U.S. social security system going broke

Drudge Report - UPI ^ | March 2004 | Unknown - UPI

[Baynative]

U.S. social security system going broke

WASHINGTON, March 23 (UPI) -- U.S. officials said Tuesday the Social Security system is not financially self-sustainable.

The Medicare and Social Security trustees made the assessment in releasing their annual report on the entitlement program.

Each year, the trustees look at the financial condition of both Social Security and Medicare, and Treasury Secretary John Snow told reporters Social Security "continues to be seriously underfunded," with a $3.7 trillion benefit obligation, for which trustees predicted it will not have the money.

Snow said the program's cash flow will be in the red in 2018 and the program's money will be exhausted in 38 years and "neither of those dates have changed since last year's report. Part of the growing problem is the 76 million baby boomers who will be retire and file for Social Security in the next couple of decades.

"While we have some time," Snow told reporters, "inaction is not a responsible course. The longer we wait the more difficult the ultimate solution will be."

Copyright 2004 by United Press International. All rights reserved.

[Baynative]

OK- help me out if you can, please. This topic comes up again and again, mostly from democrats who are going to fix the problem. Am I wrong or could a real social security fund be built in no time if congress would just leave their hands off the money we are paying in and take the cash out of the general fund?

[isthisnickcool]

For ever dollar you give me I'll give you an IOU saying that I promise to eventually give you a very low return on the money you must give me (or go to jail) someday. You really don't own the IOU. You can't give it to your kids or your church or the SPCA. In the meantime I'm giving the money to other people when I feel like it. Oops! I gave it all away. No matter, I'll just keep issuing IOU's.

Oh, don't expect ME to save money like this. What do you think? I'm stupid? Heck no, if I'm someone like John Kerry I don't even have to show up for work and I can roll up huge savings in my REAL pension.

This is a good deal for you. I promise!

[ancient_geezer]

Am I wrong or could a real social security fund be built in no time if congress would just leave their hands off the money we are paying in and take the cash out of the general fund?

Ahhmmmmm! Hate to be the one to inform you, but it all comes from general revenues now. That supposed lock box you keep hearing about, is nothing more than IOU they write against future tax revenues, while spending current receipts today.

The entire Social Security system is vaporware.

 

HELVERING v. DAVIS, 301 U.S. 619 (1937)

• Title VIII(Social Security Act), as we have said, lays two different types of tax, an 'income tax on employees,' and 'an excise tax on employers.' The income tax on employees is measured by wages paid during the calendar year. Section 801 [26 USC 3101]. The excise tax on the employer [26 USC 3111] is to be paid 'with respect to having individuals in his employ,' and, like the tax on employees, is measured by wages.
• . The proceeds of both taxes are to be paid into the Treasury like internal revenue taxes generally, and are not ear-marked in any way. Section 807(a)[26 USC 3501]. There are penalties for nonpayment. Section 807(c), [26 USC 7203].

 

Title 26 US Code Subtitle C Sec. 3101. Rate of tax

• (a) Old-age, survivors, and disability insurance
  In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section (a)) received by him with respect to employment (as defined in section (b)) - --------------------------------------------------------------------- In cases of wages received during: The rate shall be: ---------------------------------------------------------------------
  1984, 1985, 1986, or 1987 5.7 percent
  1988 or 1989 6.06 percent
  1990 or thereafter 6.2 percent.
  -------------------------------

• (b) Hospital insurance
  In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section (a)) received by him with respect to employment (as defined in section (b)) -
  • (1) with respect to wages received during the calendar years
    1974 through 1977, the rate shall be 0.90 percent;
  • (2) with respect to wages received during the calendar year
    1978, the rate shall be 1.00 percent;
  • (3) with respect to wages received during the calendar years
    1979 and 1980, the rate shall be 1.05 percent;
  • (4) with respect to wages received during the calendar years
    1981 through 1984, the rate shall be 1.30 percent;
  • (5) with respect to wages received during the calendar year
    1985, the rate shall be 1.35 percent; and
  • (6) with respect to wages received after December 31, 1985, the
    rate shall be 1.45 percent.

Title 26 US Code Subtitle C Sec. 3501. Collection and payment of taxes

• (a) General rule
  The taxes imposed by this subtitle shall be collected by the Secretary and shall be paid into the Treasury of the United States as internal-revenue collections.

Nothing has changed todate inspite of all the political rhertoric about "lock boxes" and "Trust Funds" for SS/Medicare funds, the tax that is supposed to be levied for SS/Medicare is indistinguishable in operation from what we normally refer to as the Income Tax, and is paid into general revenues in just the same manner.

THE SOCIAL SECURITY TRUST FUND FRAUD

CRS Report for Congress (98-422 EPW)
Social Security: and the Federal Budget:

"Its taxes like all other federal funds flow into the U.S. Treasury and its benefit payments flow out of the U.S. Treasury. The Treasury Department issues federal securities to the Social Security trust funds to reflect receipt of these taxes, and redeems securities from the trust funds to reflect Social Security expenditures, but the money itself flows to and from the Treasury."

"Taking the Social Security trust funds "off budget" has not changed how Social Security funds are handled. They are treated the same way today as they were in 1937 when Social Security taxes were first levied -- the tax receipts flow into the U.S. Treasury and benefit payments flow out of the U.S. Treasury. The Treasury Department issues federal securities to the Social Security trust funds to reflect the receipt of these taxes, and redeems securities from the trust funds to reflect Social Security expenditures, but the money itself flows to and from the Treasury. "

"While the trust funds have an important role in monitoring the finances of the program and maintaining its fiscal discipline, they are basically accounting devices. The federal securities they hold are not assets for the government. When an individual buys a government bond, he or she has established a claim against the government. When the government issues a bond to one of its own accounts, it hasn't purchased anything or established a claim against some other entity or person. It is simply creating a form of IOU from one of its accounts to another. It certainly establishes legal claims against the government for the Social Security system (i.e., it is a legal form of indebtedness of the government and does count as part of the federal debt; see Table 3 on the next page), but the system is part of the government. Those claims are not resources the government has at its disposal to pay for future Social Security claims. Simply put, the trust funds do not reflect an independent store of money for the program or the government, and taking Social Security "off budget" did not change this. "

What Social Security Trust Fund

"The U.S. Supreme Court ruled in Fleming v. Nestor (1960), 363 US 603; that there is no Constitutional right to Social Security benefits. Social Security benefits can legally be cut or eliminated at any time, and beneficiaries have no recourse. The Court held that, "To engraft upon the Social Security System a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustments to ever changing conditions which it demands."

[Baynative]

I understand the current situation and what congress has done to deceive the public. What I'm wondering is, if someone waved a magic wand and the money being confiscated was actually directed to a designated fund, would it (could it) build up in time to out run the assault that is soon to come from retiring boomers?

[ThinkDifferent]

Am I wrong or could a real social security fund be built in no time if congress would just leave their hands off the money we are paying in and take the cash out of the general fund?

Money is fungible; when the government spends a dollar, it makes no difference whether it comes out of the "general fund" pile or the "Social Security" pile. The fundamental problem is that we have promised trillions more in SS benefits than will be raised via SS taxes.

[supercat]

Am I wrong or could a real social security fund be built in no time if congress would just leave their hands off the money we are paying in and take the cash out of the general fund?

The way the politicians look at the government's finances, paying off debt costs money. The reality of course is that paying off debt saves money and not paying off debt costs money, but since politicians deny the existence of most of SS's systemic debt, they can't accept such a view.

[Baynative]

With that said, how can there be ANY discussion of Social Security at all; in congress, in debates or in campaigns?

[ThinkDifferent]

With that said, how can there be ANY discussion of Social Security at all; in congress, in debates or in campaigns?

Because Democrats are skilled at obfuscating the issue, and Republicans are inept at telling the truth.

[Stew Padasso]

May 1, 1997

Social Security: A Permanent Fix by George Pearson

George Pearson is a senior consultant to the Cato Institute.

In 1983, Allan Greenspan, now chairman of the Federal Reserve Board, and former Kansas Sen. Bob Dole, among other prominent and influential people, served on a commission that recommended repairs that were supposed to fix the Social Security system. Their recommendations were passed, Social Security taxes were raised and Congress declared that the problem was fixed until the year 2058.

Today's forecast is less optimistic. The forecast now is that Social Security will go broke by the year 2029 and payments will exceed income by 2012.

The 1983 fix was the big fix, not the only fix. Social Security tax rates have increased 17 times since 1951. Counting both tax rate increases and adjustments of the wage base, payroll taxes have grown from 3 percent of $3000 in 1951 to 12.4 percent (not including Medicare) of $65,400 today.

The big fix was necessary because the original Social Security concept had changed. During the first 37 years of the program the maximum starting benefits paralleled the average hourly wage of the production worker at roughly one-third of that wage.

In 1972, Congress began increasing maximum Social Security benefits faster than increases in the hourly wage. As a result the maximum starting benefits today are nearly two-thirds of the average monthly wages. The old concept of providing a minimal retirement benefit has been replaced by the present, more generous approach of providing retirement income.

The Social Security program is under stress today not only because the ratio of workers to beneficiaries has changed (an issue that many talk about) but because the benefit payments have increased to provide a comfortable pension (an issue that few talk about).

When the Social Security committee looked at different options for fixing the program in 1983, the Chilean model was not considered an option. In 1924, Chile became the first country to adopt a Social Security program. In 1981, when it ran into the same demographic problems that we are facing today, it privatized its program. So in 1983, there was not enough evidence to draw conclusions about the Chilean experiment.

Today there is considerable evidence that Chile made the right move. The country's gross domestic product has been growing at the annual rate of 7 percent for the last 10 years. Its rate of savings is 28 percent compared to 3 percent in the U.S. Its pension fund has registered a 12.6 percent annual return since being established 15 years ago. Most telling is that 95 percent of all Chilean workers have chosen the private system that exists side-by-side with the state system.

By 2012, the federal government no longer will have the Social Security surpluses to apply to its annual deficit. At that time, if not sooner, the federal government will have to get along without the subsidy that the surplus funds have been providing. Instead the federal government will have to find money to fund both its own budget and the annual deficit that will begin occurring in the Social Security program.

If the past is any indication, the politically motivated fix can not be expected to outlast the political life of the elected officials who vote for it. What is needed is fundamental reform, a permanent fix, that will provide a sound retirement program for our children and grandchildren.

https://www.cato.org/dailys/5-01-97.html

[smokeyb]

"...Put a dollar in an envelope to each one of the top 7 people on the list and see how many you get back....."

It's nothing but a pyramid scheme. Sooner or later someone at the end gets screwed.

[groanup]

As I understand it the SSS has a few hundred billion in assets that is all invested in US Treasury notes and bonds. That would sound like one branch of gov't owes another wouldn't it? Well, sorry. The politicians don't look at it that way. They figure it doesn't count as debt. If I'm wrong someone please correct me. Our national debt is a hell of a lot more than anyone can imagine.

[WILLIALAL]

"Snow said the program's cash flow will be in the red in 2018"

This is the important item. This means that the SS system will have to start collecting on their IOU's that have been piling up over the years. As these IOUs are cashed in, this will reduce funding for other programs that are paid from general revenue. The crunch begins.

[Fiddlstix]

BTTT

[ancient_geezer]

if someone waved a magic wand and the money being confiscated was actually directed to a designated fund, would it (could it) build up in time to out run the assault that is soon to come from retiring boomers?

To direct a real cash flow out of the economy into some Treasury lock box (accounting book) draws down the money supply would induce monetary deflation.

As long as it is issued as Treasury bonds like today, the capital is allowed to return to the money supply for draw at later date through additional taxation.

Either way has an impact on the economy. Deflating the money supply, causes interesting scenarios that scare politicians and most labor people to death, and causes bond holders and lenders to smile.

[FITZ]

It's nothing but a pyramid scheme. Sooner or later someone at the end gets screwed.

In the past 50 years, the population of the USA just doubled --- higher population growth than we've ever seen yet that didn't help Social Security at all --- the program should be ended now.

[FITZ]

It isn't a smart time to think about retirement --- the best plan is to go on working, find a career that suits you until at least age 90.

[supercat]

As I understand it the SSS has a few hundred billion in assets that is all invested in US Treasury notes and bonds.

And even that doesn't cover all its obligations.

The fundamental problem is that given the choice between having Social Security seriously damage the economy now or having it totally destroy the economy in 2020, most politicians will opt for the latter. Someone needs to somehow make the public realize that the longer people wait before fixing Social Security, the more painful it's going to be. Fixing Social Security won't "cost" trillions any more than paying off a $5,000 credit card balance "costs" $5,000. It may reduce cash-on-hand, but paying the balance isn't what costs--NOT paying it is what's really expensive.

[ExSES]

"While we have some time," Snow told reporters, "inaction is not a responsible course. The longer we wait the more difficult the ultimate solution will be."

Don't worry the problem will easily be solved, just print more dollars! The benefit checks will go out as planned, they just won't buy as much (just the way we now figure the CPI reducing COLAs!)...

[David]

"I understand the current situation and what congress has done to deceive the public. What I'm wondering is, if someone waved a magic wand and the money being confiscated was actually directed to a designated fund, would it (could it) build up in time to out run the assault that is soon to come from retiring boomers?"

A direct answer to your question which people seem to be having some trouble with, is "NO".

As presently written, the Social Security benefit is a lifetime joint and survivor annuity, CPI adjusted. Not enough wage earners to support the probable payout under any set of assumptions.

In order to put the fix on this problem, you need to "means adjust" the system. You don't need to do much adjusting--I don't have current numbers hand but I think if you kicked out everybody with taxable income over $200,000, you solve the problem. That assumes the US is willing and able to make payments on the debt currently held by the Public Trustee.

[Baynative]

Very informative. Thanks for the link. Would you by chance, know if the Chilean system is similar to the employees option exercised in (I think) Galveston or Corpus Christi, Texas? I understand they were given the option of using a private system in the early 80's and some people are already realizing great benefits after less than 25 years.

[Happy2BMe]

Now you are touching on the REAL PROBLEMS that created this immigration crisis to begin with . .

Q: Why does the United States Government permit wholesale illegal Mexican immigration?

A: For the workers.

Q: Why does the United States Government need foreign workers (not just Mexicans)?

A: It does not have enough labor force to meet the service sector and other blue collar work sector demands and growth within it's economy.

Q: Why does the United States Government not have enough workers to meet economic demand?

A: Over TWENTY MILLION AMERICAN WORKERS HAVE BEEN ABORTED OVER THE PAST TWENTY YEARS.

Q: If over twenty million American workers have been aborted over the past twenty years, who is going to pay for (read: generate taxes) the Social Security of the baby-boomer generation (now reaching critical mass)? (NOTE: BABY BOOMERS have killed as many Americans as Lenin and Stalin did Russians.)

A: Mexican workers.

Final Question: If they had survived, who would they have to thank for it and WHO WOULD THE TWENTY MILLION ABORTED AMERICANS HAVE VOTED MOST FOR?

Any questions?

Here’s another solution. Stop killing American Citizens before they draw their first breath.

[palmer]

In order to put the fix on this problem, you need to "means adjust" the system. You don't need to do much adjusting--I don't have current numbers hand but I think if you kicked out everybody with taxable income over $200,000, you solve the problem.

And naturally the politicians won't spend those savings on more pork. The simplest calculation is that the government has promised $40 trillion to seniors, government workers, bond holders, etc. That's $400,000 per American family. That's $1100 / month in my case (age 41 to age 71) which I can barely afford, but I wouldn't be able to carry my share of the freeloaders.