By 2017 Social Security will begin paying out more in benefits than it collects in taxes and will have to begin redeeming bonds from the Social Security Trust Fund. Worse, Medicare is expected to cross the same line later this year, resulting in a massive fiscal crisis.
The annual report (PDF) of the Social Security trustees released Monday puts it plainly: “Annual cost will exceed tax income starting in 2017 at which time the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets, until these assets are exhausted in 2041.”
There’s just one problem: Those trust fund assets aren’t what you and I would think of as assets.
“The Trust Fund is not a pile of money that can be used to pay Social Security benefits,” explains Michael Tanner, director of health and welfare studies at the Cato Institute. “It is simply an accounting measure of how much money the system owes, a collection of IOUs.”
And in this case, it’s not the government owing you, it’s you owing the government. As President Bill Clinton’s 2000 budget message explained it:
These Trust Fund balances are available to finance future benefit payments . . . but only in a bookkeeping sense. . . . They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not by itself have any impact on the government’s ability to pay benefits. — Budget of the United States Government, Fiscal Year 2000 (PDF)
In other words, ordinary Americans are going to get squeezed, harder and harder, as the Social Security program implodes on itself beginning just ten short years from now.
Both programs will be in trouble soon, with the baby boomers about to enter the system. The first baby boomers begin retiring next year, accelerating benefit payments while reducing the number of workers paying into the system.
”Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues and threaten America’s future prosperity,” Treasury Secretary Henry Paulson said. — Associated Press
But, ordinary Americans, you don’t have ten years to avoid getting soaked. It’s going to start this year, as the Medicare program begins the same sort of fiscal implosion. Its trust fund bookkeeping tricks, which will soak even more trillions out of you, will be gone by 2019.
Treasury Secretary Henry Paulson, who has engaged in months of talks with members of Congress, said the new report underscored a need for action.
“If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the programs’ ability to support people who depend on them,” Paulson said in releasing the report. “Reform is needed and time is of the essence.” — Associated Press
For reasons unfathomable, someone at the AP actually thought this was good news.
The Trustees and the Clinton administration are hardly the first to warn that these entitlement programs will cause the government’s finances to collapse. Federal Reserve chairman Ben Bernanke warned Congress last month that the “expansion of debt would spark a fiscal crisis . . . sort of like a snowball rolling down the hill.” The Government Accountability Office has been making the same warnings since 1992.
With over half of all Americans benefiting from government largess, it was hard not to see this coming. One would have to have put blinders on, covered one’s ears and said, “La la la, there’s no fiscal crisis!” As somebody once said, “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury.” Whoever said it, it has happened, and now we all get to witness its collapse.
Take notes this time around, and make sure they get passed on to future generations, so that hopefully they may learn where we did not.
(1 votes, average: 4.00 out of 5)
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Ultimately, the war supporters in Congress prevailed in the vote on the resolution. Still, the vote was significant because it places every member of Congress on the record as supporting or not supporting the unconstitutional, costly, violent occupation of a country that never attacked us. This vote should serve as an important reminder to the American people of where their representatives really stand when it comes to policing the world, empire building, and war.
Gardner Goldsmith explains why claims by politicians that consumers can become "irrational" and why claims by the same politicians that government can help "fix" markets are both false and misleading. He also explains what the terms Praxeology and Epistemology mean, which is key in understanding how to place free markets in their proper place among human history.
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j
Apr 26, 2007
Too bad they can’t just admit the program is a flop and phase it out before it becomes a bigger problem.
Of course I’ve been saying this for about 15 years (since high school) and if they had listened to this idea back then, we’d have a new program just starting to overlap with social security and we’d be discussing phasing SS out all together, instead of (still) rehashing the problem.
Jason
Apr 26, 2007
Its not a flop, Social Security has consistently brought in MORE money than it has paid out.
Sadly, it is the greedy Baby-Boomers, who expect to drink cocktails all day and go golfing while the rest of the nation suffers the burden of their greed. Why should we have to suffer because they are breaking the bank?
Answer: lower benfits, raise the retirment age, oh wait…the greedy AARP wojn’t allow that, thewy wuold rather drive the naiton into massive crisis so they can go to yoga class.
People live much longer now and it is irresponsible to be collecting SSA checks for 30+ years.
Learn what you speak of before you talk.
Verbos
Apr 26, 2007
The reality of SS is that it is a slush fund for bankers. The money comes from the private sector in the form of an interest free promissory. The inevitable failure was past on to the future. The bankers still stand good. The tax payers are liable for the default. The payout for SS, like most government plans, is around 10% with operating costs being around 90%. With 90% overhead, what organization could remain liquid?
AARP, by the way, is the child of American Express Corp.
BelchSpeak
Apr 26, 2007
I’m certain the Democrats leading Congress are right on top of this crisis and will announce their plan to fix it shortly. Meanwhile, enjoy the sound of the crickets.
Rick Levandowski
Apr 26, 2007
This is why there’s also an impending housing bust – - the next gener’s aren’t gonna be able to afford those $350,000 houses when the boomers retire. All the “rob Peter to pay Paul” bookkeeping of the 60’s War on Poverty, Vietnam War, Space Race and the 80’s War on Drugs and today’s War on Terror cost something (add our trying to buy worldwide friends through foreign aid over the years) and the buck is stopping here soon.
And yes, the AARP is merely feeding the inter-generational envy gap.
Q
Apr 26, 2007
I have to agree with Jason. SS just needs some adjustment, better management, and to be more scalable the ever changing health situations in this country. the last 50 years we have seen so many changes to our culture, our medicine technology, computer technology, we’ve learned a lot about ourselves.
the old paradigm simply doesn’t work anymore, it’s time for a reboot. there are plenty of untapped resources out there that can supplement and share the burden with the over tapped ones,
it’s about that times folks…
Michael Hampton
Apr 26, 2007
If you restart it with another pyramid scheme, which relies on taking money from people by force whether they want to participate or not, then we’re going to have a problem.
As for Jason, I sort of expect him to defend his job.
j
Apr 27, 2007
Its not a flop…lower benfits, raise the retirment age, >>>
Of course lower benefits and higher retirement age is the answer! Why didn’t I think of that!
If we raise the retirement age to 99, and lower the benefits to ZERO, I bet we can keep the program up and running for a LONG, LONG time!
It’s all based on the idea that people are too stupid to care for themselves or plan ahead. Maybe if we stopped letting our government act like we as citizens are too lazy or stupid to plan for our own retirement that they have to hand us money on a silver platter we wouldn’t have so many people who think they are entitled to “drink cocktails all day and go golfing…”
It’s not just the money aspect of the program…it’s the ethical one too. Personal responsibility, as you pointed out, is a concept of the past. The idea that our government should take care of us filters into all aspects of life. People condemn single mothers or widows who are on welfare, but then demand that our government gives them money they didn’t entirely earn simply because they’re old and lazy and don’t want to work anymore.
To me, that’s all FLOP. The program needs to go.
mr smith
Apr 27, 2007
remember folks the system isn’t broken, it’s working perfectly, just not for the majority of the people it’s claimed to be designed for.
excuse my non-Harvard-skull-and-bones education I guess I should have known better, you know we poor folk always have our conspiracy theories about how “the man” keeps us down.
Nancy
Apr 27, 2007
Come on have you ever tried to live on ss and as for medicare recepients pay 20% of their medical bills on top of what medicare pays and medicare also can say what you had done isnt necessary and not pay for it at their discression and yourstuck with the bill. SS is for in many cases peoplewho have been hurt or disabled and cant find work. Besides if something happened to you wouldnt you want it there to help you. So quit bitching about ss and pay into it like everybody else does, youd be the first one hollaring if you needed it and it wasnt there.
Michael Hampton
Apr 27, 2007
I don’t want any of that Antisocial Insecurity. It’s evil to steal from another person, regardless of the reason.
Duane
Apr 27, 2007
When our fiat dollars become worthless, which little by little they are headed that direction, it won’t matter how much SS or retirement money you get because the dollars these programs represent will be of little or no value. So you could have a retirement of $1,000,000 and each of those dollars will be of little value so good luck if you are waiting to retire on a nice healthy retirement package. People – our economy and our dollars are in trouble – sorry if this is a doom and gloom message. There is time to prepare.
F
Apr 28, 2007
A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.
- Alexander Tyler
I think
Michael Hampton
Apr 29, 2007
You failed to click the link in the original post which explains who made that statement.
Apr 30, 2007
MONEY: Retirement risks « Reinke Faces Life
nick
May 01, 2007
i suggest we do our democratic bidding with our money. you like welfare, social security, food stamps, similar govt programs? then choose to subsidize them. you don’t like the war in iraq? then choose not to pay any money to support it. if i could choose to support no government programs, and put all that money into some sort of an investment plan, my goodness, i’d be saving 1/2 of my paychecks for retirement.
Rusty
May 01, 2007
If 10 years is the timeframe, look for the US to find a country with a nice balance sheet that needs to be ‘liberated’ in about 8.
Richard Braakman
May 01, 2007
Rusty, that’s not going to work. The purpose of foreign interventions is to transfer public funds to private wealth, not the other way around. The balance sheet of the target country has very little to do with it anyway — the money is going from the American public to the American plutocrat.
The more likely response, in 10 years, is for Congress to magic up (sorry, “borrow”) a few billion extra to cover the difference.
Q
May 01, 2007
so…
They’re gonna let us opt out of this system since it’s imploding, right?
Mrs. Mecomber
May 05, 2007
We wouldn’t have such a big problem if those greedy Boomers hadn’t wiped out half the population of Gen Xers.
The litmus test for every Boomer to receive should be “Do you support abortion?” If no, please pass GO and collect $200… if yes, then no SS for you.
Warren Lee
May 10, 2007
It’s simple really… The government just has to provide
anyone over 30 – with Free – Black Capsules.
The way things are going – are’nt you ready to Check-Out ?
I know I am – Life Used to be worth living – now, it’s just
all Stress – stress – stress. Who needs it ?
I hope the future generation’s have a better time of it -
but, I dout it.
Or, we can also continue this perpetual War- and Draft all of us over the age of let’s say 50. That should do it.
May 11, 2007
Bureaucrat Appreciation Week - Homeland Stupidity
May 16, 2007
Social Security card to be national ID - Homeland Stupidity
May 26, 2007
Last Free Voice » Blog Archive » Another thing happens that has nothing to do with Ron Paul
Funding???
May 28, 2007
The majority of funds go to our law makers salaries not Social security. Check it out!!! Do’nt let anyone feed you BS. The Data is there. Just research it and you will be shocked!! More needs to be put into job training, education, social programs and our communities!! We pay the taxes!! This would also reduce crime!!! WE should decide where it goes into our lives or your favorite politicians Cadillac?????
Sarah
May 29, 2007
If people didn’t live longer, then we wouldn’t worry about this situation, but people do because of better medical treatment and whatnot. There are other reasons too…like illegal immigrants. Not only do the future of this country have to worry about SS, we have to worry about Medicare too. Yay…=|
The only thing that would work is to reform the immigration policy. None of the other ways to fix this problem will work.
Jul 05, 2007
Independence Day - Homeland Stupidity
Ashley McGhee
Oct 02, 2007
I am a 17 year old girl i hope there will be social security when i get old enough to need it. Social security helps people and without social security some people wouldn’t be able to live.
Samuel Hunter
Jan 06, 2008
The mystery to me is why none of this is really in the news. About 40% of physicians decided to stop taking Medicare this year. This is a no confidence vote in a centralized system whi has been paying 10-20% less than the cost of service to the people delivering the care, while paying a straight 15% profit to the insurers who pass out the dollars for Medicare advantage programs.
You can be sure, the future is that you show up with cash or plastic at the doctors office. Plan for your retirement to have $500,000+ for your healthcare expenses stashed away.
Everyone needs a high deductible health plan and health savings account now and stuff it full every year.
Con S. Ervative
Jan 18, 2008
The lack of knowledge, understanding and education exhibited in these comments is astounding.
Michael Hampton
Jan 18, 2008
Con S., it appears from your content-free post that you just might be a liberal. Care to splain, Lucy?
Dec 07, 2009
Growth of charities “troubling”
Trucker Mark
Feb 02, 2010
Sure, no problem, blame us baby boomers, the generation that was expected to work hard and pay of the retirements of the WWII and Korean War generations. Most of us baby boomers have worked hard for 35 or 40 years or more, paying into a retirement system without question, like good citizens. Now with medical care and medical insurance costs rising out-of-control, many of us baby boomers are being let-go from our jobs lest we drive-up our employer’s health insurance costs. Too bad that we are now in our 50s and 60s, too bad that people that age often need medical care, too bad that we have paid into a retirement system since the 1960s or 1970s that will now not be financially able to service our needs. I am a Korean War baby boomer, my first job was in 1972, 38 years ago. Since then I have paid $50K or more into Social Security, which should have been compounding interest. The age for full retirement has already been raised once, from age 65 to age 70, with 75% payment available at age 66 & 1/2, for me not until February of 2024, though I can get half at the age of 62. Half of my current benefit only amounts to $1200/month. Where in the US can I afford food, utilities, property tax, clothing and shoes, not to mention golf and cocktails, on $1200 per month???
I’ve been a semi driver for 30 years, and I worked in a factory setting-up a big lathe for several years before that. Lately my earnings are in the $50-$60K range, and I am still paying into the system. Kind of funny, figured for inflation, my earnings are only half of what they were in 1982, when I had 3 years of experience driving a semi. My 35th high school reunion is this Summer, where we will undoubtedly talk about retirement looming. Us good citizens, who have paid into the Social Security and Medicare systems our entire lives, are now being blamed for its insolvency. Just keep on working, don’t retire they say. Any of you youngsters know what it feels like to be in your 50s or 60s? These days I prefer to relax a fair amount, 18 holes just about wipes me out.
So now it is the turn of the younger generations to ante-up, and pay for the retirement of the older generation, just like us baby boomers have done our entire lives, and instead of respecting their elders like we were taught, we are getting blamed for not wanting to work longer. A whole lot of us would like to work longer, but we have been getting laid-off in droves recently because the younger generations have lower medical costs. Just think, we could have passed health-care reform, perhaps done away with a lot of the problem of older workers medical costs driving-up health insurance costs, but I hear that younger workers don’t think it is fair to them. What’s next, a generation war, the older crowd versus the younger generations for control of scarce resources???
My guess is that in 2019, I’ll begin collecting half of my Social Security, after I have been out of work because of my age and the possibility that I might drive-up my employers health-care insurance costs for at least several years. The chance of me working right up to age 66 or age 70 is virtually nil, at any job that has group health-care insurance. Perhaps that is where to lay the blame, on medical costs that have risen 300% (figured for inflation) in the last 10 years. It is little wonder that Social Security is going bankrupt when older workers can’t buy a job that has medical insurance. Anybody need any truck drivers with 35 years of experience??? Nope, you are too old!!!
A good friend of mine just got laid-off yesterday. He is 55 years old, he had 28 years with his company, he always had excellent reviews, they decided to just keep one guy at his position instead of two, and the other guy was 10 years younger. There goes 10 years of this guy paying into Social Security at the wage-level he was earning. I know at least 10 people on layoff from auto assembly plants, another 10 that have lost their jobs permanently. None of those people are paying into the system more than a fraction of their former level of contribution either. Like I said, it is little wonder that Social Security is going bankrupt when age 55 is the new retirement age.
I favor socialized medical care, I think that it would rid us of the problem of companies getting rid of older workers to avoid their higher medical costs.
Michael Hampton
Feb 03, 2010
Trucker Mark, to address your immediate problem, most towns and cities will grant property tax abatements for people below a certain level of income. It’s something to look into.
As you’ve correctly noted, Social Security will be a raw deal for you, and for most baby boomers. If you’d been able to invest that money yourself, you could retire comfortably and play golf every day for the rest of your life. Probably could have years ago. Instead you were forced into a Ponzi scheme the likes of which Bernie Madoff could only have dreamed of, and like Madoff’s scheme, it’s unclear whether there will be any money left for you.
The trouble with the economy today goes far beyond Social Security, as some of my more recent articles illustrate. In each case, it has been the government which has taken a perfectly workable system and completely screwed it up. No single person is to blame; it isn’t fair to lay the blame on Obama, or Bush, or Clinton, or whoever. The system itself is fundamentally flawed.
As I’ve noted elsewhere on this site, it is this same system which has driven health care costs through the roof. Turning over what’s left of it to the government would be even worse, I think, than turning it over to Bernie Madoff.
There have been no “market failures.” The economy has failed because the government, with the help of the Federal Reserve, has brought us to the brink. Encouraging them to do even more will result in more of what they have done to us. It’s time to take the keys away before they drive us over the edge of the abyss.