Note to WMP: This, from section II.D of the Report:
In short, all the Trust Fund has is a set of promises by the government to repay the money that Trust Fund has lent it due to the current suplus of taxes collected over benefits paid. After 2018 (under the intermediate assumptions), the Trustees will start asking that this debt be re-paid, at an ever accelerating rate. Since the government has no "savings", making good on those promises will require it to do one or more of the following: refinance the debt (i.e. borrow more), increase in the money supply (i.e. print more money), increase government income (i.e. raise taxes); or obtain an extension (i.e. reduce benfits so that it has longer to repay the debts).Under the intermediate assumptions, the OASDI cost rate [i.e. benefits to be paid] is projected to decline slightly between 2004 and 2007 and then increase up to the current level within the next 3 years. It then begins to increase rapidly and first exceeds the income rate [i.e. SS taxes collected] in 2018, producing cash-flow deficits thereafter. Despite these cash-flow deficits, beginning in 2018, redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2042, when the trust funds will become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. [Therefore,] Pressures on the Federal Budget will thus emerge well before 2042.
Emphasis added.
For a (somewhat cynical) review of the history of the "Trust Fund" see "The Illusory Trust Fund" article refrred to below.
4 comments:
Bill,
Just as I was slogging through all the Social Security information to attempt to say something relevant and insightful, Mr. Kevin Drum’s post,
Forward to the Past!, goes and says it more succinctly then I fear I ever could and with an amusing bite.
See, I just don’t trust the current politicos in power to tackle Social Security unless we’re looking for say, another excellent adventure that they think they are right about -- Iraq and the War on Terror. I hate to think deferring Social Security reform might need to wait for more competent adults to take back the reins of this runaway stagecoach, but then again…
--TGM
TGM --
Did you follow the link to the Onion article that is at the end of the Drum post you refer to? It is hilarous. If you didn't see it, here is the link: Onion Article on Social SecurityIn terms of entrusting this administration with the task of "fixing" social security, I understand your concerns. But, it seems to me that the question of whether anything should be done and if so what are essentially empirical ones that can be answered independent of who's doing them. To the exetnt the administration bases its projections of cost on "fuzzy math", there are plenty of people out there prepared to call them on it.
But, I suspect you will respond, plenty of people called them on the tax cuts, but they still passed. That's true. And, I don't know how to respond except to say "That's democracy for you." Allowing everyone to vote is no guarantee that wise decisions will be made, especially when so many people vote against their own economic interests out of a concern for things like "moral values.". What was it Churchill said? "Democracy is the worst possible form of government except for all other form". Something along those lines.
Let me start off by saying that I would not normally pay any attention to an anonymous writer. I was not prepared to read the thousands of lines of text in the service agreement for a blogger account and have no intentions of giving my information out without a thorough read. So I will not be offended if not much attention is paid to what I have to say. As a newcomer to this site I am posting a comment for an earlier thought of yours and so I hope that you get it. I surely will speak to your more recent thoughts after sleeping on them.
The year 2042 has been thrown out there as the time when SS will "run out" of money. This is a concern for me in that right around that time I will be eligible to start benefitting from SS (of course that is probably not the case because by then then they will have raised the retirement age to 80 in order to keep the program afloat and I will then have many more years of payments to make.)
We have a large problem right off the bat in that our government is poor at handling the finances of the people (our country,) nevermind handling the personal finances for the people. An even larger problem is that atleast 95% of Americans are inept at best in handling their own financial well being. This does not leave many capable people to fix the problem.
Before I go any further, let me state that I do not want any of the money back that I have already paid into the program. I consider it gone. I just want to be removed immediately, be made to pay no more, and be sent to fend for myself.
It is my opinion that none of the four courses of action mentioned (borrow more, print more money, raise taxes, and lower benefits) are a good solution on a stand alone basis or in combination. These are band-aids and we need surgery.
One assumption that I am making is that anyone reading this is probably in the 5% of Americans that can properly handle their finances and has most likely seen a financial planner. Anyone who has met with one that is at all competent should know that all people are different and have individual needs that vary throughout their lives. This is a huge aspect that needs to be addressed.
The government presently treats us all the same when it comes to SS. It is my opinion that this the first road block that has to be overcome.
I know ending here leaves my thoughts incomplete and it is intentional. I think this needs to be left out there for consideration before moving on.
JDL
JDL:
Thanks for the post. Yeah, having to choose between commenting anonymously and signing up for an account is a pain. I apologize for that. It's a very new blog, and I haven't had time to figure out how to get aroound that yet. Don't worry about it though. I'm much more interested in your thoughts than your name.
As to your thoughts: I can understand your frustration. If I had been able to invest the money I have paid into SS for nigh on 30+ years now it would be well over $2MM by now, even at 5% annual returns.
Also, even at my age (57) I would be willing to abandon my claim for benefits -- which I will probably never get either anyway -- because the burden of paying me will fall on my kids. But, the reality is that there are too many people who are totally dependent on SS to survive after, say, 65. We can't simply abandon them at this point. So, people like you (and my children) are going to have to keep paying even though the chances are(as you suggest) that you/they will get nothing for it. Frankly, it's just another tax.
My struggle is to try to figure out how to get out of what I see as a vicious ccycle.
Bill
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