Boehner: Raise SS age and means-test benefits

[MasterBlaster]

Yes and no. The government has spent the money, but SS got government bonds in exchange. What did people expect to be done with the money in the "lock box"--piled up as currency in a big vault? Used to buy equities (making the government a stakeholder in American businesses--even more than they already are?). But, yes, now the taxpayers need to pay back those bonds, and that will mean more taxes.

In leau of your expected SS payment we will issue you some bonds to frame on your wall.

We wouldn't want to cheat you out of what's due you.

 

[Emeritus]

To address another point of noise--there's precious little "productive government spending" from an economic viewpoint. Defense spending is vital (at some level), but produces little payback economically. Roads and infrastructure might be an exception--government expenditures enhance economic growth by making the private sector more efficient--to a point. Government-sponsored high-speed rail through high-importance congressional districts is likely not a net winner.

Agree on the last point, almost no politically inspired prestige projects are productive. The most important and productive government investment is in human capital. Schools and public health. Courts and the rule of law (yes I know everyone hates lawyers but the alternative is always worse) are extremely productive, since no one will invest in minority interests in private firms without a strong rule of law culture. (look at Russia today) Because of the enduring problem of corruption of one form or another the Russians, the Chinese, the French, Japan and a number of other countries engage in what can be described as a state/corporate model. In this model "profits" from enterprises flow to those with political clout rather than traditional investors. These can be individuals, unions or political parties. Corruption is simply redefined as depriving the politically well connected of their share.

In the USA we are betting that a high rule of law culture and financial transparency can combine with investments in human capital to make a more productive economy and one which can ensure an equitable distribution of the financial benefits. We shall see if it works.

 

[Texas Proud]

Funded with what? What do you define as "money"? Federal reserve notes?
Euros? Pounds sterling ? All are promises based on future economies.
If you have a company pension that is "funded" with AAA US Government bonds how is it any different from the government bonds held by SS?
Shares of stock are pieces of paper that also depend on a functioning economy. It is freshman economics that no asset is "worth" anything without a functioning economy to turn the asset into income. Try taking gold bars to a desert island

The amount of money that SS has in bonds is not enough to pay all current or future liabilities that have already accrued.... in the private sector... they are supposed to have that amount invested.. most private pensions could pay 80ish % of their benefits if the plan stopped... SS (and this is a big guess) could probably pay 5 to 10%... maybe less....

That is what I mean by funded...

 

[Emeritus]

In leau of your expected SS payment we will issue you some bonds to frame on your wall.

We wouldn't want to cheat you out of what's due you.

Go ahead and send me all your US government bonds. I'll take care of that worthless paper for you for free. If you don't have any bonds, all your US currency will do
It's all paper.

 

[chemist]

According to the neat WolframAlpha knowledge engine Martha recently steered us to:
-- In 1935, the average person reaching 65 in the US could expect to live to be 77.76 years old, thus drawing on SS for 12.76 years.
-- In 2005. the average person reaching 65 in the US could expect to live to be 83.82 years old, thus drawing on SS for 18.82 years.

So, the average senior is drawing checks for about 1/3 longer now than when the program started. Add in all the other benefits that SS didn't have in the beginning (for kids, disability, etc) plus the demographic changes, and it's easy to see why the Ponzi scheme (beloved as it is) is in trouble.

Closer to 1/2 again as long, not 1/3 longer. 47.5% longer to be precise.

 

[Emeritus]

The amount of money that SS has in bonds is not enough to pay all current or future liabilities that have already accrued.... in the private sector... they are supposed to have that amount invested.. most private pensions could pay 80ish % of their benefits if the plan stopped... SS (and this is a big guess) could probably pay 5 to 10%... maybe less....

That is what I mean by funded...

OFGS Corporate stock is just a right to a future stream of income. If you want to compare SS to a private fund SS taxes are an "asset" "owned" by SS. That is a right to a future income stream which even under the worst assumptions is over 70 % of future obligations.

 

[Texas Proud]

Yes and no. The government has spent the money, but SS got government bonds in exchange. What did people expect to be done with the money in the "lock box"--piled up as currency in a big vault? Used to buy equities (making the government a stakeholder in American businesses--even more than they already are?). But, yes, now the taxpayers need to pay back those bonds, and that will mean more taxes.

Noo.. what I expected is that they do NOT count the 'profit' from SS to offset the 'loss' on the rest of the budget to make it look like the rest of the gvmt deficit was not as big as it really was.... we MIGHT have asked our gvmt officials to spend LESS so when it was time to pay off all those bonds we would not be in a pickle where going to the market for an additional $3 trillion would be laughed at...

 

[samclem]

Noo.. what I expected is that they do NOT count the 'profit' from SS to offset the 'loss' on the rest of the budget to make it look like the rest of the gvmt deficit was not as big as it really was.... we MIGHT have asked our gvmt officials to spend LESS so when it was time to pay off all those bonds we would not be in a pickle where going to the market for an additional $3 trillion would be laughed at...

I'm guessing you're also not a supporter of the magic accounting whereby the huge increase in government spending on health care will somehow reduce the deficit (partly by counting inflows as "increased revenues" but by ignoring the later indebtedness the system countenances)?

The recent health care fight and funny math provide a close-at-hand example of the same tricks and gymnastics that let us get into trouble with SS. In comparison to Medicare and the new health care legislation, SS is a model of prudent, sober government financial stewardship. Which is scary.

 

[MasterBlaster]

Noo.. what I expected is that they do NOT count the 'profit' from SS to offset the 'loss' on the rest of the budget to make it look like the rest of the gvmt deficit was not as big as it really was.... we MIGHT have asked our gvmt officials to spend LESS so when it was time to pay off all those bonds we would not be in a pickle where going to the market for an additional $3 trillion would be laughed at...

You can thank Lyndon Johnson for that. In 1968 they put SS and the regular budget accounting together into a "Unified" budget. Before that SS was accounted for separately.

 

[TromboneAl]

Isn't it nice that most of us are close enough to SS age that the government is afraid of changing anything that will affect us?

 

[ziggy29]

Isn't it nice that most of us are close enough to SS age that the government is afraid of changing anything that will affect us?

True of anyone older than me. I suspect I'd get screwed while those only slightly older don't. That's what happens when I'm a few months too young to be a Boomer...

 

[W2R]

Isn't it nice that most of us are close enough to SS age that the government is afraid of changing anything that will affect us?

At 62, I'd be really furious if they changed anything having to do with my SS (which I haven't yet claimed). I don't imagine they will change much, though I suppose they could lower the COL increases. Oh wait, they are 0.0% this year.

I'd worry if I was younger than 55, though.

 

[Emeritus]

At 62, I'd be really furious if they changed anything having to do with my SS (which I haven't yet claimed). I don't imagine they will change much, though I suppose they could lower the COL increases. Oh wait, they are 0.0% this year.

I'd worry if I was younger than 55, though.

None of the suggested changes will happen any time soon. If you "means test" social security you have to eliminate the caps on earnings, the focus on earned rather than total income and the benefits for non working spouses. None of these is relevant to a means tested welfare program for the elderly. Taxing all income at the SS rate and eliminating "unearned" spousal benefits would solve all the SS system problems without any other change.

What GOP type is going to tax the "rich" i.e. those receiving unearned income and income over the cap to support the means tested elderly?

Not to mention this proposal would be a "kick in the teeth" to all LBYM savers.
It's a non starter


This is why IMHO its all political hot air.

 

[IndependentlyPoor]

The SSA has a report with more than you ever wanted to know about funding here:
2009 Trustees Report: Section II.D, Projection
Some charts from it

Trust fund to expenditure ratio

Income and cost as percent of taxable payroll

and the one I was looking for, income less cost

this one is a goody, workers per beneficiary

And projected dates for running out of money

 

[lets-retire]

Isn't it nice that most of us are close enough to SS age that the government is afraid of changing anything that will affect us?

Enjoy your champaign. Hopefully there will be half a glass of water left in the system when I am old enough to sign up.

 

[IndependentlyPoor]

You can thank Lyndon Johnson for that. In 1968 they put SS and the regular budget accounting together into a "Unified" budget. Before that SS was accounted for separately.

Yes, and I have never forgiven him for it. It is the old Guns and butter problem. Johnson wanted the Great Society and the Vietnam war and resorted to accounting chicanery to get it done. We have been suffering the consequences ever since.

 

[Texas Proud]

SOOO,

Looking at the report... if we said 'lets stop this NOW'... the heck with everybody...

There appears to be $2 trillion at the end of 2008... they are paying out over $0.5 trillion... so in 4 years there would not be any more money for ANYBODY...

Now.. the unfunded liability is "However, given a proper understanding of Social Security’s current unfunded liabilities—variously estimated at from$4
trillion to $11 trillion"

This is why I call it a Ponzi scheme....

 

[Texas Proud]

I'm guessing you're also not a supporter of the magic accounting whereby the huge increase in government spending on health care will somehow reduce the deficit (partly by counting inflows as "increased revenues" but by ignoring the later indebtedness the system countenances)?

The recent health care fight and funny math provide a close-at-hand example of the same tricks and gymnastics that let us get into trouble with SS. In comparison to Medicare and the new health care legislation, SS is a model of prudent, sober government financial stewardship. Which is scary.

IMO, the new heath care plan is different than SS... for a good while now, SS has been running a true surplus... the gvmt was taking in more than it was spending... the problem is that the rest of the gvmt was spending that surplus and giving SS an IOU... but that IOU was not counted toward the deficiet or the debt.. so when they said 'we will have a balanced budget'.... that was only because they ran a surplus on SS...

In the coming years... SS wants their money back... so what agency is going to reduce their spending so we can have a balance budget again NONE... they will go out and borrow the money... and maybe even split the accounting again so the deficiet does not look as bad....



As for health care... they could have raised taxes without paying out so much and paid off the debt... saying otherwise is just lying...

 

[IndependentlyPoor]

I believe this is true

so when they said 'we will have a balanced budget'.... that was only because they ran a surplus on SS...

but is it true that the Treasuries held by the SSA do not count toward the commonly reported total debt?

the problem is that the rest of the gvmt was spending that surplus and giving SS an IOU... but that IOU was not counted toward the deficiet or the debt..

It may well be another bit of trickery. I hope not.

 

[bbbamI]

Isn't it nice that most of us are close enough to SS age that the government is afraid of changing anything that will affect us?

....and we get senior citizen's discounts......

Who knew it could be so much fun being closer to death?

 

[MasterBlaster]

Income and cost as percent of taxable payroll

and the one I was looking for, income less cost

These charts assume that there is indeed a trust fund of which to draw money from. Conclusions drawn from that are unrealistic.

A more realistic chart would show that the unified US budget is in big trouble as the boomers retire. SS does not and will not operate in it's own little universe outside normal budget and debt service issues.

What is the verticle axis of the second graph - Is that trillions of dollars ? Notice the big negative slope starting around 2017. If my eyeball is calibrated correctly it looks like they are short around $500 billion a year forever just for SS starting then.

But that is just SS. Medicare/medicaid are the real issues going foreward. The are an order of magnitude harder to support than SS. Do you have the charts from them ?

cleraly these obligations are not sustainable - at any level of taxation. Big cuts and big tax increases are inevitable.

 

[IndependentlyPoor]

....and we get senior citizen's discounts......

Who knew it could be so much fun being closer to death?

I couldn't resist

YouTube - Time - Pink Floyd

 

[samclem]

IMO, the new heath care plan is different than SS... for a good while now, SS has been running a true surplus... the gvmt was taking in more than it was spending...

Take a look at the Long Term Care component of the new health care law. It's optional (so only those who are most likely to need it, and the ones most likely to pay in less than they take out. will sign up). The money taken in as premiums gets counted to reduce the annual budget deficit, even as it creates a tremendous unfunded "owed entitlement" years down the road. Just like SS.

That's part of the budget trickery by which the ten-year cost of health "reform" was driven down.

Link

The Congressional Budget Office projected that for the program to be self-sufficient, average annual premiums would have to be $1,477, although the legislation provides for substantial price breaks -- with premiums as low as $5 a month -- for students and the poor. Actual premium levels will depend on factors in including your age at enrollment.
What will you get in return?
After paying in for at least five years and working at least three of those years, you'll get at least $50 per day if you need help with your daily care, and possibly more if your care needs are greater. That comes to $18,250 in annual benefits. If the average benefit was $75, as projected by the program's architects, that would come to $27,365 annually.

Does this sound sustainable? Private estimates say it won't be.

We haven't learned anything from the SS accounting mess.

 

[bbbamI]

Ahhh...yes indeed Pink Floyd....

Brought back memories of sittin' around with a group of friends [-]smokin'[/-] contemplating life....

...I just wish I could remember what we discovered...

 

[IndependentlyPoor]

These charts assume that there is indeed a trust fund of which to draw money from. Conclusions drawn from that are unrealistic.

I do seem to remember that the Treasuries issued to the SSA are "special", but I don't know how special, and haven't researched it. They might be tricky.

However, I'm beginning to feel like I'm playing whackamole. Why are medicare, medicade, and health care reform suddenly popping up?

Back to the original subject...

Raising the retirement age may well indeed be a good long-term plan. However, based on the stuff I have read (referenced in an earlier post) on the SSA site, it doesn't seem like we will even start getting into trouble with SSA (other budget problems are aside) until 2020 or so.