Social Security’s finances are getting worse as the economy struggles to recover and millions of baby boomers stand at the brink of retirement.
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year — the first deficit since it was last overhauled in the 1980s. But CBO said last year that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.
The outlook, however, has grown bleaker as the nation struggles to recover from its worst economic crisis since Social Security was enacted during the Great Depression. 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.
The deficits add a sense of urgency to efforts to improve Social Security’s finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs. Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.
“It means that Social Security is increasingly adding to our long-term fiscal problem, and it’s happening now,” said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.
It’s a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.
Lawmakers from both parties have vowed to address the nation’s financial problems, including such contentious issues as Social Security and Medicare. The political climate, however, has made it difficult. Some Democrats have criticized plans to cut Social Security benefits as secret plots to destroy the program. Many Republicans have refused to consider tax increases.
“We need to get past the politics of the past and deal with this issue, making the hard decisions that have to be made,” Sen. Mike Crapo, R-Idaho, said Thursday at a Senate hearing on the budget deficit. “As we move forward in that context, I personally believe strongly that all aspects of the spending and revenue side of the equation must be on the table.”
He also called on President Barack Obama to become engaged in the issue.
A debt commission appointed by Obama has recommended a series of changes to improve Social Security’s finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel’s recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.
“I take the president at his word when he says he’s eager to cooperate with us on doing all of it,” McConnell said.
Social Security experts say news of permanent deficits should be a wake-up call for action.
“So long as Social Security was running surpluses, policymakers could put off the need to fix the program,” said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute. “Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform.”
More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.
The program has been supported by a 6.2 percent payroll tax paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 — unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.
Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds.
“It’s an IOU that is backed by Treasury bonds and the faith and credit of the United States government,” said Sen. Bernie Sanders, I-Vt. “It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor.”
Copyright © 2011 The Associated Press
28 thoughts on “And, oh yeah, this whole Social Security thing could have been avoided too”
Hi Almandine,
Of course I’m not championing ‘redistribution’ of assets and wealth, but those more fortunate than others have a responsibility to their fellow citizens in terms of maintaining social programs which SS and Medicare.
The rules of the game have been changed though due to ever-scheming crimpols coming up with ways to pilfer money from the people beyond taxation. They’ll never have enough because they’re addicted to spending no different than heroin addicts to their drug of choice.
America is a complex ‘tank’ no different than an ecosystem. As long as things are in balance with our political leaders, the business and banking community playing by ethics guided rules, then everything runs smoothly, but we’ve witnessed in our face ravaging of national assets within the past ten years with it reaching a crescendo with the Bushistas exiting office while demanding a massive payout from the taxpayers, known as TARP. Then on comes our freshly ensconced President with more of the same with his so-called massive stimulus package. Both of these unwarranted massive hits on our tax base are the result of complicit criminality in high places from all the aforementioned interests that now seem terminially corrupt.
I’m not an extreme socialist or a hardcore commie, but I surely have revolution in my heart concerning the necessary retribution these knaves in high places sorley deserve for intentionally scuttling the USS America and all for a buck or two more. : |
Regardless of all these intrigues, I truly believe that “I am my brother’s keeper” and I have an obligation to help those that are genuinely less fortunate than myself in order to keep our social ‘tank’ healthy. It’s a good thing for not only myself and those less fortunate, but for all Americans who understand that with freedom comes responsibilities to their fellow citizens and the nation. Freedom is not free and has associated obligations in order to maintain such…!
To live in isolation with an “I’ve got mine, screw you mentality” is the height of our modern era paradigm and so too our nemesis, known as “self-interest”, seemingly now run amok.
Carl Nemo **==
Re: paragraphs 1 & 4
“of maintaining social programs which SS and Medicare” …extract from post
should read: of maintaining social programs such as SS and Medicare.
***
“sorley deserve” should read: sorely deserve
My apologies.
Carl Nemo **==
Yeah, it’s not like John McCain is having to decide between groceries and his medication. He could sell a mansion (or six) and make some money. It’s a question of need. Yes, John McCain was lied to about SS just like all of us were. Is he going to suffer without it? Is he going to lose his position in society without it? You can cry redistribution of wealth, but he’ll still have more money than 95% of the rest of the people in the USA.
I know, I know, it’s technically his wife’s money. So was Bernie Madoff’s.
Things were hunky dory with SS until LBJ and the congress of the time decided to get their mitts on the funds. By 1983 the writing was on the wall that SS needed a re-configuration. They did so, and all was hunky dory again. And the funds kept overflowing into federal coffers, spent, and by magic the stolen funds were converted into T-bills.
I wouldn’t classify SS as a Ponzi scheme. It was as straightforward as a retirement system could have been developed by a government. It has been plundered for over 40 years, and that is the rub; the stolen funds have to be returned. They are gone; we’re being told by the Serious People that there really is no “trust fund” or “lock box” or whatever. Just forget about it. Deal with it, etc.
What the bottom line is this: all the talk should be put like this: “We have to do something to protect the SS SURPLUS.” That’s all that matters. Danial Patrick Moynihan warned of this in testimony in the late 80’s. I remember him saying that “we are stealing the American people blind,” and “if GM managed their pension fund the way we do SS, their directors would all be in prison.” But GM directors don’t make the laws. That is the only difference.
So cut benefits, raise taxes..whatever is necessary. But maintaining an ever flowing surplus teat is what it’s all about in the end.
I know it’s his right to do so. I’ve often pondered his actions. Seemingly John is simply a shallow, ignorant, stiff-necked, self-aggrandizing ‘prick’ with little to no heart, much less any charity in his soul. There’s a special place in Christian hell for his lot…no?
Carl Nemo **==
Just a clarification, Carl… is it redistribution you’re championing?
Is this the wrong time to mention that millionaires like Sen. John McCain collect Social Security?
Yes they do. When SS was created they decided to give everyone benefits in order to get everyone to buy into the program. If they had taxed the rich and then given them no benefits, they wouldn’t have supported the program.
For decades this program has been expanded to include a variety of questionable recipients.
Giving the option for some private investment of your and your employers SS dollars would leverage the Big Daddy out of the picture to look for “loans” elsewhere.
As a financial tool this program as constituted is laughable. A financial planner attempting to sell you a vehicle like this they’d be laughed at.
Where else can you pour in a $100,000 or more and your estate get zero?
The program was viable for a long time but now we have folks who are more savvy and living a lot longer so changes need to be made especially in investment strategies.
Well, some forty million people no longer paying into the system doesn’t help. Maybe we should deduct payroll taxes from the Chinese, Indonesians, Malaysians and Indians, for starters.
Inflation and dollar devauation doesn’t help either. Consider that the dollars paid into the system over the last 40 or 50 years are worth a mere fraction now.
Maybe the funds should be held in an interest-bearing account that matches the rate of inflation. How about compounded daily, like your typical mortgage?
Surely all the banksters that swarm Capitol Hill when they need a few billion in bailout funds or some rapist-friendly legislation passed would be open to paying a little interest in order to help out the lowly masses?
The SS Trust Fund is no more “gone” or “raided” than the “money” in your bank account: The bank doesn’t cash your paycheck and put some currency in a little cubbyhole with your name on it. Your account is a record of the balance they owe you. T-bills are backed by the ability of the US to collect taxes. With our current tax rates (the lowest over the last 50 year period), why would they chose to default over raising taxes? It would be totally insane.
Increased taxes has a probability of 100%. Defaulting on T-bills has a probability of 0%. Plan accordingly!
Good point Pondering It All. Let’s hope you are right, but the worst time to raise taxes is when a crisis hits. They just opted for reducing payroll deductions with hopes of boosting the economy, it won’t. So in essence they are making the SS situation worse rather than better. Tax receipts are dwindling due to the fact that millions no longer have jobs and are on government supported subsidy programs such as unemployment and food stamps. They also had a chance to let the Bush era tax cuts expire, but they didn’t.
Taxes may be the lowest in 50 years along with interest paid on sovereign debt, so why aren’t things just ‘peachy keen’ for the populace? There’s no serious commitment to reduce core spending across all agencies of the government All we get from these clowns are talk talk and talk some more about what they are going to do, but time is running out.
The Fed Chairman Bernanke is an “inflationist” and has been so since his days as a graduate student believing that the printing press can save the day; ie., the M.O. of a counterfeiter except in this case a legally enfranchised one. All I can say is too many crises are going to meet up at the watering hole of financial retribution sooner than we think.
Thanks for your thoughts on this subject. : )
Carl Nemo **==
A “trust fund” is not the same as a bank account, either structurally or functionally. One thing’s clear though… the money ain’t there.
So why is SS a Ponzi scheme?
“A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.” Wikipedia
SS doesn’t work right and it has been abused, but that does not make it a Ponzi scheme. I know a person who has some similar opinions to mine and lives in a house like I do, but that doesn’t mean that I’m Ruth, does it?
Paid by subsequent investors… that IS the definition.
Al,
Let me break this down for ya…
Ponzi was a crook who came up with this scheme (actually, he wasn’t the first, he just got credit).
The scheme was a plan to take advantage of people through a deceptive “pyramid” of smoke and mirrors faux investing. The originator of the scheme gets the biggest chunk of the money. At some point it collapses.
SS was not a scheme to make a few folks rich back in the late 1930s. It was not originated by a crook who wanted to get rich.
SS is actually an insurance model. Any problems that it is having is due to poor management.
Hence, and therefor, SS is not a Ponzi scheme.
I’m crushed after losing a long and studied retort into cyberspace. Suffice it to say, SS may have been started as insurance, but now it is a retirement fund for most folks. It is supposed to pay annuities to those who have been taxed in the name of that retirement system, the govt has functioned as did Ponzi, right down to taking the big chunk of money and spending it on everything else, and now the jig is up – as the system is $Ts in the hole with little ability to set things right. Call it what you will, but it’s still a pig… red lips and all.
Retirement plans are voluntary. S.S. is Mandatory…This is a huge difference.
I worked for a company that had private meetings after hours and dealth in savings bonds turning them over as investments. They were closed down and labelled a ponzi scheme. I quit the company as I respected my security classification. I had hoped that when I hit 65, I could cash out my long time investment from my paychecks. It doesn’t work that way.
The Social Security plan started out a Ponzi Scheme and has ended up the same way. It is no longer possible for the American Federal Government to act for the people. Blaming the government is a waste of time as we elected the entire lot of them. The American dream was lost in a sea of corruption elected by those same Americans. The government will not change until the voters demand integrity. Heh, heh, heh…….
Sandy
Actually, I think SS started out based on much the same concept as any retirement plan. You save in an account, the money is invested, and you get paid back in the future including interest.
I would agree that there is a good deal of speculation in any retirement fund that promises any particular level of return that is not strictly and directly limited by what actually transpires during the investment period. If a person lives longer than “planned”, or the investment doesn’t perform as well as projected, or some a**holes raid the account to pay for wars and stuff, then it would seem impractical to think that any guaranteed payments above what is actually in the accounts is warranted.
Even private retirement plans, like say, a major automobile manufacturer’s, are subject to the same dynamic.
But I think that to call them Ponzi schemes is not accurate. Like my Momma always said, “No point in spoiling a good point through hyperbole.”
“some a**holes raid the account to pay for wars and stuff, then it would seem impractical to think that any guaranteed payments above what is actually in the accounts is warranted.”
Guaranteed payments based on what has been paid in and contracted for are not warranted?
Where the heck you get that?
Clearly, it was farckled. We have the technology.
In addition, your quote from my post is not the same thing, so I didn’t get what you said I said from anywhere.
Where the heck did you get what you said?
It IS a direct quote. Were you not saying that it would be impractical to expect payments above what had not been spent from an account?
I don’t understand the complaints of some that the “government has taken all the money”: All of the Social Security trust fund is invested in US T-Bills, which everyone the world over considers the safest investment on Earth.
Were they not supposed to invest it? It would have lost value at the inflation rate then! Were they supposed to invest it in something else? With banks failing and markets crashing that would have been a disaster! Oh I know, they should have invested in mortgage-backed securities: Real estate ALWAYS is a safe investment!
Even T-Bills are in question lately and that’s scary. The U.S. is headed for a downgrade in their credit rating, like it or not by the major rating agencies.
We’ve finally reached a threshold where the time honored statement that “The full faith and credit of the United States” stands behind its debt instruments as being a shaky proposition.
If LBJ had kept his mitts off the SS Trust Fund then all the money contributed would have still been under the umbrella of the Fund’s protection so to speak. I haven’t researched how the fund holds it’s assets or at least in the mid-60’s. The politicians have even pilfered the government retiree pension fund too with their IOU scam. It’s basically insolvent and has been for quite some time going back as far as the Clinton era.
Now the Treasury has climbed in bed with the Fed beyond its basic association for operating the fractional reserve currency system along with all the Fed’s questionable wheeling and dealing concerning the money supply; ie., endless printing of currency with Bernanke’s QE program and now questionable book-keeping practices of moving their liabilities onto the U.S. Treasury. All of this is leading to inflation and possibly hyperinflation sooner than we might think. The American people are stuck with the bill as a function of this many year profligacy, unfortunately they too are depending on the very government that’s broken their trust.
That’s why these politicians are whining because they realize that they are now obligated to pay up these cashed IOU’s from the general fund; ie., money that they don’t have so their intent is to possibly stiff SS recipients with a boohoo story that the money simply isn’t there. Worse yet these idiots opted for a reduction in payroll deductions to hopefully boost the economy in the worst of times for the SS Fund. Of course they are projecting the crisis into the future, but things are unraveling alot more quickly than most folks realize. Anyway that’s my drift on this matter as to why we can’t even trust the U.S. Treasury to cover it’s debts to investors as well as to SS recipients, government retirees or anyone else in the future.
Carl Nemo **==
Why are we not borrowing from ourselves for a cheap pair of shoes ?
hHell,,, we can make non durable crap here too !
I see it all now.
Yeu due tu.
“That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.” …extract from article
This single sentence best describes the duplicity on the part of our reps. They know SS is in trouble, so what do they do, cut payroll taxes to hopefully boost the economy. This is like someone pulling on their shoe laces mightily and hoping to levitate.
Someone once referred to Congress as a a bunch of ‘evil clowns’ and I tend to agree, actually far worse. Seemingly the want to destroy the very concept of SS and have less fortunate Americans living in tarpaper shacks by the RR tracks spearing rats with fire-hardened sticks to survive while the movers and shakers drive by in their limo’s gazing at the desperate ‘groundlings’ that are simply trying to survive.
The American people need to get really angry and upset about this. The best way to shake these smug sob’s up is to start picketing their state offices nationwide turning entire blocks into gridlock. Forget demo’s in D.C. The nation’s capitol gives them insulation from their consitutents back home. People need to focus on their reps with laser like precision within their home states and give them their marching orders concerning this SS issue.
Folks in Mayberry, USA need to start chanting, “get the ropes, tar, feathers and sharp-edged rails.” Hey if people can do this to abortion clinics or picket their offices concerning gay issues, then they best get both upset and motivated concerning how their deductions have been both pilfered and squandered by our criminally disposed Congress during the past 40 years or so.
Watch out for Obama’s solution. He’ll probably advocate letting Goldman Sachs manage the SS T-Fund promising a great return that will far eclipse inflation or the need for an increase in contributions. They want to steal this money so badly that its become obsessional with them to do so. I’m sure any ‘fix’ for SS will take at least a 5,000 page bill along with a rush to pass with little discussion as all of them starting with the Patriot Act. / : |
Carl Nemo **==
It is simply time that there was a head of government that has the guts to stand up and say to people, “It’s not real. The money that you all think is worth so much is junk.” The system is based on fraud.
Federal Reserve notes are a fraud. The moment that the public’s own money (then based on an intrinsic value) was replaced by private interests, and loaned to the public for interest…the fraud began.
Later when it was “unhooked” from an intrinsic value of any sort (came off the gold standard), the fraud was complete and perpetual.
If, as I suspect, that other financial interests (most notably European trading blocks) decide to undermine confidence in the U.S. dollar as the world standard currency, we’ll all be back to living in the bronze age with stunning speed.
Personally, I welcome it. I welcome the utter and complete destruction of the system that is little more than a fraud continually strapped onto the backs of the basic and hard working people of this country.
The path to renewal is unfortunately, going to cause a lot of pain for millions of people in this country. I hope that those out there that have done so well by way of this perpetual fraud reap what they have sown to the fullest measure of pay back being a stone cold bitch.
Vai Victus.
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