Posted on 01/16/2005 8:00:22 AM PST by bogeybob
Sunday, January 16,2005 "As a matter of fact, by the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. If you're 20 years old, in your mid-20s, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now."
President Bush, Jan. 11
Simply put, this assertion by the president isn't true.
If nothing changes with Social Security, the system will still be able to pay benefits well beyond the time today's young workers retire.
A person who is 25 years old today will be 67 in 2047. According to the Congressional Budget Office, Social Security will be able to pay out benefits at the current level until 2052. After that, benefits would decline to about 80 percent of what's scheduled - still considerably more than today's retirees receive. And that's if nothing changes.
More conservative estimates by the Social Security trustees also refute what the president said last week. By their calculations, in 2042, Social Security will be able to pay about 70 percent of scheduled benefits, without any changes. Taken even further, 68 percent of those benefits could be paid out in 2078. Today's 25-year-old would be 98 years old by then.
Social Security will not go "flat bust" or "bankrupt." It can't, unless the law is changed.
Currently, Social Security runs a surplus, which is held in a trust fund. According to the Social Security Administration, the trust fund holds money that is not needed to pay current benefits. By law, the money must be invested in Treasury bonds, which are guaranteed by the U.S. government.
Beginning in 2018, payroll deductions will not be enough to cover scheduled benefits and the trust fund will begin to be drawn down. Even if the trust fund hits zero, payroll deductions could maintain benefits at a reduced level.
The only way for Social Security to go bankrupt would be for the government to default on the bonds held by the trust fund or to monkey with payroll withholdings. It is, in fact, Congress' willingness to act in the wrong direction that poses the greatest threat to Social Security.
The president has not released details of his plans to privatize Social Security. Instead, he's barnstorming the country trying to stir up a crisis that doesn't exist. But his administration has talked about some of the components of his plan. It includes private investment accounts that would allow participants to invest a portion of their payroll deductions - perhaps as much as a third - into 401(k) type accounts. Down the road, the participants would face benefit reductions in Social Security, the idea being that private accounts would make up the difference.
To continue scheduled benefits for retirees and those nearing retirement, the president would need to borrow a massive amount of money to cover the transition costs to his plan. Estimates put that figure in the $1 trillion to $2 trillion range, and that borrowing would be immediately added to the national debt.
The president talks about more than $10 trillion in unfunded liabilities in the Social Security system. This projection, however, looks at Social Security over an infinite timeline and has little meaning. It's putting a dollar amount on forever. If the projections are narrowed to a more manageable 75 years, the amount falls to about $3.7 trillion - still a lot of money, but not as difficult to manage.
Estimates by the liberal Center on Budget and Policy Priorities put the liabilities in perspective with other Bush policies. The new Medicare prescription drug benefit will cost about $8 trillion over 75 years; making the president's tax cuts permanent would cost $11.6 trillion.
Selling the country on a major overhaul of Social Security requires exaggerating the system's problems and convincing young workers that they can't count on receiving a dime from it. The president is on the road, making his deceptive pitch, trying to undermine faith in Social Security. If he's successful, future retirees will pay the price.
And, like all defenders of the Social Security status quo, he ignores the implications of what he has said. The trust fund was created to avoid a massive tax hike or borrowing binge to cover the cost of Boomers entering the system. Well, to redeem those trust fund notes, what will the government have to do? Raise taxes ... or borrow money. So the trust fund has failed to accomplish the purpose for which it was created - and should therefore be treated as a non-entity in this debate.
All the trust fund consists of is promises to pay. The only way to pay is to print money or raise taxes.
There is no trust in the fund and there is no fund in the trust!
Help me out here. In 2052 benefits decline to 80%. In 2042 SS will pay out about 70%. So we'll be doing better in 2052 than in 2042?
Please explain how a Ponzi Scheme with a declining pool of suckers to contribute to it, and "winners" who don't even contribute to it can survive longer than 60 years...
Without some kind of a change.
This clown sounds like he also wrote that other book I read decades ago: The Flat Earth.
Congressman Billybob
I think I have got it, the government taxes me gives it to a government organization then gives(loans)it back to the government, who then taxes me to pay off the government organization who gave them the money.
Ping.
I wish that I had the oportunity when I was young to funnel my SS deductions into privite investment when I was young. I would be drawing a lot more money from it then I am now and wouldn't be ripping someone elses wages from them. I used to argue with old guys when I was young telling them we needed to make real accounts for individuals instead having people pay each generation, that sooner or later it would fail. Boy, did I get laughed down! They couldn't see you could make more money in the long run with privitization. The problem we face with this is the brain washing everyone has gotten concerning SS, plus the dimwits will not admit that a program started by the GREATEST dimwit of the all, FDR, could possibly be flawed!
If growth continues as anticipated, outlay will exceed income - that is not sustainable. Quibbling over whether that qualifies as bankruptcy or not ignores the problem.
Letter to the editor:
Dear Sir:
Who was that man, that President, who made the centerpiece of his domestic economic priority the need to "save social security"???
".....Now, if we balance the budget for next year, it is projected that we'll then have a sizeable surplus in the years that immediately follow. What should we do with this projected surplus?
I have a simple four-word answer: Save Social Security first.
Our fiscal discipline gives us an unsurpassed opportunity to address a remarkable new challenge, the aging of America. With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom.
So first and above all, we must save Social Security for the 21st century..... "
WILLIAM JEFFERSON CLINTON, State of the Union Address, 1998
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou98.htm
"......Today, Social Security is strong, but by 2013, payroll taxes will no longer be sufficient to cover monthly payments. By 2032, the trust fund will be exhausted and Social Security will be unable to pay the full benefits older Americans have been promised....
From its beginnings, Americans have supplemented Social Security with private pensions and savings. Yet today millions of people retire with little to live on other than Social Security. Americans living longer than ever simply must save more than ever.....
Therefore, in addition to saving Social Security and Medicare, I propose a new pension initiative for retirement security in the 21st century. I propose that we use a little over 11 percent of the surplus to establish universal savings accounts – USA accounts – to give all Americans the means to save.
With these new accounts, Americans can invest as they choose and receive funds to match a portion of their savings with extra help for those least able to save. USA accounts will help all Americans to share in our nation's wealth and to enjoy a more secure retirement. I ask you to support them."
WILLIAM JEFFERSON CLINTON, State of the Union Address, 1999
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou99.htm#socialsecurity
".....Tens of millions of Americans live from paycheck to paycheck. As hard as they work, they still don't have the opportunity to save. Too few can make use of IRAs and 401-K plans. We should do more to help all working families save and accumulate wealth. That's the idea behind the Individual Development Accounts, the IDAs. I ask you to take that idea to a new level, with new Retirement Savings Accounts that enable every low- and moderate-income family in America to save for retirement, a first home, a medical emergency, or a college education. I propose to match their contributions, however small, dollar for dollar, every year they save. And I propose to give a major new tax credit to any small business that will provide a meaningful pension to its workers. Those people ought to have retirement as well as the rest of us. (Applause.)"
WILLIAM JEFFERSON CLINTON, State of the Union Address, 2000
http://www.washingtonpost.com/wp-srv/politics/special/states/docs/sou00.htm
The big difference between Clinton and Bush was NOT whether SS was in trouble!!!! It was in how to fund partial privatization of the national retirement plan to "save" it for future generations.
Oh, and another big difference between Clinton and Bush? The courage to be controversial and perhaps even (gasp) unpopular by taking on the hard roles of lead-lead and do-do and fix-fix, instead of just bloviating and passing the buck.
By the way- has anyone noted the irony that CONGRESS DOES NOT PARTICIPATE IN SOCIAL SECURITY? Any congress perosn who puffs and pouts about there being no crisis and there should be no changes in SS - should be encouraged to change that and have CONGRESS PARTICIPATE IN SS. After all, CONGRESS changed it so the military came under SS some years ago.
Or maybe CONGRESS could just give every American the same retirement plan that COINGRESS set up for itself (one that includes govt-supported private savings accounts)
" According to the Congressional Budget Office, Social Security will be able to pay out benefits at the current level until 2052. After "
A political office stating they are fine? Nah, no bias and lies there.
Why try and fix one of the Democrat programs? Don't make any changes to it. Just leave it alone like the Democrats recommend. Let the Democrats fix it after the final check is sent out in 2047.
How in the hell can these people say this with a straight face?!?!?!
The "Social Security 'Trust Fund'" is nothing more than a bunch of IOUs (treasury bills) that Congress uses to spend the money coming into the treasury! If any company were to try doing this, the executives would wind up in jail!
All money from income taxes, excise taxes, and payroll taxes goes into the general fund, where our congress-critters just can't wait to spend it. For accounting purposes, they issue treasury bills to the SS administration. There is NO money in the SS "trust fund!" So, when the time comes that the amount of money they have to pay out to SS beneficiaries exceeds that which comes into the treasury, they're going to have to make up that short-fall from the general fund.
Mark
Social Security will not go "flat bust" or "bankrupt." It can't, unless the law is changed.
Not true. See the Supreme Court ruling in "Fleming vs. Nestor (1960)" that ruled that Americans have no property rights to the money we've paid in Social Security taxes. Of course knowing that would require brainiac to actually have studied this subject, but I think that's behind him.
The charter of the Social Security trustees requires them to assume that the government will pay principal and interest on its debts held by the fund. It is not for the trustees to ask how this is to be done. But it's long past time that we asked.
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