Looking for help with the facts about Social Security (insolvency, etc...), any help appreciated!

[DaveinJapan]

Hi all. So, lately, I've been chatting with some of the more moderate right wingers I know (yeah, I know, that's a bit of an oxymoron but I try, and they are friends, and are civil with me and vice-versa), and I've been getting a lot of "well, we have to do SOMETHING! It's going insolvent, you know!", and I'm not enough of an expert on the subject to know exactly how to respond but I know there are lots of people here who know the issue much better than I. So, I'd appreciate any help anyone is willing to offer on this issue, as to how to explain to my fairly moderate friends that KILLING S.S., Medicare, etc, is not the answer, and exactly why their arguments are off base.

Here's an example from a guy I know who wrote just today;

"According to stories in the press this morning, Social Security is pushing out $45 billion more than they are taking in this year. At this rate the program will be insolvent by 2037 - 26 years. Guess when I'm set to retire? Bingo....this needs to be addressed. No more putting it off because politicians are worried about getting reelected."

I'm just looking for guidance on the veracity of this argument (and others), what is a REASONABLE course of action if it's really true (many on DU have talked about "tweaks to the system", which I understand in the abstract but I'd like to learn more about specifically so I can continue the conversation with some info and facts that I don't currently possess).

Thanks in advance, just hoping to learn a lot more on this issue and concerned that, as usual, the extreme right wing will take hold of it and run with it and sucker lots of people into THEIR version of what's what...

[Lochloosa]

1. Try this site.

http://www.truthaboutsocialsecurity.com/

[DaveinJapan]

3. Got any site that doesn't suggest raising taxes? lol...nt

[Statistical]

5. Here are some potential solutions from AARP study & CBO.

http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)#AARP_Study

On edit. It looks like DU butchers links with a ( in them.

Copy and paste this
en.wikipedia.org/wiki/Social_Security_debate_(United_States)#AARP_Study

You can pick and choose the portions that you like to close the gap.
For example simply raising the cap to 90% of wages closes roughly 40% of the gap. Requiring all new employees to participate closes about 10% of the gap.

Those two non-tax, non-benefit reduction changes would close roughly half of the projected gap over next 75 years.

CBO looks at it differently. SSA unfunded liability represents roughly 0.6% of GDP over next 75 years, and 1.2% of GDP over infinite time horizon.

CBO scored some potential changes and the effect they would have. CBO looks at % of GDP so to close the gap over next 75 years you would need a combination of changes that add up to >= 0.6. To close projected gap forever (infinite time horizon) you need changes that add up to 1.2

[Godhumor]

2. The SSA's annual Trustees' Report is right from the horse's mouth

"Although the combined OASDI program passes the short-range test of financial adequacy, the DI program does not; DI costs have exceeded tax revenue since 2005, and trust fund exhaustion is projected for 2018, two years earlier than was projected last year. In addition, OASDI continues to fail the long-range test of close actuarial balance. Projected OASDI tax income will be sufficient to finance about 75 percent of scheduled annual benefits in 2037 through 2084 after the combined OASI and DI Trust Funds are projected to be exhausted. Over 75 years, Social Security’s actuarial imbalance is 15 percent as large as payroll taxes, and 12 percent as large as program outlays."

...

Conclusion

"The ACA makes significant progress toward making Medicare financially viable. But while it is projected that the Medicare HI Trust Fund is adequately financed until 2029, and the Social Security OASI and DI Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare."

http://www.ssa.gov/oact/trsum/index.html

[Statistical]

4. Graphic that sums it up from trustee report

See the hump on the left. That is the SSA trust. Worth about $2.5 trillion. Initially it was projected that SSA would go cashflow negative (expenses/benefits > revenue) in 2015. It happened in 2010 due to the recession (more people retiring, less wages to collect on).

Still going cashflow negative doesn't mean you are broke if you have a $2.5 trillion trust. However the trust will slowly be exausted. By 2037 the trust fund will be exausted and current year revenue will be only about 78% of current year benefits.

The simplest way to "solve" this is to simply do nothing. In 2037 when the cash runs out cut all benefits across the board 22%, that would balance the books. SS could operate forever at a reduced benefit level. Not exactly fair for people retiring after 2037 though. Simple isn't always the best.

To pay FULL promised benefits over next 75 years results in a $14.5 trillion unfunded liability. So to balance the system either you need $14.5T more revenue or $14.5T less expense. Remember this $14.5T gap is including all future payroll taxes & full repayment of the trust fund & all interest on SSA assets.

Solving the problem is relatively easy. It represents only 0.6% of GDP over next 75 years. The sooner we get started the more options are available and the smaller the required changes will be.

AARP did a study on what changes could be made to close the gap.
http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)

We can close about 80% of the gap by simply raising SS payroll tax by 0.5%, raising the cap to 90% of wages, include all future employees in SS (some govt workers are exempt), and taxing benefits for high income retirees.

[SlimJimmy]

6. I keep hearing that there is a surplus of more than 2 trillion, and that this will

grow to nearly 4 trillion in 10 years or so. At least that's what some here and Thom Hartman have said. I was listening to him on XM a few days ago and those were nearly his exact words. So what is it? Deficit or surplus? Either the CBO is lying or Thom Hartman. Which is it?

[dixiegrrrrl]

8. The "surplus is on paper, it is a book keeping IOU.

There is not real money lying around in a Soc. Sec. only bank.
Each month the gov. has to sell Treasury bonds to cover the checks that go out.

The actual taxes that people have paid which were ear marked for Soc. Sec. were spent.
Since there is now less tax money coming in than going out, the gov. borrows to pay the difference.

[lumberjack_jeff]

21. So are $100 dollar bills.

The "IOU's" are imprinted with the words "backed by the full faith and credit of the United States of America", the constitution of which says; "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

[SlimJimmy]

30. Well, that's not what the previous reply said. So which is it? Is the money physically there

or not?

[Statistical]

9. No both are telling the truth.

Say you have $10,000 in the bank. That is like the SSA trust.

Now say this year your expenses are $50,000 but your income is only $49,000.
You still have $10,000 in the bank but you also have a current year deficit of $1,000.

This is essentially the situation that SSA is in. It has $2.5 trillion "in the bank" and is earning around $80B a year in interest. This year its expenses (benefits paid) are greater than its revenue (payroll taxes collected) by $54B. So it has a deficit.

Having a deficit isn't a short term problem is you have $2.5 trillion in the bank. Still if you have deficits every year for a couple decades eventually you will use up all that money in the bank. The SSA trustees say that will happen in 2037.


Thom Hartman shouldn't have used the word "$2 trillion surplus" because it is ambiguous. He should have said $2 trillion trust or $2T in assets, $2T in holdings, $2T in the bank. Surplus/deficit tend to refer to current year changes.

[lumberjack_jeff]

22. The social security system is still in surplus.

Their income, plus their starting fund balance (trust fund), plus the interest on that starting fund balance is $2.5t greater than the expenditures.

It is not a deficit.

[Statistical]

23. Deficit & Surplus refers to current year changes not standing balances.

For example we had a surplus in 2000? Under Clinton. The CURRENT YEAR revenue exceeded CURRENT YEAR expenditures however we still had almost $8T worth of national debt.

SSA has
a) assets worth $2.5 trillion.
b) has a current year deficit of ~$50B.

If you have $10,000 in the bank, a $49,000 job, and spent $50,000 in 2010 you would have deficit spending. Your net worth would be declining. You would end up with $9,000 in the bank you still have money in the bank but you would also have a deficit for 2010.


SSA Trust = accumulation of all prior year payroll tax surpluses & accumulated interest
National Debt = accumulation of all prior year federal deficits & accumulated interest.

[lumberjack_jeff]

24. Here's a better analogy

If you have $10,000 in the bank, a $49,000 job, and spent $50,000 in 2010 you would have deficit spending. Your net worth would be declining. You would end up with $9,000 in the bank you still have money in the bank but you would also have a deficit for 2010.

Since I had $1500 in interest income, my net worth is still growing and I'm not deficit spending.

But household budgeting is a flawed comparison. In all government accounting with which I'm familiar, The starting fund balance is added to taxes and interest to form "total revenue". The expenses for the year are then subtracted to create an ending fund balance.

The ending fund balance for next year is not only a positive number, it is larger than the ending fund balance of the previous year.

[Statistical]

25. Prior years balance are never added to revenue to inflate revenue.

You are correct though about interest income being part of revenue. Deficit or surplus is current year accounting. The accumulation of all prior years surpluses & deficits is current balance (national debt or SSA trust for example). It is the difference between balance sheet and cashflow statement.

When govt says we will have a $1.5 trillion deficit in 2011 (or a $128B surplus in 2000) it doesn't include prior years. It is a balance of current accounting period.

Deficit/Surplus is a change in balance not a balance. Any mention of deficit or surplus always has a time period attached.

Corporate Balance Sheet + current year profits/losses = New Corporate Balance Sheet.
National debt + current year deficit/surplus = New national debt Balance
SSA Trust + current year deficit/surplus = New SSA Trust Balance


"The ending fund balance for next year is not only a positive number, it is larger than the ending fund balance of the previous year."
True but by 2015 (or 2017) it won't. Even with interest income the ending balance will be lower and that begin a terminal decline towards $0.00 as growth in expenditures outpaces growth in revenue. The trust fund exhaustion is projected to be around 2037.

[lumberjack_jeff]

26. My first hand experience is limited to 12 years municipal budgeting.

The ending fund balance was always added to the following year's income "to inflate revenue". In a government setting this makes sense - to do otherwise leaves large parts of the finances "off the books" and prevents elected officials from having the information they need.

It's part of what makes cities with prudent stewardship look like big spenders. The size of a municipal budget is generally reported as Total revenues + Total expenditures. So the budget of a city which has $1m in the bank, $105k in taxes and fees and $95k in expenses is reported as "A $2.2 million budget."

Does the federal government do it differently? Your Clinton surplus example shows that, unofficially at least, they do.

[Statistical]

27. " Your Clinton surplus example shows that, unofficially at least, they do."

No it doesn't. At the time Clinton had a $128B CURRENT YEAR SURPLUS we also had a $7.8 trillion national debt. The two are seperate entities. The national debt had no effect on current year surplus. The revenue for FY2000 exceeded the expenses for FY2000 by $128B. However that didn't include the $7.8 trillion we owed in debt (balance statement).

Likewise if FY2011 SSA expenses exceed FY2011 revenue by $50B then we have a $50B deficit. However than doesn't include the $2.5T in trust (balance statement).

Likewise Obama 2011 budget has a $1.5 trillion deficit, the current $12.0 trillion in national debt isn't included.
Current year change surplus or deficit. Accumulation of surpluses & deficits is account balance.

[lumberjack_jeff]

28. You misunderstood the last sentence.

I know how municipal budgeting is done.

I concede that the federal budget is apparently done differently - with compelling justification; you can't make rational decisions when your starting fund balance is ($12,000,000,000,000.00)

[Statistical]

29. Sadly that is kinda what Ron Paul is doing.

He is looking at -$12T and saying hey we need to slice off $500B starting this very second.

Obviously we both agree that isn't a very intelligent way to handle budgets.

[Tippy]

7. Senator Sanders answers a lot of quesitons

There has always been feverish opposition on the right to Social Security. What is happening now, in a period of deficit hysteria, is that this crucial retirement program is being dishonestly lumped together with Medicare as an entitlement program that is driving federal deficits. Medicare costs are a serious problem, but that’s because of the nightmarish expansion of health care costs in general.

The deficit hawks and the right-wingers can scream all they want, but there is no Social Security crisis. There is a foreseeable problem with the program’s long-term financing, but it can be fixed with changes that do no harm to its elderly beneficiaries. One obvious step would be to raise the cap on payroll taxes so that wealthy earners shoulder a fairer share of the burden.

We need a reality check. Attacking Social Security is both cruel and unnecessary. It needs to stop.

The haves so often get a perverse kick out of bullying the have-nots.


http://sanders.senate.gov/

Senator Sanders...tells it like it is..I called his
DC office today and left a message, thanking him for his service and told them I sure wish he was my Senator.

[doc03]

10. I don't think it is just a coincidence this Congressional report

came out just one day after the SOTU. To make Democrats happy Obama never said anything about SS cuts, then the (very next day) a report comes out suggesting if we don't cut SS it will be armageddon, how effing stupid does the Administration think we are? Mark my words this is the start of a PR campaign from this Administration and Congress to sell a cut in SS to Democrats.

[Statistical]

11. The report didn't say we have to cut SS.

SS does need changes though. Either increased revenue or decreased expenses.

We need to get proactive and push increased revenue solutions. Some want to put their head in the sand and say "SS is fine" well doing that likely means the debate will be focused on decreases expenses.

[doc03]

13. No it didn't say we have to cut SS or raise taxes either..

With the Republicans controlling the House and a President that wants to work with the Republicans, I think most of us know which way it will go.

[Statistical]

14. Are there any lobbying organizations for protecting SS.

I know AARP is but anything more direct. Get enough people in an organization like that and you have clout.
NRA has massive influence with 4 million members. One would hope you can find at least 4 million people willing to protect SS.

At least AARP recognizes that changes DO need to happen to SS. It is about influencing the changes which will help majority of Americans.

[doc03]

16. I think anymore the AARP is more interested in selling

insurance to seniors than worrying about SS cuts.

[doc03]

15. According to another post the report does take into account

the interest on the SS $2.5 trillion trust fund. I also read that this payroll tax cut costs $130 billion. Of course they say SS will be repaid from the general fund. Since 42% of every dollar spent doesn't exist they will just issue SS another IOU.

[Statistical]

18. Agreed.

It isn't an immediate "crisis".

However the long term trend is rather clear. The growth rate of trust fund has slowed over last decade. Now expenses > revenue. By 2015 expenditures will exceed payroll taxes & interest so trust fund will slowly begin to shrink. As it shrinks the interest earned will decrease and the process will accelerate.

By 2037 the fund will be exhausted. So small changes need to be made. If people pretend that they don't and stick their head in the sand then don't be surprised if those changes are cuts in benefits instead of raising revenue.

Either way SS will eventually be rebalanced.
a) by raising revenue.
b) by cutting benefits now.
c) by waiting until 2037 when fund is exhausted and SSA is forced to cut benefits 22% to match revenue.

I just think talking about Option A and showing how small changes in revenue can strengthen SS is the best route. Those who want to pretend no problem exists are opting for Option C.

[ChoppinBroccoli]

12. Another Victory For Tax Cuts!!!

Is there ANYTHING tax cuts don't fix? Oh wait. The tax cuts are actually making the situation WORSE??? IMPOSSIBLE!!!

[Name removed]

17. Deleted message

Message removed by moderator. Click here to review the message board rules.

[lumberjack_jeff]

19. The reason there's a trust fund at all, is because boomers agreed to a big tax hike in 1983

The next generation will have to figure out a solution to their problem. Boomers did their part, they paid benefits to their parents (who retired at 62), delayed their own retirement to 65 and raised their own taxes to create a trust fund.

The fact that this trust fund would eventually be depleted was the intent. By 2037, the YOUNGEST boomers will be 75. Boomers did what they set out to do - not be a burden on their kids.

Reagan signed the 1983 tax hikes and got re-elected easily.

The fact that tax hikes are off the table as a solution shows me that americans expect magic. If gen X wants boomers to agree to a solution, best start with a solution which doesn't simply prevent boomers from getting the benefits their trust fund created.

The general government owes workers $2.5 trillion. Pass the hat.

[Statistical]

20. "The fact that this trust fund would eventually be depleted was the intent."

True but the intent was for it to be depleted around 2060 after number of retirees stabalizes (due to stabilized birth rates).



Birth rates didn't really stabilize until the 1970s. Thus if you project this "bulge" in birthrates into the future. There will be a higher than normal % of retired Americans until about the 2050s.

If the fund had been slightly larger it would be fine. The fund is slightly too small, and as a result even with 100% full repayment plus interest there will be a shortfall in 2037.



We should not cut benefits but we also shouldn't pretend that nothing is wrong. The "default" do nothing option is business as usual until 2037 and then SSA will be forced to cut benefits across the board by 22%. There are small and reasonable steps we can take to improve the financial outlook for SS. The earlier we take them the easier it will be.

[DaveinJapan]

31. Thanks to all. Lots of valuable info here, much appreciated! nt