We Are So Screwed: Federal Financial Analysis

[Zeno]

Great post and subsequent follow on posts.

The whole smoke and mirror thing about SS is what really burns me.

But this illustrates the need to always have options.

I'm moving to China. [img]/images/graemlins/smirk.gif[/img]

-Zeno

[morphball]

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Great post and subsequent follow on posts.

The whole smoke and mirror thing about SS is what really burns me.

But this illustrates the need to always have options.

I'm moving to China. [img]/images/graemlins/smirk.gif[/img]

-Zeno

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Better pick another country, China tanks if the US tanks.

[adios]

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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.

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Of course I didn't say that Bush's popularity lag was mainly due to his Social Security initiative. Where in my post did I state this?

[Zeno]

"But this illustrates the need to always have options"


-Zeno

[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.

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Of course I didn't say that Bush's popularity lag was mainly due to his Social Security initiative. Where in my post did I state this?

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Maybe I'm wrong, but that's what I thought you meant by "and Bush found out what that truly means."

[Mempho]

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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.

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As with the first question, if you look on page 44 of the report you will see that the trust balance has been increasing every year. However, you are correct. Look at page 52 and look at the text on top of the graph. The general fund is "borrowing" these assets and the trust fund is "earning credits" against the general fund. This is a type of Jedi-accounting mind trick that only the government can get away with because, if you download the full financial statement package linked at the top of the OP and look at page 81, Note B, you will see that these statements are on a GAAP (generally accepting accounting principles) with a few exceptions, one of them being that expenses for SS and Medicare are not recognized as they are incurred but only when they are immediately due and payable (within one year). In this way, SS and Medicare recognize the money that they loaned to the "General Fund (Operations)" as an asset but the General Fund doesn't recognize the liability. Needless to say, this is meant to do exactly what you think its meant to do and that is trick curious media types who don't have any idea what they are reading.
As for the second part, 2041 is the projected year that the trust fund gets exhasted. Coincidentally, this is very close to the time that many 2+2ers will reach retirement age. At that point, then current wage earners would fund some portion of the retirees' benefits but not all of it. This makes the rather generous assumption that people, realizing the trust fund is exhausted, decide to end it in their own self-interests instead of perpetuating what basically amounts to an ill-fated check kiting scheme.

[Nielsio]

"The question to ask statists is not 'whether' the state should continue, but 'how'?"

http://www.freedomainradio.com/Traff...rough_Debt.mp3

[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]

[/ 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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As with the first question, if you look on page 44 of the report you will see that the trust balance has been increasing every year. However, you are correct. Look at page 52 and look at the text on top of the graph. The general fund is "borrowing" these assets and the trust fund is "earning credits" against the general fund. This is a type of Jedi-accounting mind trick that only the government can get away with because, if you download the full financial statement package linked at the top of the OP and look at page 81, Note B, you will see that these statements are on a GAAP (generally accepting accounting principles) with a few exceptions, one of them being that expenses for SS and Medicare are not recognized as they are incurred but only when they are immediately due and payable (within one year). In this way, SS and Medicare recognize the money that they loaned to the "General Fund (Operations)" as an asset but the General Fund doesn't recognize the liability. Needless to say, this is meant to do exactly what you think its meant to do and that is trick curious media types who don't have any idea what they are reading.

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Yes I guess I'm just saying is that the problem is not that the trust fund does not exist. It is just that b/c of the way the govt does the accounting they are overspending to an extent that counteracts the trust fund. Is that fair or am I misundertanding it?

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As for the second part, 2041 is the projected year that the trust fund gets exhasted. Coincidentally, this is very close to the time that many 2+2ers will reach retirement age. At that point, then current wage earners would fund some portion of the retirees' benefits but not all of it. This makes the rather generous assumption that people, realizing the trust fund is exhausted, decide to end it in their own self-interests instead of perpetuating what basically amounts to an ill-fated check kiting scheme.

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Yes SS is kind of a pyramid scheme but only to small extent. For example, anyone that is informed would know that under the current system they are worst case scenario (quite likely) they are getting 70% of what they *should* get, and there is not a groundswell to try to change this. So this is hardly a Ponzi scheme, and I don't think it's ever going to get to the point where the system is going to collapse. The problem is that someone is going to get shortchanged along the way b/c the government for the last 20 years (with no apparent change in the near future) has not been willing to the correct thing (and btw those saying that what Bush tried to do is fix this IMO are FOS, he is not addressing the fundamental problem here as privitiaztion on its own does not address solvency, his main thing was price indexing, which essentially is the same as not doing anything and just cutting benefits in the future when the money runs out).

[Brainwalter]

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For example, anyone that is informed would know that under the current system they are worst case scenario (quite likely) they are getting 70% of what they *should* get,

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Ha, what "should" they get?

[tehox]

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For example, anyone that is informed would know that under the current system they are worst case scenario (quite likely) they are getting 70% of what they *should* get,

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Ha, what "should" they get?

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Just meant that right now under current law you pay your taxes and expect X amount of benefits in 2050. If it is switched to price indexing you will get .7(X)