Extra Year Expected for Retirement Funds

[papau]

Source: Associated Press

http://hosted.ap.org/dynamic/stories/S/SOCIAL_SECURITY?SITE=FLTAM&SECTION=HOME&TEMPLATE=news_generic.htm

Apr 23, 8:48 PM EDT

Extra Year Expected for Retirement Funds

By JESSE J. HOLLAND Associated Press Writer

WASHINGTON (AP) -- Fewer benefits, more tax money and some accounting magic have bought an extra year of life for Social Security and Medicare, trustees of the government's two largest benefit programs said Monday.

The oncoming crush of 78 million retiring baby boomers still will crash the Medicare trust fund by 2019 and the Social Security trust fund by 2041 unless Congress and the White House can agree on a way to save the programs, the officials said. Those dates are each one year later than the trustees estimated in last year's report.

For the first time, Medicare hit a trigger that requires President Bush to send the House and Senate legislation to deal with Medicare's funding problems with his 2009 budget. Congressional Republicans, who crafted that trigger when they were in control of the House and Senate, immediately used the news to call for changes.

"Today's report reinforces the need for Congress to address runaway entitlement spending that will bankrupt future generations of Americans," said House Republican leader John Boehner of Ohio.<snip>



Read more: http://hosted.ap.org/dynamic/stories/S/SOCIAL_SECURITY?SITE=FLTAM&SECTION=HOME&TEMPLATE=news_generic.htm

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As "expected", the US Media reports that the Social Security system is getting healthier than was "expected", and then runs for a GOP quote about runaway entitlement spending. The 2007 Social Security Trustees report says SS getting healthier and healthier - the Trust Fund adds one year to 2041
before benefits would be cut to 75.56%% of what would otherwise be paid in that year (in 2041 with no funds to draw on from the Trust Fund the benefits would be limited to the tax produced by a combined (employer plus employee)tax rate of 12.4% in the face of a benefit flow that would otherwise be 16.41% - so 12.4/16.41 = 75.56% of the otherwise payable benefit so as to match tax income). But even 2041 is not a real "worry date" because it is based on the middle projection of 3 projections all of which use quite conservative assumption - the three could be called "conservative", "very conservative", and "extremely conservative".

The past history of the Social Security "low cost" projection being the one that the system actually followed leads many actuaries to expect something like the the least conservative "low cost" scenario (the report says "Low cost" has only a 2.5% likelihood - but that assumes a bell shape curve around very conservative assumptions - and is more an opinion than a statistic). Under the "low cost" projection the Trust fund never drops below 3 times the amount of money needed for one years benefit payments - meaning through 2082 the Social Security tax may well be set a bit too high, and indeed could be reduced - today!

I have the complete 250 page Trustees report in Word Format - should anyone care to read it in WORD and do not want to just download the PDF formated version at http://www.ssa.gov/OACT/TR/TR07/tr07.pdf , just pm me with your email address.


SOCIAL SECURITY
News Release
Social Security Board of Trustees Issues Annual Report
Long-Range Financing Challenges Continue

The Social Security Board of Trustees today released its annual report on the financial health of the Social Security Trust Funds. The 2007 Trustees Report shows slight improvement in the projected financial status of the Social Security program from last year.

In the 2007 Annual Report to Congress, the Trustees announced:

The projected point at which tax revenues will fall below program costs comes in 2017 -- the same as the estimate in last year’s report.

The projected point at which the Trust Funds will be exhausted comes in 2041 -- one year later than the projection in last year’s report.

The projected actuarial deficit over the 75-year long-range period is 1.95 percent of taxable payroll -- .06 percentage point smaller than in last year’s report.

Over the 75-year period, the Trust Funds would require additional revenue equivalent to $4.7 trillion in today’s dollars to pay all scheduled benefits. This unfunded obligation is about $100 billion higher than the amount estimated last year.

NOTE THAT EVEN THIS MINOR CHANGE IS ONLY DUE TO THE CURRENT VALUATION DATE BEING CLOSER TO THE BOOMER PERIOD THAT IS AROUND 2030 - THERE IS NO DETERIORATION IN THE SYSTEM'S FINANCES.

Other highlights of the Trustees Report include:

Income including interest to the combined Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $745 billion ($626 billion in net contributions, $17 billion from taxation of benefits and $102 billion in interest) in 2006.

Total expenditures from the combined OASDI Trust Funds amounted to $555 billion in 2006.

The assets of the combined OASDI Trust Funds increased by about $190 billion in 2006 to a total of $2 trillion.

During 2006, an estimated 162 million people had earnings covered by Social Security and paid payroll taxes.

Social Security paid benefits of $546 billion in calendar year 2006. There were 49 million beneficiaries at the end of the calendar year.

The cost of $5.3 billion to administer the program in 2006 was a very low 1.0 percent of total expenditures.

The combined Trust Fund assets earned interest at an effective annual rate of 5.3 percent.

The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: Henry M. Paulson, Jr., Secretary of the Treasury and Managing Trustee; Michael J. Astrue, Commissioner of Social Security; Michael O. Leavitt, Secretary of Health and Human Services; and Elaine L. Chao, Secretary of Labor. The two public trustees are John L. Palmer and Thomas R. Saving.

The 2007 Trustees Report will be posted at
http://www.ssa.gov/OACT/TR/TR07 /

http://www.ssa.gov/OACT/TR/TR07/tr07.pdf
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ALSO, FROM THE CONSERVATIVE CHICAGO TRIBUNE, WHICH IGNORES THE GOOD NEWS OF THE SOCIAL SECURITY TRUST FUND HEALTH, COMES A REVIEW OF THE TRUSTEES REPORT THAT FOCUSES ON MEDICARE - BUT NEVER SAYS THAT THE SOLUTION IS SINGLE PAYER UNIVERSAL HEALTH:


http://www.chicagotribune.com/news/local/chi-070423social,1,6713292.story?track=rss&ctrack=1&cset=true

Medicare funding report puts onus on Bush, Congress to act

By William Neikirk
Tribune senior correspondent
Published April 23, 2007, 7:30 PM CDT

WASHINGTON -- For the first time, President Bush and Congress were put on legal notice Monday that they will have to consider legislation to overhaul the Medicare program next year. But "consider" is a long way from "pass."

It happened because trustees of the health-care program for the elderly projected for the second year in a row that general taxpayer revenue would have to bear more than 45 percent of the program's cost.

Their report triggered a law passed in 2003 aimed at trying to force action on Medicare's growing financial problem.

As a result, Bush is required to present a plan to Congress so the 45 percent limit isn't breached in the future. Congress is supposed to consider legislation, but is under no obligation to pass it. Payroll taxes and insurance premiums also support the Medicare program.<snip>

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OK - So moving the funding of national health from wages to real income is "bad" - why? Indeed one of the reasons for rejecting the wage tax approach to universal health that keeping health insurance funding "employment based" allows the rich to pay near nothing as a percentage of their income in tax for the system - since the income of the rich is 90% investment income.

"General funds" - read the standard Federal Income Tax - is currently allowed to pay for Medicare up to 45% of the annual cost, and is not a "bad way" to pay for health coverage.

The only way to pay less for national health coverage than we do today for our current "non-universal" coverage is via single payer universal health coverage. It is the only way if a Presidential candidate is interested in the cheapest way to pay for health, but some seem more interested in protecting the rich by pushing employment based universal coverage.

[papau]

1. The only real "income tax cut" for poor/middle class is payroll tax cut - and no wage cap and

taxing income - including investment income of the rich - would be a drop over 2% is that tax rate - meaning a near 20% drop in the only "income tax" most poor and middle class American pay.