We Are So Screwed: Federal Financial Analysis

[Mempho]

By the way, I've got this in a Word document and it reads much better. If anybody would prefer a Word copy, just PM me with your email address.

[adios]

Entitlement spending is mandated by law and not subject to the normal budget process where Congress allocates the funds and the President has veto power.

[Mempho]

I wanted to comment on your original reply but I forgot. If you mean to imply (by the reference to a misnomer) that it's actually worse than the numbers indicate, you are correct. The hard actuarial numbers, though, are bad enough and tough to argue with.

[tehox]

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Doubt if they'll vote to reduce their payments [img]/images/graemlins/smile.gif[/img].

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Stealing from their own children. Who'd have thunk it? [img]/images/graemlins/frown.gif[/img]

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Nope that's not how the government has sold it with the trust fund concept. People feel they've paid into it and should get what they were promised. The trust fund concept perpetuates this myth. The reality is what you imply though. The current wage earners support the current retirees.

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It's true that even if you think the trust fund doesn't exist that in 2050 or whatever that 70% of current obligations will still be met. So no matter what it will not be *that* bad (health care is a different story though I think).

But I had a question about the trust fund. The best way that I heard it explained is that the surpluses now are being spent by the goverment, allowing the goverment to forgoe an equal amount of deficit spending. Basically in 2017, the crossoever point, the goverment will have to start deficit spending to meet obligaitons not met by SS revenue. So basically by forogoing defecit spending now, this deficit spending will be freed up in the future (assuming there is a fixed amount of debt the US can sustain). Hope that makes sense. My only problem with that is that probably by doing the accounting this way (using the SS surplus to balance the budget), that the current govt can get away with deficit spending they wouldn't otherwise be able to if the SS was set aside.

[tolbiny]

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our currency is backed by the full faith of the US government - i.e. - our guns and tanks -

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Guns and tanks have to be held by men getting paychecks. I'm sure if it comes to this worst case secnario (which i think it will) a military option will be tried (most likely on its own citizens) and will eventually fail.

[Darryl_P]

I agree completely. For the last several years I've been predicting another Great Depression starting at a time when a significant percentage of the baby boomers have retired. My opinion is based mainly on similar analyses to the ones you cite.

When I was an actuarial student in the late 80s, this demographic time bomb was a hot topic and I remember various industry meetings in which the situation was considered an emergency already back then.

Since then, despite the various warnings, the situation's only gotten worse. Scary times are ahead, no question about it.

[natedogg]

All of the entitlement spending can be more accurately considered as "hopeful". There is no physical law of the universe that says these obligations will be met. When the time comes, congress will make changes (i.e. cut benefits etc)

This situation is analogous to airline union leaders negotiating unrealistic pension plans in the 60's and then in the 90's their unions get screwed out of the unrealistic deal.

Social Security was a sweet ride while it lasted (for recipients that is), but when the rubber hits the road, you can be damn sure that retirees will get shafted.

When the money isn't there, the government won't go bankrupt, they'll just severely cut social security.

Without doubt, means-testing will be implemented, probably as the first measure. There is simply no way that the astronimal entitlement obligations will be met in full, because, as you say, it's a financial disaster to do so. So they won't. It's that simple.

natedogg

[adios]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Doubt if they'll vote to reduce their payments [img]/images/graemlins/smile.gif[/img].

[/ QUOTE ]

Stealing from their own children. Who'd have thunk it? [img]/images/graemlins/frown.gif[/img]

[/ QUOTE ]

Nope that's not how the government has sold it with the trust fund concept. People feel they've paid into it and should get what they were promised. The trust fund concept perpetuates this myth. The reality is what you imply though. The current wage earners support the current retirees.

[/ QUOTE ]

It's true that even if you think the trust fund doesn't exist that in 2050 or whatever that 70% of current obligations will still be met. So no matter what it will not be *that* bad (health care is a different story though I think).

But I had a question about the trust fund. The best way that I heard it explained is that the surpluses now are being spent by the goverment, allowing the goverment to forgoe an equal amount of deficit spending. Basically in 2017, the crossoever point, the goverment will have to start deficit spending to meet obligaitons not met by SS revenue. So basically by forogoing defecit spending now, this deficit spending will be freed up in the future (assuming there is a fixed amount of debt the US can sustain). Hope that makes sense. My only problem with that is that probably by doing the accounting this way (using the SS surplus to balance the budget), that the current govt can get away with deficit spending they wouldn't otherwise be able to if the SS was set aside.

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Exactomundo.

[adios]

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I wanted to comment on your original reply but I forgot. If you mean to imply (by the reference to a misnomer) that it's actually worse than the numbers indicate, you are correct. The hard actuarial numbers, though, are bad enough and tough to argue with.

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Yes, basically the trust fund is not a trust fund in the traditional sense.

Social Security Trust Fund


Here's the truth about the trust fund from the Office of Management and Budget:


These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)

Yet the government has promulgated the notion that there are assets accumulating as people have paid into Social Security. Nothing could be further from the truth.


[b]

[hmkpoker]

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Bush sought to reduce the government Social Security liability but was unsuccessful. Social Security is the "third rail" of American politics and Bush found out what that truly means.

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Fortunately, I don't think SS is really that third rail of an issue here. It's pretty standard fare among Republicans, and most of them are still openly talking about it. I'm pretty sure that Bush's popularity lag has more to do with other issues, like the war and the NSA.