Social Security: It's worse than you think

[Quantum Windbag]

I knew it was bad, but it turns out that the numbers I have been looking at depend on an erroneous assumption about life expectancy. It seems they expect everyone my age to be dead by 2028.

CONGRESS and President Obama have pushed through a relatively modest stopgap measure to avoid the “fiscal cliff,” but over the coming years, the United States will confront another huge cliff: Social Security. In the first presidential debate, Mr. Obama described Social Security as “structurally sound,” and Mitt Romney said that “neither the president nor I are proposing any changes” to the program. It was a rare issue on which both men agreed — and both were utterly wrong.
For the first time in more than a quarter-century, Social Security ran a deficit in 2010: It spent $49 billion dollars more in benefits than it received in revenues, and drew from its trust funds to cover the shortfall. Those funds — a $2.7 trillion buffer built in anticipation of retiring baby boomers — will be exhausted by 2033, the government currently projects.
Those facts are widely known. What’s not is that the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted.
We reached these conclusions, and presented them in an article in the journal Demography, after finding that the government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.) More retirees will receive benefits for longer than predicted, supported by the payroll taxes of relatively fewer working adults than projected.

http://www.nytimes.com/2013/01/06/opinion/sunday/social-security-its-worse-than-you-think.html?_r=1&

There are charts at this link.

Social Security?s Flawed Forecasting - Graphic - NYTimes.com

 

[boedicca]

I posted this in another thread. It bears repeating here. I also recommend that people read the Trustees report each year. I combination with the Annual Financial Report of the United States (produced by the Treasury), one gets a very start understanding of how truly in debt our nation is.

S.S. is not going bankrupt only if one assumes that SS taxes will increase dramatically.

Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will grow rapidly from 11.3 percent in 2007, the last pre-recession year, to roughly 17.4 percent in 2035, and will then decline slightly before slowly increasing after 2050.[/ Costs display a slightly different pattern when expressed as a share of GDP. Program costs equaled 4.2 percent of GDP in 2007, and the Trustees project these costs will increase gradually to 6.4 percent of GDP in 2035 before declining to about 6.1 percent of GDP by 2050 and then remaining at about that level.


SS benefit costs as a share of workers' taxable earnings is projected to increase by 53%, so expect such an increase in the current 6.2% SS tax rate over the next 20 years. (The alternative is to cut benefits).

Also, Disability is nearly insolvent now; hardly surprising as the Obama Administration has used it to move people out of the workforce for two purposes: Income Redistribution and to lower Unemployment Stats.

However, the Disability Insurance (DI) program satisfies neither the long-range test nor the short-range test. DI costs have exceeded non-interest income since 2005, and the Trustees project trust fund exhaustion in 2016, two years earlier than projected last year. The DI program faces the most immediate financing shortfall of any of the separate trust funds; thus lawmakers need to act soon to avoid reduced payments to DI beneficiaries four years from now.

The quotes are from:

A SUMMARY OF THE 2012 ANNUAL REPORTS
Social Security and Medicare Boards of Trustees

Trustees Report Summary

 

[Samson]

Well perhaps after pot is legalized nationally life expectancy will decline as lung cancer prevails.

See, you need to begin to appreciate the silver lining of unintended consequences

 

[waltky]

Snafu in Social Security Admin. gives aliens two S.S. numbers...

Government Gave 4,317 Aliens 2 Social Security Numbers a Piece
January 29, 2013 – A report from the Social Security Administration Inspector General (IG) found 4,317 instances where a non-citizen was able to obtain two Social Security numbers, including 542 instances that happened since 2001.

“We identified 4,317 instances where the Numident record of 2 SSNs assigned to noncitizens contained matching first, middle, and last names; dates and places of birth; gender; and fathers’ and mothers’ names,” the IG reported on Dec. 10, 2012. Numident – which stands for Numerical Identification System – is the master file of applications for social security numbers. The IG found that SSA had issued multiple numbers to 4,317 non-citizens from 1981-2011. The IG found that the errors occurred because SSA did not cross-check the names of the people applying for an additional Social Security number. “In each case, SSA had not cross-referred the records, indicating that SSA either was not aware it assigned two SSNs to the same noncitizen or it believed the number-holders were not actually the same person.”

The review was initiated after a non-citizen was convicted of defrauding the government out of $55,000 in Social Security and federal housing payments by using two Social Security numbers, the report said. While no further fraud was found, the IG acknowledged that the potential for fraud still existed. “We did not identify any instances where SSA issued benefit payments under both SSNs [social security numbers]. However, we identified other activity on these records that indicated potential abuse or fraud.” The IG found 514 cases where a non-citizen had reported work under both numbers, making them appear eligible to receive double the federal benefits. In 80 of those cases, at least 10 years of earnings had been reported under both numbers.

Surprisingly, most multiples were issued by the same office, meaning that a non-citizen obtained a Social Security number from a Social Security office and then returned to that same office and obtained a second number, despite using duplicate information. A total of 3,320 multiples were given by the same office, with nearly half of those being issued within a week. The report said 1,252 multiples were issued by the same office within a week’s time – 251 multiples were issued by the same office in the same day - and 216 of those same office, same day multiples were issued prior to 2000.

In all, the IG found that SSA has gotten much better since 2001 at preventing the issuance of multiple Social Security numbers to non-citizens but was not successful at preventing it entirely. “SSA controls designed to prevent issuance of multiple SSNs to noncitizens have been effective at preventing these occurrences, and the number of such cases has declined significantly over the past 30 years. However, SSA’s records indicated that, on occasion, the controls did not prevent the unauthorized issuance of multiple SSNs to noncitizens,” the report concluded. “Noncitizens who obtain multiple SSNs have used, or could use, the SSNs to defraud Federal benefit programs or to conceal work activity.”

Source

 

[Lakhota]

Social Security still has a $2.7 trillion surplus and is good to around 2033 - even with no changes.

Plus, Social Security doesn't cost the government one penny - other than the interest paid on the government bonds held by Social Security - just like China and other holders of U.S. debt.

Social Security is the largest holder of U.S. debt - which is why NaziCons would like to fuck it over.

 

[OKTexas]

What we need is another payroll tax holiday, that'll help.

 

[auditor0007]

What we need is another payroll tax holiday, that'll help.

While I think we all understood the purpose behind it, we really could not afford it. The thing that bothers me is how conservatives are now crying that Democrats raised taxes on the middle class by letting the tax holiday end. Things like that are the reason I am having a very difficult time taking anything from right wingers seriously.

 

[auditor0007]

I knew it was bad, but it turns out that the numbers I have been looking at depend on an erroneous assumption about life expectancy. It seems they expect everyone my age to be dead by 2028.

CONGRESS and President Obama have pushed through a relatively modest stopgap measure to avoid the “fiscal cliff,” but over the coming years, the United States will confront another huge cliff: Social Security. In the first presidential debate, Mr. Obama described Social Security as “structurally sound,” and Mitt Romney said that “neither the president nor I are proposing any changes” to the program. It was a rare issue on which both men agreed — and both were utterly wrong.
For the first time in more than a quarter-century, Social Security ran a deficit in 2010: It spent $49 billion dollars more in benefits than it received in revenues, and drew from its trust funds to cover the shortfall. Those funds — a $2.7 trillion buffer built in anticipation of retiring baby boomers — will be exhausted by 2033, the government currently projects.
Those facts are widely known. What’s not is that the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted.
We reached these conclusions, and presented them in an article in the journal Demography, after finding that the government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.) More retirees will receive benefits for longer than predicted, supported by the payroll taxes of relatively fewer working adults than projected.

http://www.nytimes.com/2013/01/06/opinion/sunday/social-security-its-worse-than-you-think.html?_r=1&

There are charts at this link.

Social Security?s Flawed Forecasting - Graphic - NYTimes.com

SS is easily fixable. Whether anyone likes it or not, we are going to raise the retirement age, as that is the most important step to making SS sustainable for the long run. What makes this the most attractive fix is that it cuts benefits on the front end, at a time when most people can figure out how to get by without it, either by saving more before hand, or by working longer if need be.

In order to make this work, employers will need to keep older employees working longer. And this is where the ACA comes into play as there are limits to the cost of premiums from health insurers as some of the cost is shifted downward, which will make it easier for employers to keep employees on a few extra years. The good news is that many CEO's are already pushing for this, and their reasoning makes sense. They don't want to see a payroll tax increase as it would be cheaper just to keep people working longer.

CEOs want to raise the retirement age to 70

There is one other benefit to having people work longer; they will pay into both SS and Medicare for a longer period of time. Yes, some people would be pushed into disability if they physically could not work past 65, but the fact is that the vast majority of workers are not in white collar or soft jobs where their bodies don't take as much abuse. I realize that construction workers and many blue collar workers may not be able to work to 70, but this is something that can be solved, if we want to try.

Bottom line is that this is going to happen eventually, so if you are younger, you better prepare for it. The good thing is that by doing so, everyone will continue receiving full benefits once they do hit retirement age.

 

[Lakhota]

What are the Social Security Trust Funds?
How are the trust funds invested?
What interest rate do the trust funds' assets earn?
What happens to the taxes that go into the trust funds?
If all the income is invested, how do benefits get paid each month?
What were the amounts of securities bought and sold during recent years?
Why do some people describe the "special issue" securities held by the trust funds as worthless IOUs? What is SSA's reaction to this criticism?
Can the Social Security Trust Funds remain solvent without making changes to the program?
Were the assets of the Social Security Trust Funds depleted in the past?

Trust Fund FAQs

 

[Clementine]

Don't worry, Obamacare is going to take care of Social Security. People 75 and older will be denied lifesaving procedures and given pain pills. So, fat chance of anyone living to be 80, 90 or 100 once Obamacare if fully implemented.

Illegal aliens have benefitted from a lot of things they shouldn't have. Look at Obama's aunt, who lives better than most of us. A lot of money is spent on illegal aliens. Our money.

 

[Lakhota]

I've heard that Obama is secretly constructing large grinders to turn old folks into cat/dog food and fertilizer.

 

[Clementine]

I've heard that Obama is secretly constructing large grinders to turn old folks into cat/dog food and fertilizer.

Don't be silly, he's just going to recommend pain killers. He said as much when a woman asked if her elderly mother, who had a pacemaker put in 5 years earlier, would qualify for the same care after Obamacare. The cold answer was no.

Old people have a duty to die, ya know. At least according to some Dems.

 

[Quantum Windbag]

Social Security still has a $2.7 trillion surplus and is good to around 2033 - even with no changes.

Plus, Social Security doesn't cost the government one penny - other than the interest paid on the government bonds held by Social Security - just like China and other holders of U.S. debt.

Social Security is the largest holder of U.S. debt - which is why NaziCons would like to fuck it over.

It must be nice not to be able to read.

 

[Lakhota]

Social Security is one thing. Medicare is another...

 

[Quantum Windbag]

Social Security is one thing. Medicare is another...

Since you, obviously, cannot read, here is a nice picture for you to look at.

 

[Lakhota]

Those charts are funny.

 

[Lakhota]

Who are the largest holders of US Debt?

Most of the US debt is held by the US citizens only. Foreign holdings of US debt is only 30% of the total debt. China and Japan combine holdings is 50% of all foreign holdings which means 15% of total US debt is held by US. Here are the some of the largest holders of US debt:

1. Social Security Trust Fund

Holds total of $2.67 trillion debt which is 19% of the total debt.
The Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds invest exclusively in special issue bonds that are only available to the Social Security trust fund. These are not publicly traded securities, but they still constitute a huge amount of debt.​

2. The Federal Reserve

Holds total of $1.63 trillion of treasuries which is 11.3% of the total debt.
The Treasury owes the Fed $1.63 trillion in Treasuries, much of which were bought for the Quantitative Easing programs.​

3. China

Holds $1.6 trillion of treasuries which is 8% of total debt.
China is the highest holder of US debt among the foreign buyers.
​

4. US Households

Holds total of $959.4 Billion of treasuries which is 6.6% of the total US debt.
Household sector includes Hedge funds too, so no surprise that the percentage holdings are high.​

5. Japan

Holds $ 912.4 Billion of treasuries which is 6.4% of total US debt.
Japan happens to be the second highest holder of the US debt among the foreign holders.​

6. State and Local Governments

Holds $506.1 Billion of US treasuries which is 3.5% of the total debt of the US.
​

7. Private Pension Funds

Holds $504.7 billion of US treasuries which is almost 3.5% of total debt.​

8. United Kingdom

Holds $346.5 Billion of US treasuries which is 2.4% of total debt
UK is the third largest holder of US debt among foreign debt holders.
​

9. Money Market Mutual Funds

Holds $337.7 billions of US treasuries which is 2.4% of total debt.​

10. State, Local and Federal retirement funds

Holds $320.9 Billion of US treasuries which is 2.2% of total debt.​

There are other holders of US treasuries including Commercial Banks, Mutual Funds, Oil Exporting companies, Brazil, Caribbean banking Centers, Hong Kong.

Who are the largest holders of US Debt? » WEALTHSON | WEALTHSON

 

[OKTexas]

What we need is another payroll tax holiday, that'll help.

While I think we all understood the purpose behind it, we really could not afford it. The thing that bothers me is how conservatives are now crying that Democrats raised taxes on the middle class by letting the tax holiday end. Things like that are the reason I am having a very difficult time taking anything from right wingers seriously.

I never favored the holiday, you don't defund a program that's already on shaky ground and the try to blow smoke up the public's ass and tell them the program is fundamentally sound. It's all political BS.

 

[deltex1]

Social Security still has a $2.7 trillion surplus and is good to around 2033 - even with no changes.

Plus, Social Security doesn't cost the government one penny - other than the interest paid on the government bonds held by Social Security - just like China and other holders of U.S. debt.

Social Security is the largest holder of U.S. debt - which is why NaziCons would like to fuck it over.

Is that 2.7 in your lockbox?

 

[g5000]

You can't talk about one entitlement program for seniors and pretend the other one does not exist. We must talk about the combined costs of Medicare and Social Security, and then it becomes blazingly obvious we are running deep in the red, and that the eligibility age must be raised to at least 70, if not 72, and then indexed to life expectancy or 9 percent of the population. It began at less than 6 percent of the population and now that we are living longer it has shot past 13 percent and climbing.

We are living longer, and that demands we work longer. An inconvenient truth.

Entitlement minded people pretend SS and Medicare are "safety nets", but they defend them as if they are their paychecks.

You want a paycheck? Then it is time to grow up and act your age and earn a paycheck longer.