 at 10:51 AM ----------

The amusing thing about Conservatives opposing social security is that it was originally a "conservative" construct when it was first introduced in Great Britain (or Germany). When those countries finally had modern, free elections the ruling (I'll call it "Conservative" class) quickly realized they did not have the votes to stay in power. What they did have was money to essentially pay people who could no longer work (old age or infirmity), so essentially it was a move to buy the votes of the lower classes.

Read this in either Ascent of Money by Niall Ferguson or History of Money by Jack Weatherford. Both great reads by the way.

Here social security is one of the greatest sucesses of the brief flirtation the United States had with liberal rule. From 1933-1968 with a few notable gaps ( Eisenhower, and Kennedy).... Social Security is perhaps the greatest American government program ever. It's benifited more people than any other in dramatic fashion, and basically has run a financial surplus for about 80 years until 2011.

It showed the country in dramatic fashion what the government could do when well run, and properly motivated. And the conservatives have always hated that.

Currently, it's a huge problem facing the country and government. As mentioned the government (both republican and democrat) keeps dipping in there to fund their projects. Young people like myself are more than likely going to end up with the short end of the stick. Not that I'm relying on social security for retirement, but the implicit idea is I pay into it so my parents can have something in retirement. But when it comes my turn to retire there will be no money in there for me.

Actually it would be more accurate to say that currently it is not a problem. Rather it will be a medium sized problem in about 30 years if we don't tweek our program. The Republicans are proposing bills like tax cuts that over 10 years are equivelent in expense as the untweeked social security deficite will be over the next 70 years. But conservatives don't see that as a problem.

Politicians refer to SS as the third rail of American politics. Grab it if you wanna die, kinda thing. It's tough because one of the strongest (if not the strongest) lobby in the country is the AARP.