Why people say Social Security is "going broke"

[Recursion]

Since this seems to be a source of both wonder and outrage to many.

The reason that line gets so much traction is pretty simple: in the past few decades, Social Security added to our revenues; in the next few decades, it's going to take away from them. SSA is going to have to redeem bonds to the tune of $2.6 trillion over the next few decades, and those will have to be paid for by some combination of tax increases, spending cuts, inflation, or borrowing. (Incidentally, claiming that Social Security cannot add to the debt is more or less true, since we can borrow to redeem the bonds in the trust fund, but we won't be able to borrow 1:1 since servicing bonds on the general market is more expensive, so there will be a slight debt increase; claiming it can't add to annual deficits is not just false but honestly absurd.)

If we're as concerned about "framing" here as we tend to claim, I think it's a big mistake to try to avoid this fact. Simply saying we the people are sitting on a big pile of bonds doesn't really address the fact that we the people are also the ones who have to pay them; being legally obligated to repay a debt doesn't make actually coming up with the money any easier.

We could debate whether this represents "a crisis". $2.6 trillion spread over the next 3 decades would be, oddly enough, about 3 times the cost of the Iraq war spread over about 3 times as long, meaning it's about the same rate of spending.

Yes, it's absolutely appallingly hypocritical for politicians to support the Iraq war and then call similar levels of spending for Social Security "a crisis". And hopefully we will be able to point that out. But I also think ignoring the magnitude of the financial obligation we're facing is a mistake.

[eridani]

1. The trust fund established for the boomers is SUPPOSED to be spent

Then current workers can go back to supporting the much smaller number of retirees.

[Recursion]

2. Well, ok...

But the trust fund is a bunch of bonds that we have to pay back. It's a big pile of financial obligations against us.

[eridani]

4. Excuse me, but if a private company raids their pension fund, they have to put it back

Why should a government not be held to the same standard?

[Recursion]

8. Because in that analogy, we're the private company

We're the ones who have to put back the money. It's true, but it doesn't help us in this situation. The SSA's trust fund is a legally-binding agreement that we will pay it $2.6 trillion over the next few decades. Fine and good; we have to do it. You have $2.6 trillion handy?

[eridani]

47. End the wars and tax the rich n/t

[Recursion]

48. That's the point

There's no financial argument for doing either of those unless we admit that the current situation is actually a crisis.

[Nuclear Unicorn]

16. At least the corporation could produce more/sell better

SS is a tax and governments don't seem to produce much more than broken promises.

So to "keep their promise" they will have to take from us again what they already took from us once and promised they wouldn't spend the first time.

Good grief. I'm too young to be this cynical.

[Hannah Bell]

6. yes, & raising taxes on the top 2% back to clinton-era levels would pay it back nicely.

[Recursion]

9. Raising rates on the top 2% gives us I think 1.6 trillion over the same time period

Oddly enough the middle-class tax cuts are in aggregate about 3 times as expensive as the upper class tax cuts, because there's so many more of us.

[Hannah Bell]

22. That's absolute bullshit. Bush's cuts for the top 5% were half the cuts.

And since the cuts to "regular folks" kicked in in the first years, and the cuts to billionaires later, extending the cuts gives the top 5% an even bigger cut.

In the 10th year of the Bush cuts the top 5% took 52.5% of the gain.

The bottom 80% took 25.3%.

http://www.ctj.org/pdf/bushtaxcutsvshealthcare.pdf

There is no "middle-class" cut the rich didn't also get.

There was no special category of "middle-class" cuts.


There were, however, special categories of cuts only the rich got.

and the "time period" for the boomers to all die/to pay off the trust fund is about 30 years, not ten.

[MannyGoldstein]

33. Didn't Obama recent hostage situation cost $700 billion in gifts to the rich?

Between all of the gifts - federal tax rates, estate tax, etc?

And that was just over two years!

[Recursion]

36. Yes; the remainder of the tax cuts were something like 3 trillion

That is, the remaining cuts we kept are about 3 trillion, though that also has to do with some exemptions and the AMT

[sendero]

3. I've been arguing this here ...

.. for a while now, I always get a lot of flack.

The fact is that we ARE owed this money, it WAS collected but then it was SPENT. People not of our generation can rightly say that WE SPENT IT and it was mostly SPENT ON US.

I am against any substantial cuts in SS benefits but I suspect even reasonable people can agree that some compromise is going to happen, I just hope that the boomers don't get stuck with ALL of the pain.

[Hannah Bell]

5. "we" spent it? it was spent on "us"? like hell we did, & like hell it was.

it was "spent" giving tax cuts to the rich.

the match is near-perfect.

[sendero]

7. Bullshit..

... the REPRESESENTATIVES WE SENT TO CONGRESS WASTED IT ON POINTLESS WARS AND OTHER NONSENSE.

Yes, there were tax cuts and GUESS WHO VOTED FOR THEM?

The BOOMERS (I am one) ARE NOT GOING TO BE ABLE TO BLAME THIS MESS ON EVERYONE ELSE.

I am as disgusted at the economic injustice our country is riddled with as you are. But as time goes on my anger has moved from the politicians, to the media to the PEOPLE.

The PEOPLE voted for these assholes, the PEOPLE put up with this continuing bullshit and who are most of the PEOPLE? Boomers. The people who put Reagan in office. The PEOPLE who allow themselves to be manipulated with racism and religion and everything else while their wallets are systematically emptied.

I have lost all sympathy for them. Let them eat dog food. They have fucked up the country, SS and everything for themselves and everyone else. Why shouldn't they pay?

Maybe when the rug is clearly and irretrievable pulled out from under these assholes they will contemplate the cost of their distraction, racism and feel-good inattention.

[Hannah Bell]

14. your claim was not that we elected them, but that "we" spent the money on "us".

and no bullshit, i've looked at the reports of social security
receipts in the trustees reports & it pretty much lines up
with tax cuts to the rich.

SS Trust Fund:  Holdings in current & 2005 Dollars

Year           Current $ (Mils)       2005 $ (Mils) 

1943               4,820                   55,709 
1953              18,707                  132,760 
1963              20,715                  129,015 
1973              44,414                  199,960 
1983              24,867                   48,434 
1993             378,285                  507,152
2001           1,212,533
2003           1,530,764                1,611,323 
2005           1,858,660                1,858,660 
2009           2,540,348

http://www.ssa.gov/oact/STATS/table4a3.html#income

That is, about 1.3 trillion was "borrowed" from
Social Security income (=SS taxes, taxation of benefits, and
interest payments) during the reign of George Bush & the
first two Obama years.

If you adjust out everything but excess revenues from SS tax
collections, you get about $1.08 trillion.  You can do that
using the second to last table:

http://www.ssa.gov/oact/STATS/table4a3.html#income

Which is slightly more than the tax cuts Bush gave to the top
5% alone ($980 billion, about half the Bush cuts.)

http://www.ctj.org/pdf/bushtaxcutsvshealthcare.pdf

There's no breakout for the top 2%, but it got the majority of
breaks in the top 5%.

No one voted for the Bush tax cuts except legislators.  The
people didn't vote for them, let alone   generic
"boomers," any more than any other age group.

And there was strong public opposition to extending them;
nevertheless, our "representatives" did.

Cost of the bush wars about $1.1 trillion - $3 trillion
depending on what source you use.  More than what was
"borrowed" from SS during the Bush years. 

"They" spent it, on themselves, & not on
"us".

[sendero]

45. Those..

.. "trust fund" amounts are just treasury notes with nothing behind them but the ability to tax.

We've been over this again and again. The "trust fund" is spent. And it is unlikely, without raising taxes on the rich, that taxes can be raised on the few working people left in this country to make good on those notes.

So good luck with your "trust fund".

[Junkdrawer]

12. FICA taxes were a regressive tax on the poor designed to make up...

the budget short falls caused by Reagan's radical tax cuts.

At this point, the only fair thing to do would be to restore tax rates to pre-Reagan levels.

[Hannah Bell]

15. No, FICA tax hikes about the amount needed to fund benefits were.

Hiking income & cap gains at the top to repay the TF would be fair.

[Junkdrawer]

18. I should have been more clear. I was referring to raising income & cap gains rates...

to pre-Reagan levels, not lowering FICA tax rates.

[Hannah Bell]

19. i thought so, but wasn't sure. so just clarifying.

[upi402]

10. End the FICA cap for the rich, and no worries

Why do you get to stop paying FICA tax if you earn over $167K? They hate America, that's why.

[Recursion]

11. That's certainly an option

It makes the trust fund, which would then never be redeemed, look even more like a naked money grab by the government, but maybe we should just all admit that.

[Hannah Bell]

17. The rich don't pay FICA. Neither Bill Gates nor Warren Buffet, for example, collect wages.

FICA taxes only WAGE income.

Microsoft paid taxes at a 1.8% rate.

The money in Gates & Buffet's foundations isn't taxed at all.

Bill Gates' personal wealth appreciated 50% last year.

It's not because he got a deal on his FICA taxes. He doesn't pay any.

It's because he gets innumerable breaks on his investment income -- his capital income.

[upi402]

26. to me $168K a year is rich

and you're right, they don't pay enough- and that ain't right. Gates and Buffet have said as much.

Gates Sr pushed for WA State income tax on couples making $400K a year. Voters trounced it. WA will be bankrupt soon.

There are many people earning between $167K and Bill Gates money who could pay. It would help a lot.

Gates is out of Microsoft, has been for years.
Gates' Foundation does great work around the world for the most needy and powerless. His dad runs the charitable foundation. Bill Jr is no saint, understood.
*See Bill Gates' TEDtalk on renewable energy on YouTube.

[Hannah Bell]

29. Gates & Buffet don't pay shit in taxes. They can *say* whatever they like; it;s

a joke.

Gates pushed for an income tax because he wants to tax people other than himself, people who can't put most of their income into a tax-free foundation WHILE CONTINUING TO CONTROL IT & USE IT FOR POLITICAL PURPOSES.

HIS FATHER IS NOT A "GOOD GUY". GATES FOUNDATION IS A VEHICLE FOR GATES, INC, NOT A "CHARITY".

I don't care who *you* "think" is rich. The fact is, the top 1% takes the bulk of the country's income.

The most important thing with regards to the solvency of SS is TO MAKE THE BASTARDS PAY BACK THE MONEY THEY STOLE.

[MannyGoldstein]

13. Social Security does not add to the debt. Tax cuts for the wealthiest does.

Repaying Social Security T-bills is a known obligation. Tax cuts for millionaires and billionaires is a choice.

Why should T-bills to pay Americans be subordinated to T-bills used to pay, say, China?

This is just yet another way to shift money from working Americans to the wealthiest.

[Hannah Bell]

20. Especially when some of those payments to "China" aren't even really to China.

Because we're not borrowing from the Chinese government, but from "investors" located in China.

Some of whom aren't Chinese. They are foreign nationals located in China, including our own corporations.

It's a giant clusterfuck of scamitude.

[MannyGoldstein]

23. Good point - I never even realized that

Thanks

[Recursion]

21. I said "deficit", not "debt"

I specifically said it doesn't directly add to the debt very much, since the bonds can be swapped out at not quite 1:1 but close (hopefully that continues to be true). But it's more expensive to borrow on the public market, and those bonds are more expensive to service.

Repaying Social Security T-bills is a known obligation.

:argh: Yes that's my point

It's an obligation. It's a payment we will have to make in the future, and it will have to be paid for either with:
1) increased taxes
2) increased borrowing
3) decreased spending
4) currency devaluation

or some combination of those.

I literally don't get DU's mental block on this. We are legally obligated to pay back those bonds when SSA needs to start drawing on the trust fund.

[Junkdrawer]

24. Yeah. No one could have anticipated that we would have to pay back those funds....

:sarcasm:

[MannyGoldstein]

25. Perhaps I misunderstood, but you seem to feel that Social Security has a problem

because it needs to be paid back.

My point is that Social Security does not have a problem. The broader federal government has a problem in that we need to, as you point out, repay the borrowed money.

By starting out with a position that in some way claims that Social Security has a problem, we acknowledge that changing Social Security is a solution. It takes the focus off of the real culprit, the fact that the wealthiest Americans now pay taxes at one-third the rate they used to.

Forgive me if I misunderstood your point.

[Recursion]

30. *we* have the problem

In that we either have to find a way to come up with that money, or we have to renege on our obligation to fund our own retirements.

[MannyGoldstein]

32. There's two 'we's here

The Social Security "we" is different from the taxpayer "we", even though there's a lot of overlap.

If Social Security benefits are cut by 25%, as the President's hand-picked commission has decided, then working Americans are mightily fucked. But the wealthiest don't care - it's crumbs to them. This is what happens when we claim that Social Security has a problem.

However, if the taxpayer "we" is on the hook, rather than the SS "we", then we have a reason to restore taxes on the wealthiest to reasonable levels and not screw working Americans.
\

[Recursion]

38. When have we *not* had a reason to restore taxes on the wealthiest?

Hell, we've needed to do that since the cuts were first made.

I've clicked my heels together several times and it hasn't seemed to have happened. Do you have a way to make it happen?

[Hannah Bell]

34. "we" have not been consulted. i don't know why you;re acting like "we" are running

the budget decisions.

that "we" are not should be very obvious by now.

if "we" were, i think the results would be better.

[jtown1123]

39. This is exactly my sentiment. It's not SS's problem. It's the Fed's. They borrowed, they have to pay

[Recursion]

42. How are the Feds supposed to get this money?

Yes, they have to pay it back. That's my entire ****ing point. We will either have to raise taxes, increase borrowing, or cut discretionary spending, none of which are easily done as a political matter to meet these obligations.

[Hannah Bell]

27. Um, the money was collected from citizens by the government. It will be paid out

to citizens.

Since the money has already been collected, paying it out doesn't add to the deficit in the big picture.

And since SS finances are budgeted in a 75-year window (on order of the scamsters, to make spurious cases for terrible occurrences in the ever-receding future), I have no problem looking at the big picture.

Other expenditures may add or have added to the deficit, but SS did not, & will not.

What adds to the deficit is:

1. Giving tax breaks to billionaires
2. Running wars on multiple continents


It is only the obsessional focus of the scamsters on killing SS that keeps them pointing out that SS will increase the deficit -- despite the fact that it has been paid for to 2037.

While never looking at the fact that the bush-obama wars HAVE NOT BEEN PAID FOR. INSTEAD, BUSH & OBAMA GAVE TAX CUTS TO SOME OF THE VERY ACTORS MAKING A MINT OFF THE WARS.

[alc]

28. what does "pay back" mean?

I haven't been able to find specifics on these "special bonds" other than they are non-transferable (SSA can't trade on the open market or give them to us as benefits).

There are some VERY important details:

1) when do they have to be paid back? 3 years? 5? 20? If not for 1000 years we can forget about them. These are "special" and may not even have a maturity date.
2) what is used to pay them back? If they can be paid back with new "special bonds" that include interest we can forget about them. They will probably be paid back that way to "fulfill the obligation". If these special bonds are "good" now as so many people claim, why shouldn't they be allowed as a means of paying off the debt. (you and I can come up with reasons, but politicians are running this scheme - would they rather pay the debt for real, or keep the money and reduce benefits?)

I also have not been able to find out if these "special bonds" are currently counted in our federal debt. It sounds like the answer is "no" or at least could be "no". If that's true, there is another big problem. Once they agree to pay the bonds back with real assets instead of more "special bonds" the value of the special bonds is added to the federal debt. That's a big hit that will affect our borrowing rate.

[mmonk]

31. They are not special except that they are held in trust.

In trust supposed to mean they can not be touched. It is the whole point of a trust account. It means they are held in trust for us.

[Hannah Bell]

35. social security website has any piece of information you could ask for about ss

much more transparent than federal budget info

http://www.ssa.gov/oact/progdata/specialissues.html

[jtown1123]

37. No, WE don't have to pay it back. It's up to the gov't to decide where the money comes from.

They can borrow from China, tax the wealthy, cut defense spending, etc. WE must revolt if they try to pull this shit that since the trillions in surplus were borrowed, they don't have to pay up.

[Recursion]

40. "We" are where the government gets its money

And, yes, we could borrow our way out of this, which kicks the can farther down the road and adds to the expense of it.

[jtown1123]

41. Also, our government cannot go broke. It is not a household. We have the money to pay for everything

[Recursion]

43. Well, no, we certainly can go broke

Though it's much less likely than the "bond vigilante" doomsayers seem to think.

But superpowers have a long, long history of going broke.

[Hannah Bell]

44. the main time is after utter defeat in war

[librechik]

46. they're just trying to blame the Boomers for everything

and use the hatred engendered by that effort to push out progressives and sneak in conservatives.

As Usual.