I need help with Social Security Solvency...

[hholli1]

and was wondering if any of you happened to have some links handy stating that Social Security is not REALLY in a crisis, according to the "people"* (name of group I need too) who actually monitor its solvency.

I can give a little background if you're interested. (***stop reading here if you're not***)

I have a friend. She spouts off right wing loony things because she thinks they sound smart; then we tell her the truth, and she comes around. I have this theory that most of the republican social conservatives (I hold some hope out there for the moderates...call me crazy) are a lot like the character in "American Beauty" who kills Kevin Spacey's character. It has been my experience that most social conservatives are freaky, closeted homosexuals and/or child-molesting pedophiles who cross-dress. It's either that (one of those situations) or they haven't gotten laid in so long that they don't want you to get any either. YOU may disagree with me about this...but I am sticking to my opinion.

Now it turns out that my friend (I swear to God this REALLY IS a friend and not a "friend", i.e., pseudonym for me) is really just spouting off her parent's claptrap until we set her straight. Given my firm stance on social conservatives, I have to tell you that I was shocked...SHOCKED and dismayed when I found out that her father is a cross-dresser named WANDA. (I swear to fucking GOD). Now some of you may know me from bartcop, and others are just becoming more familiar, but TRUST ME, I do not hold my opinion about social conservatives in for long if the subject of politics comes up. To top it all off for you, the man is a freaking police officer who had an open affair with his wife's partner. WHATAGUY!!!! er girl...ok...you get the point. And...of COURSE he is a heueueueuege Limbaugh/Liddy fan, so I can pretty much anticipate what we need to deprogram based on whatver lunacy they happen to be spousing on aany particular day.

And I had noooooooooo idea about her father until one day she told me in confidence. Her mother falls victim to the same bullshit and I watch as they spiral around this shit-storm, but...as my crazy Uncle Mudd would say, "Whaddyagonnado?". So last night she asked me about the social security thing, and could I send her any information. I want to be able to nip this in the bud as she is a teacher, and may influence our youth in an inappropriate way. WANDA'A WAY is NOT the way of the world.

But I am looking for a car today...so I need to enlist the help of the du community. Please help if you have any link to social security not being in crisis, and how this is all made up. I already have the leaked memo from Josh Marshall, so anything that proves they are making this up in lieu of that leaked memo would be great.

Thanks.

[Worst Username Ever]

1. use google

http://www.nytimes.com/2005/01/04/opinion/04krugman.html?oref=login&oref=login&oref=login&n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists

[hholli1]

2. Of course I used google...

but anything coming from the NYT is going to be immediately dismissed. You should know that.

But I do appreciate the link to Krugman. I have that issue in paper, and am hoping that it may work a bit...but you know as well as I do that the old grey lady is now the aging whore that nobody wants.

I like Krugman...but I dislike Miller even more

[ThomasJackson]

3. sorry

sorry hh, but there is no Santa Clause ( not even one wearing Ms. Claus' lingere )

there really is a problem with SS. not immediately, but in 2018. even aarp ( a very rosy analysis )says that in the future benefits will have to be reduced to about 75 to 80% of planned levels. worse, the rest of their analysis is technically right, but misses the big picture. basically, beginning in 2018 we have to start borrowing 3.5trillion dollars from somewhere to fund the system. that's kind'a a problem.

[hholli1]

4. I was wondering where you got the 2018 number.

as my limited research has shown it is completel solvent until 2042 if we don't do a thing about it.

[ThomasJackson]

7. 2018

because, in 2018, if we do nothing, the outflow in benefits paid will exceed the taxes received. to make up the difference - which everybody agrees will be there - SS is supposed to start redeeming some quasi-treasury securities that it holds. Fine. Except that just means that SS has to get $ from the regular Budget - which is currently 500 billion dollars in the red. Kind of like saying .... "Ihave no money in my pocket, but no problem, i'll get it from my wallet" .... except that your wallet is empty too. So SS is solvent to 2042, but only by getting money - which we don't have - from the regular budget .... ie redeeming those bonds.

if you assume, as some experts do, that those redemptions will not pose a problem, then everything is fine and SS is solvent to 2042. However .... by 2018 those bonds will account for 3 trillion dollars owed to SS. WHere is the $ going to come from?

[LynnTheDem]

11. Oooh WRONG.

Why does that not surprise me?

[rustydad]

8. Read Paul Krugman

He nails it down. SS is solvent to around 2040. The problem is that there is no cash money in the Trust Fund. It is in the form of IOUs issued by the Federal Gov. The reason it is in trouble is not that people haven't paid in enough, no, it is because the Fed can't pay back it's obligations. It is that simple. Bob

[stevebreeze]

5. Here is an analogy I have been working up for a letter to the editor.

.............................................................
I need some financial advice. I have a grasp on my income and expenses right now, but am worried about the future. This year my income is about $56,000 but my expenses are only $50,000 so I plan on banking the difference. My interest income is $8,900 I am putting that away for the future too. I have been doing this for years now and have a nest egg of $170,000.

My problem lies 15 years in the future. That year I expect my regular earnings to be $80,000 and an interest income of $20,000 but my expenses will climb to $86,000. I will also have a bank balance of $380,000 so you can see my financial problems are immense! Yes my expenses will exceed my regular income! I believe I have no recourse but declare bankruptcy.

Of course I would be laughed out of court with that much in assets and income greater then expenses. This is my point this is exactly the financial situation that Social Security is in, adding of course a few mind numbing zeros to the end of these numbers.

.................................................................

These figure are from the SS Trustee report. 6 of the 8 members are Bush appointees.

http://www.ssa.gov/
on the right hand side click on the Trustees 2004 report.
These numbers are on page 182 or thereabouts.

some other good sources of information are the center for budget and policy priorities http://www.cbpp.org/
and the center for economic and policy research. http://www.cepr.net/index.html

[ThomasJackson]

6. better analogy

"need some financial advice. I have a grasp on my income and expenses right now, but am worried about the future. This year my income is about $56,000 but my expenses are only $50,000 so I plan on banking the difference. My interest income is $8,900 I am putting that away for the future too. I have been doing this for years now and have a nest egg of $170,000."

Good, nice. Then you lent %170,000 to your brother-in-law so he could but an avacodo farm. But, no worries, you got a nice Promissory Note from from your brother-in -law. So now you have no cash in your nest egg, but you have this asset, the Note.

"My problem lies 15 years in the future. That year I expect my regular earnings to be $80,000 and an interest income of $20,000 but my expenses will climb to $86,000. I will also have a bank balance of $380,000 so you can see my financial problems are immense! "

For the next 15 years, your brother-in-law requires additional financing for the farm, seems he's running contiual defecits. Each year you lend him your cash and get additional Promissory Notes. So you have no cash, but DO have Promissory Notes worth $380,000.

SO I agree .... your financial problems ARE immense!!!

[stevebreeze]

9. If the problem is the inability to pay back the note...

This is NOT a problem with SS. It is a problem with the regular budget. SS is NOT in trouble.

[DaedelusNemo]

13. In other words the gov't is running a huge deficit

therefore they can't pay back their bonds?

Dude - if they renege on bonds the whole shootin' match is over - the house of cards will go down. Do you realize how many foreign countries are holding how many of our bonds?

They borrowed the money, they will have to pay it back, or be financially ruined.

BTW, the INTEREST PAYMENTS on our CURRENT DEFICIT are ALREADY projected to be a WORSE PROBLEM than SS by Bush's own committee. They propose to borrow MORE MONEY to deal with it - also known as the 'drunken sailor' approach to financing.

[solarspa]

10. Please don't use the word "IOU's"

These are NOT IOU's. These are legal Treasury Bonds. They must be repaid to the Trust Fund BY LAW. I suspect that the administration is making a case to STEAL this money to cut the budget deficit. Then they can say that the Social Security Fund is in trouble.

The Social Security fund is perfectly fine until 2042. At that time they will still have 70% to pay out until the Boomers are dead. After that the fund slowly recovers again.

[LynnTheDem]

12. There is NO CRISIS, bush is just LYING AGAIN.

Just like bush was LYING in 1978 when he said SS would be bankrupt by 1988 if it wasn't privatized.

http://www.bushfiles.com/bushfiles/midland.html

And in 2001:

Commission Impossible:
Why Bush is abandoning Social Security reform

So when Bush became the latest Republican to back away from the commission, its critics were ecstatic. For months they had warned that conservative-style reform would require either unpopular tax increases or equally unpopular cuts in benefits.

Now it looked like the White House had come to the same conclusion.

http://www.prospect.org/print-friendly/print/V12/22/confessore-n.html

Then in 2002:

Social Security In The 2002 Elections:
Candidates Won By Renouncing Privatization

A special Republican Campaign Committee task force instructed candidates there was no way to win votes with the Bush Social Security plan.

http://www.tompaine.com/feature.cfm/ID/6717

Report Predicts Deep Benefit Cuts Under Bush Social Security Plan
http://www.nytimes.com/2002/06/19/politics/19SOCI.html?ex=1105765200&en=9d7a169317235b0e&ei=5070&oref=login&ex=1104987600&en=d93ab4effc7725c1&ei=5070&ex=1103086800&en=02fd1e95887df5be&ei=5070&oref=login&pagewanted=print&position=top

And now, with no voters to woo in 2004:

Projections in a recent report by the Congressional Budget Office say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits.

The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P.

That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.

http://query.nytimes.com/gst/abstract.html?res=F70E11F73F550C748CDDAB0994DC404482

bush's TAX CUTS, if made permanent, will cost THREE TO FIVE TIMES GREATER than the amount of Social Security over the next 75 years.

http://www.thedubyareport.com/socsec1.html



Cost of the 2001/2003 tax cuts, if made permanent; $11.6 trillion

Cost of the new Rx Drug Benefit; $8.1 trillion

Combined cost of Rx drugs and permanent tax cuts; $19.7 trillion

Shortfall, Social Security Trust Fund; $3.7 trillion

http://www.cbpp.org/1-4-05socsec.htm

And WHO BENEFITS? Why, Wall Street! By BILLIONS!

Investment Pros See Bonanza in Bush Social Security Plan

http://www.chicagotribune.com/business/chi-0501090320jan09,1,6035889.story

Conservatives rarely point to Britain's partial state pension privatization program, because it's been a total disaster.

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997

BOTTOM LINE:

And if we DO NOTHING whatsoever then retirees will still get 81% from 2052 onwards.

http://www.truthout.org/docs_04/120804X.shtml

With bush's "plan", you'll only get 75% from 2042 onwards.

So, as always, doing bush's plan IS WORSE than doing nothing at all.

Gee, what a surprise.

[DaedelusNemo]

14. Might accept gov't documents in lieu of NYT?

http://www.gao.gov/new.items/d03376t.pdf

This GAO report clearly shows in figure 5 that interest payments on the deficit are already projected to be a larger unfunded liability than either SS or Medicare. (Indeed, we'll be paying more on interest than on the military!) Clearly, then, borrowing money to fix SS would be making the bigger problem worse, to fix a smaller one.

It also admits the trust fund is fine for at least 40 years (although the CBO says fifty.)

It discusses the proposals put forward by the Bush commission; #2 is where the attention is. It shows that this proposal cuts benefits by much more than we would have to if we were going to solve the problem entirely by cutting benefits! It shows that there would likely have to be several decades of 'general revenue transfers' - that is, that SS would also cost us more than simply paying back the bonds in the trust fund, 20% of GDP higher. It points out that savings are not increased.

So it cuts benefits more than we have to even if that's all we do, and it costs more than we have to spend even if we do nothing about it!

But there's also an argument you can make that doesn't need sources: that it takes away your guaranteed security and puts you at risk. Sure, you might be lucky in your investments, but if you aren't, your safety net has been eaten away. Investing for higher return is often a good idea, but you don't gamble away your nest egg. Keep your security, and invest on top of that if you want to.