Skip to comments.Social Security: A Green Swindle of Another Type
Posted on 10/08/2012 6:39:21 AM PDT by Kaslin
Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Democratic Speaker Tip O'Neill. But the basic structure is sound."
So said Obama in his first presidential debate with Mitt Romney before moving on to another topic that he was more interested in discussing.
But the reality is that Social Security--the federal government's largest program--is not sound. And the "tweaks" Obama spoke of (from the Reagan-O'Neill years) include raising the retirement age, increasing social security taxes, and delaying cost of living adjustments. And those "tweaks" in 1983 weren't the only changes that have been made to Social Security: the program has suffered many "tweaks" that purposefully expanded its scope throughout its existence, and the Social Security tax has been increased and applied to a larger and larger tax base since its inception.
So Social Security is "sound" if you reduce benefits, increase taxes, and offer benefits to fewer people. Sounds like a typical "green jobs" investment.
In other words, it's not structurally sound.
The problem is exacerbated by the fact that there's no Social Security trust fund. The "surplus" funds collected by Social Security over the years were used to buy U.S. Government bonds. Now Social Security is paying more in benefits than it's collecting in taxes so it has to "cash in" its U.S. Government bonds to cover those benefits.
The problem is that the U.S. Government doesn't have the money it owes Social Security. Instead of saving it, the U.S. Government spent Social Security's money each year on other programs politicians wanted. Now that Social Security needs to cash in its bonds, the U.S. Government doesn't have the money to pay it back.
Social Security started running deficits in 2010--that is, it hasn't been collecting enough money from workers to pay current benefits of retirees. Since Social Security has amassed a large stash of government bonds, it's been cashing in those U.S. Government bonds (which the federal government has to pay) to make up the difference. In 2010 Social Security demanded $49 billion from the Federal Government, in 2011 it demanded $45 billion, and it's projected to average $66 billion per year from now through 2018 before the deficit increases even faster.
So how is it that Social Security is still functioning? How has the government been paying back money it doesn't have?
By borrowing the money from someone else.
The federal government doesn't have enough money to pay for its own expenses, much less pay back money it borrowed from Social Security years ago. So when Social Security has needed to cash in tens of billions of dollars in bonds each year, the federal government sells new bonds to the public in order to pay off the old bonds that Social Security is cashing in. The federal government is using one credit card to pay off another.
The belief that Social Security is "solvent" through 2034 is nonsense. Social Security is already running deficits and is only being sustained by cashing in government bonds--and those bonds can only be paid by the federal government as long as it can borrow the money from the public. Social Security is only as "solvent" as the federal government, and it's very unlikely that the federal government will be able to make good on all the money it owes to Social Security through 2034. And once the federal government is unable to make good on those obligations, Social Security is bankrupt.
So it is that, once again, politicians like Obama will advocate for "tweaking" the Social Security program by increasing retirement ages, reducing benefits, and increasing taxes. By doing some "tweaking," they hope to reduce benefits or increase taxes just enough so that Social Security doesn't have to cash in its bonds. The goal of these politicians is to make sure that the federal government doesn't actually have to ever pay back the trillions it borrowed from Social Security.
But just as the "tweaks" in 1983 didn't permanently solve the problem, neither will similar tweaks today. They merely kick the can down the road and put off the day that we have to fundamentally address the unsoundness of the structure of Social Security.
When Obama suggests that Social Security can be fixed by making minor tweaks, he's being disingenuous. Yes, minor tweaks can kick the can down the road for a few years. But it will come at the cost of increasing taxes, decreased economic growth, higher unemployment, and a much more difficult day of reckoning when we can't kick the can any further down the road.
To fix Social Security will require a fundamental restructuring of the program. It won't be minor. And, thanks to demagoguery and denial of fiscal reality by Democrats, it will be difficult to accomplish.
Maybe even impossible.
And at the presidential debate last Wednesday, Obama dismissed and ignored the problem once again.
The core thing to know: Social Security was set up (deliberately) at a time when the average life expectancy was 60. Work and pay into the system until you die. Get nothing for it. That was the funding model. Now, in some cases, people lived to be 65. They would get checks until they died -- you know: at age 66. Or 67. Maybe some would live to 95, but almost no one did that.
We made medical advances and now most people live past 65. Most people take payouts. Most people think they deserve payouts . Lots and lots of people get payouts for decades after they retire.
That math doesn't work.
If we return to an equation where the retirement age is 5 years past the life expectancy age, then the system might work. So ... retirement age = 78?
I don't think SS can be "fixed" in any real sense. I think it should be scrapped. And -- to repeat -- the original model was that you would work and pay into the system your whole life, and never actually get a payment. That was the plan. They could scrap it tomorrow, and no one would truly be getting "ripped off".
It was a scam the whole time.
And, thanks to demagoguery and denial of fiscal reality by Democrats, it will be difficult to accomplish.
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I have absolutely ‘no love’ for Democrats, Libs or RINOS, but ALL parties and branches are guilty when it comes to this - as well as many others.
You now have lawyers advertising on the idiot box that “All we specialize in is Social Security Disability” and 20 somethings drawing SSD for job related stress.
The one thing for certain, we will probably never be able to weed the imposters out BUT had better start tightening up on who is eligible to start with.
Believe one of the larger groups are parents and dependents of newly naturalized citizens...? Think the Koreans took full advantage of that loop hole.
I have ‘donated’ to the program since the early 50’s (with exception of Navy mid 50-mid 60’s ..however, ‘they’ did adjust the sked to include those years for the final payout)
and paid full bore since the early 90’s.
Never collected welfare, unemployment, workmans comp or the like, didn’t start drawing my ‘little bit’ until 69 or so, so this is hardly an ‘entitlement’, despite the current pols trying to put EVERYONE in the hopper of Govt dependence, whether it be SSA, Military retirement or your own retirement plan that ‘they’ managed to mismanage.
My prediction is everybody gets the amounts promised.
But it will be paid in Baraqqi/Bernanke/Geithner “minibucks”
Yes, yes, yes. Finally.
Unfortunately SS is so popular with voters, especially those over 50 who vote, that Republicans (GOP) are terrified to try to tell the truth above and get attacked by dems, the truth that SS is running big deficits, as is Medicare which are much bigger deficits.
What was the life expectancy of an 18 year old at the time? That number was skewed by childhood mortality, which largely disappeared as a statistically significant factor starting with children after the 1940s but has no real effect on Social Security's budget.
[Typed a couple minutes later after actually searching for the info]
http://www.infoplease.com/ipa/A0005140.html has a table of remaining life expectancies for people of various ages.
I don't know if this table is predictive at the time (what actuaries in 1940 predicted) or if it has been corrected later with actual survival statistics since then.
Well, either way it lists the life expectancy of a newborn white male in 1939-1941 as 62.81 years, while a 20 year old's life expectancy is 47.76 more years (or 67.76 total). So five years of your original 60 year estimate is from childhood mortality.
An even bigger assumption was that the population would continue growing quickly, so one generation would rely on an even larger couple of generations following it to pay for its retirement. Between less natural growth and a longer retirement we now have fewer and fewer worker supporting each retiree.
but is your conclusion that the math of Social Security is basically something that does not work? That is my conclusion. I see it as a Ponzi scheme.
Yes. The only way it has kept going this long is by raising the combined tax rate from 2% to 12.6% (temporarily lowered to 10.6% now) and raising the cap from $3,000 to $110,100 while if it kept up with inflation it would only be $46367.
***In other words, it’s not structurally sound.***
Say it ain’t so! Say it ain’t so! Here is the promise from 1964! Bookmark this link as it is very hard to find on the SS web page!
“The program is designed so that contributions plus interest on the investments of the social security trust funds will be sufficient to meet all of the costs of benefits and administration, now and into the indefinite future—without any subsidy from the general funds of the Government. Both the Congress and the Executive Branch, regardless of political party in power, have scrupulously provided in advance for full financing of all liberalizations in the program.”
And HERE is where your money goes. Read and weep!
***I see it as a Ponzi scheme. ***
A few months ago AARP Bulletin had an editorial on how the SS program was NOT a Ponzi Scheme. Over and over the said the same thing in the article.
So, It is NOT a Ponzi Scheme!
Then a few pages on there was an article by Jane Bryant Quinn in which she told how the SS system worked. Her description, without saying it, was just like a Ponzi scheme.
sadly, as weve allowed the 'melting pot' to diminish our once individual, FReedom oriented ancestry, by not requiring assimilation to the first world, weve trended towards a third world welfare state...
technology and convenience have also allowed self sufficiency to be lost as well...now many/most SS recipients couldnt possibly survive w/o it...not to mention 40 million children being killed off that couldve/shouldve been there to support the parents in the golden years...
at this point, an adult cannot politically survive if they speak honestly about the SS insolvency, when the econ 101 is so straightforward that any idiot could understand it...
printing money to cover the IOUs in the *lockbox* is obviously circling the drain...why the old timers arent demanding real cuts to everything else, to the tune of a couple $ TRILLION bucks a yr of unneccesary gubmint could realize the *promise* of a tax refund in old age that actually has a bit of value, rather than being *paid* in monopoly money from helicopter ben and bambam...
And worse yet because both parties and the media, pretty much everyone on TV, says it is solvent for XXX years with that $2T trust fund,
I have found that very close to no-one I meet, even those NOT attached to SS (under 50, under 40, under 30) yet even know it is actually running deficits paid for by the Federal reserve buying US treasuries to buy back those SS trust fund IOUs.
This is the most successful and largest hoax of all time.
When I do tell them the truth:
Young people say :”I already assume I wont get it so I dont care about it.”
Others say one or more of these:
“Cut welfare instead of SS”
“Cut defense instead of SS”
“Tax the rich instead of SS cuts”
Here’s another one :
“its the slow economy that is causing the deficits so we cant cut spending or raise taxes until the economy recovers”
But it never recovers as spending goes up and taxes go down, maybe the wrong tax cuts.
The 2% which is not being paid now by employEEs MUST be restored.
Billions of dollars are NOT going into a system which is being padded with long-term unemployed who are being shifted to Social Security Disability by Obama;s unemployment centers. Once these persons are into that system, there is NO ‘expiration date’ like unemployment. If you go into SSDI when you are 35, you will be there until you go onto Social Security.
The system is collapsing and no one wants to hear it.
” Unfortunately SS is so popular with voters, especially those over 50 who vote, that Republicans (GOP) are terrified to try to tell the truth above and get attacked by dems, “
Republicans in D.C. are afraid PERIOD!
Social Security? Hey, Last week I contributed $50,000 to social security. REALLY. I found out that for the last four years I could have been getting over $1800 a month as a ‘widow’ of my deceased x husband. (has to be a long term marriage) I had no idea such a thing existed for X spouses and was told about it by SS a few years ago and I was told I had to be 65 to apply, but no, any age works. And no, none of it is retroactive. I’m turning 65 in a few weeks, so I called to set up my own social security benefits when this was told to me. I have my own Social Security to file on.
Now I want to see Joe Biden and Obama kick in their $50,000 to ‘save’ social security. No wonder it’s broke with all the worthless x spouses of any age getting benefits. And NO, you don’t need a dependent child. INSANE