Social Security

[jasonxctf]

i pulled this comment from the May 15th Gas Protest discussion. I think it certainly deserves its own thread. interested to see peoples thoughts/comments on this.

 

Social Security has been running a planned surplus since the early 80's and the Greenspan reforms. The design was to have Social Security take in more money for the 30 years from the mid 80's to the mid 10's so that when the baby boom hit retirement, Social Security would have extra money saved up.

 

Social Security has therefore been running a surplus in the hundreds of billions of dollars per year for years now. The problem with that plan is that the Social Security Administration used that money to purchase government bonds...and the Congress treated the money coming in through those bond purchases as added tax revenue in the general fund. Therefore, the couple hundred billion Social Security surplus has been spent every single year. Without that revenue, the deficit would have been $200-$300 billion a year greater than what we've already seen it as. The problem is, those bonds are going to come due eventually when the Social Security system starts cashing them in. So either the government will be raising taxes again to pay for them, or it will decide to destroy the world's financial system and default on its debt.

 

Al Gore's whole "Lockbox" thing was a proposal that the government should stop spending all the money in the Social Security surplus, so that the money would actually be available when the baby boomers retired, instead of constantly spending it as part of the general fund.

[southsider2k5]

There are two solutions to the problem. Reduce benefits and/or increase taxes. That's it.

[jasonxctf]

why not start saving the surpluses we earn from now on? put those into some interest bearing account (if thats legal for the govt) and not touch it? maybe that would help buy us an additional few years before its a deficit building expense.

[YASNY]

Until the 60's, social security was separate from the general government fund. It was designed and sold to the general public that way when it was implemented. I don't remember which president was in the white house at the time, probably Johnson. However, there was certainly a democratic congress and they controlled the nation's pursestrings. They put the SS surplus into the general fund. Roosevelt implemented it, the 60's congress changed the rules. Major f***ing con job accomplished. There's your reason the SS system is on the verge of bankruptcy.

[southsider2k5]

why not start saving the surpluses we earn from now on? put those into some interest bearing account (if thats legal for the govt) and not touch it? maybe that would help buy us an additional few years before its a deficit building expense.

 

It sounds great in principle, but where are you going to get a couple hundred billion dollars from to fund the programs that are currently being funded by this money? Yeah, you are either going to raise taxes, add to the debt, or cut benefits.

 

Until the 60's, social security was separate from the general government fund. It was designed and sold to the general public that way when it was implemented. I don't remember which president was in the white house at the time, probably Johnson. However, there was certainly a democratic congress and they controlled the nation's pursestrings. They put the SS surplus into the general fund. Roosevelt implemented it, the 60's congress changed the rules. Major f***ing con job accomplished. There's your reason the SS system is on the verge of bankruptcy.

 

The reason it is on the verge of collapse is because it is the nations biggest pyramid scheme. It works great as long as more and more people keep paying into it, once that stops, the pyramid collapses.

[jasonxctf]

if this program, itself creates a surplus then lets keep the surplus in a separate account and build it.

 

if that means that Arkansas doesnt get $5 million to build a Museum honoring underwater basket weaving then so be it.

 

therefore, either (a) taxes have to get raised to cover the costs of these projects or (B) these projects get eliminated.

[southsider2k5]

if this program, itself creates a surplus then lets keep the surplus in a separate account and build it.

 

if that means that Arkansas doesnt get $5 million to build a Museum honoring underwater basket weaving then so be it.

 

therefore, either (a) taxes have to get raised to cover the costs of these projects or (B) these projects get eliminated.

 

We aren't talking about 5 million dollars. In 2006 the social security fund ran a $181.3 billion surplus. That would take eliminating all of the US's education and transportation funding and still needing to find another $15 to $20 billion dollars. We are talking about something like 6-7% of the entire federal government budget. You aren't going to do that by eliminating little pork projects. What you are talking about would be closing entire sectors of government.

[hitlesswonder]

The social security system is not on the verge of collapse. This article in the CS Monitor describes the latest forecasts:

To Social Security administration actuaries, Langer is probably an unwelcome critic. Each year, these actuaries provide the trustees of the Social Security Trust Fund with three projections on the adequacy of that fund to pay all promised benefits over a 75-year period. One uses relatively optimistic assumptions, another more pessimistic assumptions. And the third one, somewhere between the other two, receives the most attention.

 

Langer figures the optimistic projection is most likely to be true. It shows a small surplus in the trust fund at the end of 75 years. After looking at the annual trustees' reports from 1992 to 2002, he finds this cheery forecast the most accurate in predicting – so far – the future level of the fund's assets.

 

The intermediate projection in the trustees' report of last spring forecasts that the trust fund reserves will be exhausted in 2040. At that point, payroll taxes and the partial taxation of Social Security benefits given to higher-income beneficiaries would provide enough revenue to pay 74 percent of promised benefits, falling gradually to 70 percent by 2080. In real terms, unless the US economy tanks and productivity falls, that 74 percent will buy a lot more goods and services than Social Security benefits do today.

 

There are a lot more immediate problems facing the US than SS (Medicare actually is headed toward a rapid collpase for example). But I'm all for changing it if people want to. Making it a progressive tax (i.e. removing the cap on earnings taxed) and means-testing would probably "fix" the fund.

 

Alternatively, a truly conservative solution is fine with me. Abolish it and have everyone take care of their own money. What I don't want to see is the fund shifted to be invested in the stock market by some set of financial management companies the government picks and who will get rich off the managament fees. Give me a real choice of what to do with my money. I find a lot of the rhetoric about market-based solutions to be disingenuous. If they really "trusted you with your money", they wouldn't make you stash it in a private account with limited choices. As it is, I like the idea of having money "invested" in SS, it's a valuable diversification from money in market-based retirement accounts (like IRAs).

Edited May 18, 2007 by hitlesswonder

[jackie hayes]

We aren't talking about 5 million dollars. In 2006 the social security fund ran a $181.3 billion surplus. That would take eliminating all of the US's education and transportation funding and still needing to find another $15 to $20 billion dollars. We are talking about something like 6-7% of the entire federal government budget. You aren't going to do that by eliminating little pork projects. What you are talking about would be closing entire sectors of government.

This is all true. I just want to add (on the other side of the ledger) that it's not like the government wouldn't find lenders if SS no longer invested in government bonds. If SS invested in corporate bonds (say -- assuming the law were changed to allow that), many current corporate bond investors would switch to govt bonds. The govt's credit is good, they'll get the money they want (for now, at least).

 

The federal govt is responsible for both SS and the rest of the budget. For some accounting tricks it's nice to pretend they are separate, but the distinction is just technical.

[Texsox]

We have bloated SS to the point it doesn't resemble true retirement planning. A harsh way to put this is, the only difference between this and Public Aid is the semblance that most people have contributed to what they take out. The problem is we are now placing people into SS that should be in other public aid groups. If you are injured and can't work anymore, that should be in the unemployment arena or similar until you are 65.