Social Security Said to Go Broke in 2041 (new 2005 Trustee's Report)

[papau]

FACT ONE: Year to year change in the Trustee's report tend to be small unless the Trustee's make large assumption changes. The 2004's Trust funds exhausted in 2043 date continued the improvement in that funds exhausted date (from 1994 to 2004, the exhaustion date rose from 2029 to 2042).

FACT TWO: After 2042 when the Trust Funds may be exhausted, Social Security will still receive taxes that will allow it to pay for benefits - benefits still greater than what people could expect from a privatized system along the lines laid out under the second option of President Bush's Commission to Strengthen Social Security (CSSS) in 2001, according to estimates by the nonpartisan Congressional Budget Office http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=476625#_ftn1

FACT THREE: The Bush Trustees use pessimistic Economic Predictions so as to be conservative. Historically, economic growth has averaged 3.4 percent annually after accounting for inflation, according to the Department of Commerce's Bureau of Economic Analysis, but the Trustee intermediate projection assumed an inflation adjusted growth rate of 1.8 percent in their 2004 report. A decrease in growth of 47% as assumed by the Trustees means significantly lower stock market gains since profits grow a lot slower when the economy grows slower. Indeed the Wall Street Journal survey of prominent economists had the majority puting stock market growth for the future between 4.0 percent and 4.6 percent, instead of the historical average of 6.5 percent. Private accounts, already projected to not be able to replace the planned Bush cuts thought to be planned for the guaranteed benefit Soc Sec program, would need to be re-projected and would project even smaller retirement payments that the small payments now being discussed by Bush.

http://ap.washingtontimes.com/dynamic/stories/S/SOCIAL_SECURITY?SITE=DCTMS&SECTION=HOME

SS benefits exceed program income 2017 - one year earlier than 2004 report -CRISIS

March 23, 2005 11:57 AM EST

Social Security Said to Go Broke in 2041

By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) -- The trust fund for Social Security will go broke in 2041 - a year earlier than previously estimated - the trustees reported Wednesday. Trustees also said that Medicare, the giant health care program for the elderly and disabled, faces insolvency in 2020.

The new projections made in the trustees annual report were certain to be cited by both sides in the massive battle to overhaul Social Security, which President Bush has made the top domestic priority of his second term.

The go-broke date for Medicare was delayed by one year, compared to the estimate that trustees gave a year ago.

The insolvency dates represent when both trust funds will have exhausted the government bonds that have been building up to take care of the pending retirement of 78 million baby boomers.<snip>

[July]

1. 78 million baby boomers . . .

minus the ones who will already be dead by 2041 (oldest boomers would be 95 that year).

[LiberalEsto]

3. I'll be 89

Maybe the fundie rethugs are expecting the Rapture will take the whole SS mess off their hands.

[Warpy]

2. Load of HORSESHIT!

The only way Social Security will go BROKE is if nobody in the USA is drawing a paycheck and paying FICA premiums.

It's INSURANCE, folks, and it's paid as it's used.

[MousePlayingDaffodil]

5. But what happens . . .

. . . when the amount of revenue that is raised through the Social Security payroll tax is no longer sufficient to pay the amount of benefits that the Social Security program is paying out?

[papau]

6. By law that year the benefits are automatically reduced to match tax

so 70 to 80% of the scheduled benefit would be paid - but that is still way higher than any benefit from the revised Bush guar. SS benefit plus the Bush private account benefit annuity.

[cthrumatrix]

26. exactly.... that is the only key point to remember !!!!!!!!!!!!!!!!!!!!!!!

[TahitiNut]

44. I don't believe so. I believe the shortage comes from the General Revenues

... and would be in the form of a 'loan' that then gets paid off (with interest) from a subsequent surplus. The Social Security Trust Fund has had shortfalls a few times in the last 60 years and this is how it's been handled.

Unless there's legislation that changes the benefit amounts, those benefits are paid.

[BlueEyedSon]

8. Every insurance plan in the known universe is adjusted

AT LEAST every 10 years (more likely EVERY year) to balance the premiums, the reserves and the benefits. Why should SS be any different?

When was the last time SS was tweaked? Maybe the FICA percent will need to be higher? Maybe the cap should be raised. If any of these steps were taken now, the RESERVE would grow, protecting the SS plan.

[MousePlayingDaffodil]

12. Of course, if the Social Security tax rate were raised now . . .

. . . or the wage cap raised now, the increased tax revenues that would result would simply flow into the U.S. Treasury to be spent, either on other government programs or (if the government were running an overall budget surplus, as happened under the Clinton Administration) to pay down the national debt. The government doesn't "save" or "invest" money in the way that a private person does.

[BlueEyedSon]

13. That is not the way SS is designed to work, it is a separate "tax"

that goes into a different "special" bucket.

That's why it's not called "federal income tax" (or lumped in with it), it's called FICA (Federal Insurance Contributions Act) and has its own tax schedule.

[MousePlayingDaffodil]

18. Well, you are right that it has its own tax schedule . . .

. . . and a different name. But you're mistaken if you think that the Social Security payroll is any different, as a matter of law, from any other federal tax. It is not.

I direct your attention to the Social Security Act of 1935 itself, and to section 807, which provided:

"COLLECTION AND PAYMENT OF TAXES

"SEC. 807. (a) The taxes imposed by this title shall be collected by the Bureau of Internal Revenue under the direction of the Secretary of the Treasury and shall be paid into the Treasury of the United States as internal-revenue collections."

Section 807 was later repealed, but only because this section of the act was moved to the Internal Revenue Code, specifically, Chapter 25, entitled "General Provisions Relating to Employment Taxes." See 26 U.S.C. § 3501:

"Collection and payment of taxes

"(a) General rule

"The taxes imposed by this subtitle shall be collected by the Secretary and shall be paid into the Treasury of the United States as internal-revenue collections."

* * * *

Put simply, there is no separate "bucket." As a matter of law, Social Security payroll taxes are collected and sent to the U.S. Treasury, to be treated just like the revenue raised by the federal income tax.

[BlueEyedSon]

20. Well, that is a mistake. So can you explain what the "trust fund"

they always talk about is, if there is no separate bucket for SS $$?

[papau]

24. The Trust Fund is the collection of invested Assets owned by the Soc

Sec System.

Almost all of which are government bonds.

[BlueEyedSon]

25. So there is some budgeting/accounting construct that is SS specific.

[papau]

27. Yes - the trick the GOP is using is the same FIT vs payroll tax one the

media allowed them to sell for the Bush tax cut for the rich.

The monies in 2001 that the FIT collects did not cover general expenses, but the tax cut was to the FIT rates only, and slanted to the rich because "the poor/middle class do not pay much FIT", while the payroll tax that provided the surplus could not be reduced because that would threaten the fiscal health of the Social Security System (how the media could whore like this and sleep at night I do not know).

In any case, when payback of the bonds is discussed "we are all one family- there are no real Soc Sec Assets because what the FIT owes is what the payroll tax owns - so it nets to zero"

So to give a better answer to your question:

SS specific accounting exists when doing tax refunds for FIT, but does not exist when Soc Sec needs FIT to raise rates to get additional cash to payoff some of those bonds.

[MousePlayingDaffodil]

28. What's a mistake?

I'm just citing a specific provision of federal law. From the inception of the Social Security program in 1935, the revenues raised from Social Security payroll taxes have been collected by employers and sent to the U.S. Treasury where that money is "co-mingled," as it were, with the rest of the money that federal government takes in through taxation and tariffs.

The Social Security Trust Fund was created by amendments to the Social Security Act in 1939. Prior to that time, what became known as the Trust Fund was known as the "Reserve Account." As for what the Trust Fund is, why not simply read the pertinent portions of the legislation that created it?

"Sec. 201. (a) There is hereby created on the books of the Treasury of the United States a trust fund to be known as the `Federal Old-Age and Survivors Insurance Trust Fund' (hereinafter in this title called the 'Trust Fund'). The Trust Fund shall consist of the securities held by the Secretary of the Treasury for the Old Age Reserve Account and the amount standing to the credit of the Old Age Reserve Account on the books of the Treasury on January 1, 1940, which securities and amount the Secretary of the Treasury is authorized and directed to transfer to the Trust Fund, and, in addition, such amounts as may be appropriated to the Trust Fund as hereinafter provided. There is hereby appropriated to the Trust Fund for the fiscal year ending June 30, 1941, and for each fiscal year thereafter, out of any moneys in the Treasury not otherwise appropriated, amounts equivalent to 100 per centum of the taxes(including interest, penalties, and additions to the taxes) received under the Federal Insurance Contributions Act and covered into the Treasury.

* * * *

"(c) It shall be the duty of the Managing Trustee to invest such portion of the Trust Fund as is not, in his judgment, required to meet current withdrawals. Such investments may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired (1) on original issue at par, or (2) by purchase of outstanding obligations at the market price. The purposes for which obligations of the United States may be issued under the Second Liberty Bond Act, as amended, are hereby extended to authorize the issuance at par of special obligations exclusively to the Trust Fund. Such special obligations shall bear interest at a rate equal to the average rate of interest, computed as to the end of the calendar month next preceding the date of such issue, borne by all interest-bearing obligations of the United States then forming a part of the Public Debt; except that where such average rate is not a multiple of one-eighth of 1 per centum, the rate of interest of such special obligations shall be the multiple of one-eighth of 1 per, centum next lower than such average rate. Such special obligations shall be issued only if the Managing Trustee determines that the purchase of otherinterestbearing obligations of the United States, or of obligations guaranteed as to both principal and interest by the United States on original issue or at the market price, is not in the public interest.

* * * *

"(f) The Managing Trustee is directed to pay from the Trust Fund into the Treasury the amount estimated by him and the chairman of the Social Security Board which will be expended during a three month period by the Social Security Board and the Treasury Department for the administration of Title II and Title VIII of this Act, and the Federal Insurance Contributions Act. Such payments shall be covered into the Treasury as repayments to the account for reimbursement of expenses incurred in connection with the administration of Titles II and VIII of this Act and the Federal Insurance Contributions Act. Such repayments shall not be available for expenditures but shall be carried to the surplus fund of the Treasury. If it subsequently appear that the estimates in any particular three month period were too high or too low, appropriate adjustments shall be made by the Managing Trustee in future payments.

"(g) All amounts credited to the Trust Fund shall be available for making payments required under this title."

The point is, whenever the amount of revenue raised by the Social Security payroll tax exceeds the amount of benefits required to be paid to Social Security recipients (as has been the case since 1983), the Trust Fund does not "save" that excess revenue as cash money. For it to do so would, of course, be utterly disastrous for the economy. Rather, the Trust Fund is required by law to, in effect, purchase bonds from the U.S. government with the surplus revenue. The government spends the money it receives in exchange for these bonds (either on other federal programs or to pay down the national debt, when the government is running a budget surplus), and the Trust Fund holds the bonds for future redemption.

[BlueEyedSon]

43. Not *your* mistake. Sorry if that wasn't clear. Thx for all the info. nt

[papau]

22. It's trur all monies go into one pot- with the National Debt the balancing

item between income and outgo.

When the FIT was reduced for the rich via the Bush Tax cuts for the rich we had to borrow money and we borrow first from the Soc Sec System.

However the "to be treated just like the revenue raised by the federal income tax" is not quite true. Soc Sec owns that money and did not just give it to the rich so their FIT could be reduced. The bonds sold to Soc Sec are real assets of Soc Sec as long as "full faith and credit" have any meaning.

And the payoff of the bonds sold to finance the National Debt is the same process for Bonds owned by Japan and for Bonds owed by the Soc Sec Trust. It is just that the rich do not want their FIT raised to pay off the bonds redeemed by the Soc Sec Trust - but they do not mind raising their taxes to pay off the bonds owned by Japan.

Guess the rich fear Japan MORE THAN THEY FEAR OLD FOLKS.

[MousePlayingDaffodil]

29. The point isn't that the government isn't obliged . . .

. . . to come up with the money when the time comes to redeem the bonds. The point is, at such time as revenues raised by the Social Security payroll tax are no longer sufficient to pay benefits at the levels required by current law, the government will have to find a way to raise that money. And we're talking about a lot of money.

The distinction between the Japanese and the "old folks" you mention is that the Japanese investors actually own the bonds which they will eventually seek to redeem for cash. The "old folks" in this country, however, do not themselves hold those bonds. One part of the federal government (the U.S. Treasury) owes the money to another part of the federal government (the Social Security Administration), and if Congress were to change the law so that, for instance, future benefits were substantially reduced, the Social Security Administration might never ask the U.S. Treasury to make good on the bonds.

Consider, for instance, if tomorrow Congress were to abolish the Social Security program in its entirety, thereby immediately eliminating all Social Security benefits. What "value" would the Trust Fund's bonds have then? The Trust Fund itself would no longer exist!

The so-called Social Security "crisis" is ultimately just a political battle, a matter of political will.

[papau]

35. True as political will - but disagree as to full faith and credit not

applying to Trust Fund assets.

There is no way to default on only part of the National Debt.

The Japanese investors is the country of Japan which will be redeeming those bonds to fund its own need for cash to pay its retires.

Ironic? Old folks pensions in Japan and old folks pensions in the US backed by same investments. Yet no problem raising FIT to pay pensions for old folks in Japan - but in US we have a crisis if we pay - via a FIT tax increase - to redeem those bonds to get cash to pay US old folks.

[MousePlayingDaffodil]

36. You're missing my point, I think.

If the law were changed and Social Security benefits were to be significantly reduced, so that the revenues raised by future payroll tax were sufficient to provide for those benefits, the issue of the "debt" owed by the U.S. Treasury to the Social Security Trust Fund would be rendered irrelevant. That is, the Trust Fund's assets, the bonds, would never be redeemed under that scenario. It would no longer be necessary for one part of the government to ask another part of the government to "make good" on the bonds. The "debt" in question is what the federal government owes itself. Unlike Japanese investors holding U.S. bonds, no future Social Security recipient actually holds any portion of the bonds held in the Trust Fund.

[papau]

41. I agree - and never being redeemed = never paying back stolen payroll tax

which = no tax increase on rich.

Which I think is bottom line.

But you are correct - Agency owned gov bonds if never redeemed are just markers for some funds the agency generated that were taken and used to decrease the need for funds from FIT.

[papau]

21. Gov borrowing is no different from personal borrowing - the lockbox

indeed was mentioned first by Greenspan, then by Bush, and then by Gore - but only Gore was not a liar.

The lockbox conceot was that we were in surplus, so the payroll tax surplus would be used to pay down the national debt, so as to leave some room to borrow funds should SS need the monies at a later date.

But we got the Bush tax cuts for the rich instead.

The bonds sold to the Trust are the same as the bonds sold to Japan, although the Trust can not resell the bonds on the capital market the way Japan can because the Trust Bonds are "special". A default on either type of bond means the US economy goes down - so it won't happen. So the tax cut for the rich - that is currently being financed by loans from the payroll tax surplus, will have to be paid back by those rich folks via a tax increase on the rich.

And that is the CRISIS that Bush is now selling. The rich MUST NOT BE FORCED TO REPAY THE MONIES TAKEN FROM SOCIAL SECURITY TO LOWER THEIR TAXES.

[papau]

23. True - Clinton asked for permission to invest SS in equities in 98 and

the GOP shot it down.

But a reduction in the National Debt financed through the capital markets is an "good"

and leaves more room for future borrowing should the country need to do so.

[UpInArms]

10. Baby Boomers Have Already Paid for Their Social Security Benefits

7/8ths down the page

http://www.allenwsmith.com/2004.10.01_arch.html

In 1982 Alan Greenspan chaired a Presidential Commission on Social Security that was given the task of “fixing” the baby boomer problem in advance of their retirement, when a larger than normal number of workers would hit retirement age at around the same time, significantly stretching the Social Security rolls. Greenspan and the other commission members decided that the baby boomers needed to pay higher payroll taxes, beginning in 1983, and continuing until they retired to meet future needs. This money was supposed to be used to build up a large reserve to supplement payroll tax revenue when the boomers retired.

In 1983, the commission’s recommendations were enacted into law, and the baby boomers, along with all other workers, have been paying the higher taxes ever since. By the time they retire, the baby boomers will have paid enough into the Social Security trust fund to cover the payment of full benefits to all members of their generation until the year 2042. By that time the youngest of the baby boomers will be 78 years old. Only after 2042 would there be an actuarial problem with the fund. That would have been the end of the story if the government had kept its hands out of the Social Security cookie jar. However, politicians from both political parties have been using the Social Security surplus money for non-Social Security purposes ever since the surpluses first began to show up in the 1980s.

As a result, the government has “borrowed” every dollar of the $1.5 trillion surplus revenue generated by the 1983 payroll tax increase, and used it to fund tax cuts and programs not related to Social Security. Furthermore, the government continues to loot the fund to the tune of more than $400 million per day. The Social Security surplus money was supposed to be invested in already existing marketable Treasury securities that were held by the public. This would have resulted in a reduction in the publicly-held debt, and the Social Security surplus would have been invested in real marketable assets that could be redeemed by the Social Security Trustees without any action by Congress or the president.

...more...

The whole freaking act is bullshit - the boomers pre-paid for their retirement. The IOUs are Treasury Notes - if those are not redeemable, then the entire country is busted flat - and no treasury note is worth the paper it is printed upon.

Declaration of Contempt for this maladministration and all of its thieving henchmen.

:argh:

[mbperrin]

38. Thank you! The boomers have paid more than any other

group in history - better educated, better wages, more revenues by more people so that we have set aside the cash - some $3+ TRILLION in bonds to be used for our retirement.

In 2041, the oldest boomers (born in 1946) will be 95 - the youngest, born in 1964, will be 77; life expectancy around 80, so the truth is, few of us will be there, and the revenue stream we have built (and continue to build - SS revenues still outweigh outflows) will be sufficient to see us through.

Thieves are trying to steal our money by convincing us it's not "real" somehow - it is as real as any money can be, and it is indeed ours.

When you hear a thief break in, you usually take a shotgun downstairs with you. I suggest we follow usual procedures in this case.....

[UpInArms]

40. Meanscam, Meanspin, Thievesman

has burned my toast one too many times lately.

and that piece of shit BlowJob is a crook, too.

I'm hoping that the rest of the country understands how dangerous it would be to allow this maladministration and its henchmen to get away with this chicanery - but I fear that they are all brainwashed or braindead.

[tech3149]

4. remember the trustees are more partisan now

The likelyhood that the basic data used may be more skewed than previous reports.

[papau]

7. Very true - I look forward to seeing the actuarial assumption changes

I am told that there was some push to get the intermediate date for Trust Exhaustion to decrease from last years 2042.

I am looking forward to private discussions with the SSA actuaries at the ERISA Enrolled Pension Actuaries meeting 4/3 to 4/6 in DC.

[papau]

37. Bush cut year by assuming LOW INTEREST RATES NEXT 10 YEARS!

so the Trust fund does not produce as much income - and 2042 Trust exhaustion becomes 2041 Trust Exhaustion.

The other fun assumption change was workers in next 10 years make lower wages - so lower payroll tax in collected.

A pretty dismal wage scenario - I wish he had told us of his plan before the election.

[papau]

48. Why the rapid lower mortality assumptions?

http://www.prospect.org/weblog/archives/2005/03/index.html#005852

DEATH DECLINE: WHY? The new report is out http://www.socialsecurity.gov/OACT/TR/TR05/index.html and the moment of Trust Fund Doom has been moved forward from 2042 to 2041. Propaganda coup for the privateers!
Why the change? I can't say in full detail at the moment, but here's one switch in the assumptions I noted immediately as I started clicking around. Last year's death rate assumptions http://www.ssa.gov/OACT/TR/TR04/V_demographic.html#wp159501 projected 858.4 deaths per 100,000 in 2005, 831.0 in 2010, 798.9 in 2015, 766.8 in 2020, and so on, declining forever. For Social Security, lower death rates mean tougher budgets. There was already good reason to believe that this was too sharp a decline, yet the new report http://www.socialsecurity.gov/OACT/TR/TR05/V_demographic.html#wp159501 just gets more pessimistic (from that actuarial viewpoint).

Now they've got 854.2 deaths per 100,000 in 2005, 828.2 in 2010, 796.7 in 2015, and 764.7 in 2020. By 2080, in the new projection, we'll be all the way down to 495.5 per 100,000 while last year's projection had us at 497.2. The text explains mysteriously that "a revision in the method of calculating death rates for ages 65-69" is responsible for the change. Given an administration known for its commitment to accuracy in factual statements and commitment to reality-based policy solutions, my assumption would be that these are good-faith (though perhaps mistaken) changes. Given the reality of the situation, I'm skeptical

[Al-CIAda]

9. Sure, and our scientists' objective findings are now being

ALTERED significantly to advance the criminal propaganda of this administration. Learn to love mercury!

[earth mom]

16. Exactly! Couldn't have said it better myself! Thanks! eom

[firefox]

11. How does Medicare Bill of 2003 figure in this?

There are four trust funds that make up social security and one of these is Medicare. The Medicare Bill passed in 2003 was a givaway to the the HMOs and pill companies and the cost of that bill keep rising from the lie of $400 billion for ten years that they knew was a lie. A bill that outlawed negotiating pill prices is obviously an industry lead raid at the public treasury.

Didn't the Medicare bill because of its generous feeding of the HMO and pill industry change everything in regards to projections?

[papau]

15. Each Trust Fund has its own projection - Medicare "improved" - for the why

we need to see the details!

[denverbill]

14. I don't get the math. I'm a late baby-boomer. Born in 1958.

The baby-boom ended in the mid-60's maybe. In 2041, if I'm still alive, I'll be 83. Within 10 years of that, most of the baby boomers will be dead.

When that population bubble is over, then the normal demographics return and SS should be completely funded. Taxes could even be lowered at that point.

[papau]

17. Around 2030 the democraphy becomes very stable - as does the

tax to benefit ration.

The only thing that happens in 2041 is that Trust Fund Bonds that the Trust owns and the sale of which has been filling the gap between benefit payouts and tax collected since 2018 - run out. Nothing more to sell.

So the system reverts to paying 73% of the scheduled benefit (the ratio of taxes collected to the amount of benefits scheduled to be paid out) - but that is still more than the Bush plan would pay in total. And that assumes rotten growth in the economy - granted that Bush has shown that GOP folks can achieve rotton growth!

[denverbill]

31. Yes, but whoop de do. Even at current tax rates,

we'd have 73% of what we need. And every year after that the % would grow til we were back over 100% funding. So if they do nothing at all, and just borrow the extra funds for a few years, everything would be hunky dory.

Here's my solution: eliminate, totally, the cap on payroll taxes. The wealthy are the ones who have eliminated private pensions, and even robbed pension plans. Let them help fund the retirement of ordinary workers.

[papau]

33. I agree - eliminate the cap is best - indeed fear of this is making Bush

compromise!

:-)

[denverbill]

34. I'd be real, real curious to find out how much money that would raise.

Seeing as how I'm always hearing from the right about how the top 5% pay 50% of all income taxes, supposedly.

I would assume that eliminating the cap would probably almost double the funds going to SS, meaning 'problem solved, time to cut SS tax rates for everyone'.

[papau]

47. It's a 93% solution under the conservative assumptions used -

brings about another 100 billion into the system - a lot more if we ever tax investment earnings at a 100 cents on the dollar the way we do wage earnings - and then start to include those investment earnings in the "payroll tax" base.

[TahitiNut]

45. It'd be far better to pay people more equitably.

When the lowest-paid workers in this country receive continuously less and less of a share of the total wage and salary income, the 'payroll tax base' shrinks and so does the aggregate payroll tax.

Again, as I've said numerous times, this is what the Gini Index is all about. The inequity of income distribution in this country has beomc more like a banana republic than a western nation.

[bookman]

46. I agree...

..the solution is that simple. In fact raising the cap could accomplish a solution.

[liveoaktx]

19. Saving one of these trustees-CONFLICT OF INTEREST-vid clip

Calling out the conflicts of interest with Thomas Saving

[rocktivity]

30. Remove the $90,000 salary cap, cancel the tax cuts...

"Crisis" over.

:headbang:
rocknation

[mbperrin]

39. Hear! Hear! Exactly what's needed!

So let's put the bastards' feet to the fire!!!

[Algorem]

32. why does bush always end up right?

he's too smart,just way too smart,it's obvious now.

[Megahurtz]

42. What a reeking crock of shit

propagated by the Bushtard himself.:argh: