Social Security Trust good to 2035

[timo2]

I've scheduled in a 20% SS haircut on my spreadsheet. If I'm fortunate enough to still be alive at 82. DW will only be 75 though.

 

[Amethyst]

Federal retiree (CSRS) here. Your post is entirely correct. Lifetime pensions for one-term representatives is up there with "Don't you dare call Social Security an entitlement!"

To add and clarify (and no doubt someone will correct me if I get this wrong):


Policymakers (members of Congress and the like) basically earn the same retirement benefits other Federal workers get, based in time of service and age. The former system (Civil Service Retirement System, or CSRS) was the one that paid a defined benefit pension, and the employees didn't participate in Social Security. The "new" system (Federal Employees Retirement System, or FERS) began in the 1980s, and covered all new employees going forward, with those under CSRS given the option to switch. FERS retirement benefits consist of the Thrift Savings Plan, or TSP (basically a 401K) and a tiny pension, along with the ability to participate in the Federal health insurance program (by paying premiums) in retirement. The majority of CSRS participants have already retired, or will soon.


The frequently-circulated nonsense that members of Congress get lifetime pensions after one term, etc. is just that -- nonsense. The only Federal employee that gets a lifetime salary is the President.

 

[Cut-Throat]

It's time to do something about it instead of just talking. We seem to be able to cut taxes without any consideration of the long term effects but ignore our major problems without any thought whatsoever.

Well that should tell you everything you need to know.

 

[ShokWaveRider]

Well that should tell you everything you need to know.

That was profound!

 

[Independent]

I used to believe that no congresscritters would back a bill that balanced the SS income/outgo. Such a bill would require either raising taxes or cutting benefits, and those are both politically DOAs.

But, I was wrong. HR 860 (Social Security 2100) would actually do the trick. The big numbers come from raising taxes.

The bill has one sponsor and 203 cosponsors. If they can get 14 more reps, they will have a majority of the House on board. IMO, that's a big deal.

The sponsor is the chairman of the House Subcommittee on Social Security, Committee on Ways and Means. That would normally mean that the bill will get hearings.

I'm not saying that this is my idea of the best bill. But, it could get things moving.

https://larson.house.gov/social-security-2100
https://www.congress.gov/bill/116th-congress/house-bill/860

 

[Independent]

These are just numbers in a spreadsheet, no? There's no lockbox holding FICA/SS money separately. Incoming FICA is commingled with other money coming into the government. If dollars commingle on the way in, SSA can draw from the same big pile when needed in the future.

Not true. The SS trust fund is in special Treasury securities. The FICA/SS money is as separate as it can be and accounted for to the penny. SS can only draw from those bonds and current SS taxes, and cannot draw from General Revenues.

Now, you could argue that the Government already spent the excess and issued bonds to replace it, but those bonds Treasuries so are quite real as long as the U.S. Government is around.

I agree with GrayHare. The trust fund has no economic significance. Physically, it is just a worksheet.

I also agree with USGrant. The trust fund has a lot of legal significance. The secretary is required to pay benefits as long as the number on the spreadsheet is positive, and is prohibited from paying benefits if the number is negative.

The legal side matters to those of us getting benefits.

(I disagree with USG on the "as long as the US government is around". The US government can choose to default on the bonds. That would, of course, require two houses of congress and the prez. But, it could be done. Since this is a special series of bonds, such a default would not have the extreme economic significance of defaulting on other bonds. But, in practice, it is easier for congress to reduce benefits so the issue of bond default never comes up.)

 

[joeea]

My thinking is that this means the IOU’s are coming due and this will need to be addressed right away. I mean come on, I don’t think Al Gore got his lock box, so isn’t the money going to come from the general fund and start to contribute to the annual budget deficit?

No. IOUs are already counted as part of the deficit. No new contribution.

There is nothing to be addressed right away.

Cashing in the IOU’s will hopefully spur action.

Seems very unlikely that "cashing in the IOUs" spurs anything.

 

[joeea]

I read it as 20% cuts immediately across the board - existing and future.

That is the current rule.

 

[joeea]

I used to believe that no congresscritters would back a bill that balanced the SS income/outgo. Such a bill would require either raising taxes or cutting benefits, and those are both politically DOAs.

But, I was wrong. HR 860 (Social Security 2100) would actually do the trick. The big numbers come from raising taxes.

The bill has one sponsor and 203 cosponsors. If they can get 14 more reps, they will have a majority of the House on board. IMO, that's a big deal.

The House, yes. The Senate, no.

 

[Independent]

I read something that said that SS will stop bringing in more than they are paying out in 2020. This will require that they start tapping the Trust Funds. My thinking is that this means the IOU’s are coming due and this will need to be addressed right away. I mean come on, I don’t think Al Gore got his lock box, so isn’t the money going to come from the general fund and start to contribute to the annual budget deficit? 2035 is just the point where there are no more IOU’s to cash. That doesn’t mean that there won’t be issues long before that. Cashing in the IOU’s will hopefully spur action.

The OASDI benefits have been greater than the taxes in every year since 2010. The annualized spreadsheet is table VI.A.3 here: https://www.ssa.gov/OACT/TR/2019/VI_A_cyoper_hist.html#282924

The great majority of Americans didn't notice.

However the shortfall has been less than the interest credited, so the balance has continued to grow. In 2018, the growth was 0.3% of the revenue (including interest). That's tiny, but I don't recall any headlines. Maybe there is some psychological impact of the balance starting to shrink, I'm skeptical.

 

[Sunset]

Congress folks have to work 5 years to get a pension, so 1 term won't make it, but 2 will and they don't have to be consecutive.
Run for Senate though and retire after 1 term:

Frankly either one is a pretty sweet deal... wonder who voted for it... ?

But ".... senators are eligible for a pension after one term, but it won’t be their full salary."

https://www.factcheck.org/2015/01/congressional-pensions-update/
"CRS, June 13: Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service....."

 

[jimandthom]

Congress folks have to work 5 years to get a pension, so 1 term won't make it, but 2 will and they don't have to be consecutive.
Run for Senate though and retire after 1 term:

Frankly either one is a pretty sweet deal... wonder who voted for it... ?

But ".... senators are eligible for a pension after one term, but it won’t be their full salary."

https://www.factcheck.org/2015/01/congressional-pensions-update/
"CRS, June 13: Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service....."

I hope that people read the whole article, as it more properly and fully explains the calculation. Seems to be pretty much the same policy, CSRS or FERS, that my spouse retired from with 35 years.

 

[Crabby Mike]

I hope that people read the whole article, as it more properly and fully explains the calculation. Seems to be pretty much the same policy, CSRS or FERS, that my spouse retired from with 35 years.

It's FERS now, and the pension would be quite small with only 6 years of service (one term Senate).

 

[youbet]

Let's hope any adjustments to SS (input and/or output) share the burden among all. Today's youngsters already have a tougher row to hoe than we geezers, so why dump all the burden on them?

 

[Cut-Throat]

It seems to me that the Current Fiscal problems are much worse than what may or may not happen in 2035.... If we cannot solve today's budget problems, why all the concern for something over 15 years down the road?


If the powers that be concerned themselves with the present, it would help things immensely for the future.

 

[Murph]

What they are not allowed to say is: "The Trustees recommend that lawmakers do absolutely nothing until the last minute, if at all, to ensure that they get re-elected, since they would not have raised taxes."

Yet another example for my European/Asian friends where they say "Why doesn't this get fixed, since it is so far away and you know it is coming?", and I just have to shrug my shoulders and say I don't know.

Why don’t they simply eliminate the “cap” on annual deductions? Seems this would have the least impact on those that can least afford it.

 

[joeea]

Why don’t they simply eliminate the “cap” on annual deductions? Seems this would have the least impact on those that can least afford it.

Who would you guess would be opposed to that change?

 

[samclem]

Who would you guess would be opposed to that change?

joeea, do you have an opinion you'd like to put forward or a point you'd like to make?

 

[joeea]

joeea, do you have an opinion you'd like to put forward or a point you'd like to make?

Am I allowed to make points about politics here? I thought that was forbidden.

My opinion is that the proposed change has no chance of actually happening.

 

[Beststash]

Why don’t they simply eliminate the “cap” on annual deductions? Seems this would have the least impact on those that can least afford it.

I think that is the simplest solution myself along with gradually raising the age FRA.

For less physical jobs that would not be a big deal, however, as a 69 YO I can definitely tell that I do not have the stamina for physical work that I had just 5 years ago. So I have mixed feelings about raising the FRA??

I hope whatever the solution that Congress quits pushing the problem down the road - it will just get harder.

 

[pb4uski]

Congress folks have to work 5 years to get a pension, so 1 term won't make it, but 2 will and they don't have to be consecutive.
Run for Senate though and retire after 1 term:

Frankly either one is a pretty sweet deal... wonder who voted for it... ?

But ".... senators are eligible for a pension after one term, but it won’t be their full salary."

https://www.factcheck.org/2015/01/congressional-pensions-update/
"CRS, June 13: Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service....."

I hope that people read the whole article, as it more properly and fully explains the calculation. Seems to be pretty much the same policy, CSRS or FERS, that my spouse retired from with 35 years.

It's FERS now, and the pension would be quite small with only 6 years of service (one term Senate).

Yes, jimandthom and Crabby Mike have it right. There seems to be an urban myth out there about congressional pensions... the worst are ignorant conservative friends of mine (I'm conservative too) that seem to think that if you serve one term in congress that you get paid for life... a total myth.. the pension benefits are similar to other federal employees... but if you have a 20+ year congressional career then you do get a nice pension.

 

[Tiger8693]

I am all for eliminating the cap, or having a donut to start again at a higher amount, and I am a beneficiary of that currently. Just have to analyze the impact of increased SS payout to those folks due to that action.

 

[Tiger8693]

Who would you guess would be opposed to that change?

Not me, and I am a direct beneficiary of the current limit. Not everyone "successful" enough to go beyond the limit is an @$$....

 

[lucky penny]

Who would you guess would be opposed to that change?

The public perception of Social Security since its inception (I think) is that it isn't a welfare program since the benefit everyone gets bears some relation to what they contributed, with the calculation structured so that the lowest earners get proportionally more. If the cap is removed without proportionately increasing the benefit for higher earners to some extent relative to their contributions, it becomes a welfare program financed by the rich. That's a very significant change that could erode popular support.

 

[joeea]

The public perception of Social Security since its inception (I think) is that it isn't a welfare program since the benefit you get bears some relation to what you contributed, with the calculation structured so that the lowest earners get proportionally more. If the cap is removed without proportionately increasing the benefit for higher earners to some extent relative to their contributions, it becomes a welfare program financed by the rich. That's a very significant change that could erode popular support.

I agree.

And it's more than just a public perception - it was specifically intended to be that way. It was a smart political move at the time, and continues to be so.

The cap will be raised, but not removed.