A crisis in Social Security retirement funding is Imminent January 15, 2010 – Update (Social Security Crisis Continues)
The cash-flow deficit between $51.412 billion in taxes collected (payroll contributions + taxes on benefits) and $57.27 billion in total OASDI expenses (benefits + admin costs) was $5.858 billion in November 2009. This deficit excludes the reported $150 million in interest income to the OASDI Trust Fund since interest income is not cash, but more meaningless Treasury IOU’s transfers. OASDI Trust Fund Assets of $2,498.85 Billion at the beginning of the month declined to $2,493.14 Billion at the end of November 2009; (-$5.707 billion).http://www.ssa.gov/OACT/ProgData/allOps.htmlNote: Enter “11” in the month number block on line 3 and press “Go”.As Treasury Bills, Notes and Bonds become due; they are rolled over (refinanced with new IOUs) and absent real reform (raising taxes and/or cutting benefits) the debt compounds perpetually. The shortfalls in the Medicare Health Insurance (HI) Trust fund and others are being funded in like manner. The OASDI cash shortfall is being covered by transfers from Treasury’s General Fund which prints an equivalent amount of debt sold to the public or printing more currency. This practice will continue until the public becomes so outraged over being lied to that they will force legislators to make substantive reforms that are currently politically unpalatable. By maintaining a façade of a REAL Trust Fund (with marketable assets) politicians can postpone the day of reckoning by paying interest into the Trust funds with meaningless IOUs instead of reforming the system.
CBO: “The concept of federal "trust funds" also contributes to misunderstanding. The conventional view of private trust funds leads many people to believe that the government takes an arms-length approach to the management of federal trust funds--that somehow trust fund money is kept separate from that for the rest of the government. To the contrary, while the accounting for such federal programs is distinct, their cash flow is not segregated.” http://www.cbo.gov/doc.cfm?index=3650&type=0 Instead of confronting the immediate cash flow problems of Social Security and Medicare; our profligate politicians are making giant strides to expand Medicare and Medicaid by adding millions of beneficiaries to a health care system that already costs more than the government tax base can support.
By attacking the health insurance industry and those dastardly bankers pocketing “obscene bonuses”; the Obama administration is diverting public attention away from the real problem of US sovereign financial liabilities and obligations (includes the National Debt - $14 trillion+, implicit/explicit social insurance obligations - $60 trillion+, and undeterminable Trillions in government guarantees such as Fannie May, Freddie Mac. Pension Benefit Guarantee Corporation, etc.).
Unredeemable/unsustainable/unpayable US sovereign debt and moral obligations has developed because of a tax code that penalizes capital (money and labor) rewards debt and a broken welfare system that in too many instances transfers money and entitlements from the working middle class to the idle rich.
Example:A spouse (who may have never paid one cent into Social Security) of a retired US Senator is entitled to receive a Social Security check in the amount of 50% of the primary benefit claimed to have been earned by the Senator, but paid for by the taxpayer. Plus exorbitant retirement pay, a Senator retiring in 2010 may receive the maximum Social Security monthly benefit of $2191.00 and his non-contributing spouse may receive $1095, for a total of $3286. See: Balance the Power , Social Security Freeloaders and http://www.socialsecurity.gov/OACT/COLA/examplemax.html
The net asset value of all insurance companies and all the banks in the United States pales in comparison to the US governments debt (implicit and explicit) obligations. The recently appointed members of the Obama created “Financial Crisis Inquiry Commission” (FCIC)was formed to determine causes of the “Financial Crisis” that has gripped the nation and the globe. “The Financial Crisis Inquiry Commission is a bipartisan commission that has been given a critical non-partisan mission — to examine the causes of the financial crisis that has gripped the country and to report our findings to the Congress, the President, and the American people.”
I can almost guarantee findings of the FCIC will find fault everywhere except fundamental flaws in US tax and welfare laws, many of which would be found unconstitutional by objective observation. Briefly stated the FCIC is just another DIVERSION that wastes time and money. They may think their intentions are noble. I think it is just the same old Bu..Sh.. that hinders real tax and welfare reforms! END of UPDATE
November 4, 2009 – Update (Social Security Crisis Continues)
The down trend in the OASDI Trust Fund that began in July 2009 has continued through September, dropping $4.319 BILLION to $2.503612 TRILLION. http://www.ssa.gov/cgi-bin/ops_period.cgiAbsent immediate reform, the Social Security Retirement/Disability Trust Fund (US Treasury IOUs) must be redeemed by continuing to PRINT NEW MONEY and/or DEBT sold to the public. The pressure on Congress and President Obama to find solutions will continue to mount before the general public becomes aware of a potential disaster in the Social Security Ponzi/Madoff scheme. The Day of Reckoning has arrived. The politicians will be forced to reform the system, that is - raise taxes and/or cut benefits. Why this impending calamity has not been heralded in the news media is beyond my comprehension. A knowledgeable, irate public can force the politicians to take immediate corrective actions. The only other alternative are class-action lawsuits filed in federal court to permit the third branch of the US government to force the other two to take rational measures to prevent a further financial meltdown.
END of UPDATE
October 20, 2009 - Update (Social Security Crisis Continues)
The Old Age, Survivors, Disability Insurance (OASDI) Trust Fund consisting of US Treasury IOU's peaked at $2,514,215,000,000.00 on June 30, 2009 . On July 31, 2009 the fund was reduced to $2,513,692,000,000.00 and on August 31, 2009 further reduced to $2,507,931,000,000.00 http://www.ssa.gov/OACT/ProgData/allOps.html
With rising unemployment and increased applications by Baby Boomers and the Disabled, the drawdown on the OASDI Trust Funds will continue and likely accelerate unless drastic Social Security reforms are legislated immediately. With benefits now exceeding total income derived from FICA taxes, income tax on benefits and dubious interest earnings on assets; the Social Security Ponzi scheme is finally exposed. Instead of allocating alledged trust fund cash surpluses to other budget priorities, the US Treasury must redeem the Trust Fund IOUs to make up the difference between income and outgo.
The OASDI Trust Fund shortfall could not have come at a worse time. US budget deficits are setting new records and the combined liabilities of the National Debt and unfunded Social Insurance obligations now exceed $63,000,000,000,000.00. In the real world (outside the Washington D.C. beltway) where interest payments are made with cash (not IOUs); the annual interest on the liabilities at just 4.7% (the 40 year average inflation rate measured by the CPI) is more than total US government revenues.
The really bad news is that Medicare Trust Funds are hemorrhaging more red ink than Social Security. If any other entity practiced the fraudulent accounting chicanery employed by the US government it would be squashed like a bug. The Enron collapse provides a real example of what happens when the almighty US government decides to exert its unlimited power. Ken Lay and Jeff Skilling were victims not criminals as the government has alleged. One can only hope that politicians could have the same integrity and moral courage exhibited by those former Enron CEOs.
End of Update
A crisis in Social Security retirement funding is Imminent August 21, 2009
The dreaded day, postulated to occur in 2017, when Social Security Retirement Benefits would exceed FICA Contributions is imminent. The shortfall where Old Age and Survivors Insurance (OASI) Trust Fund IOU’s must be redeemed from Treasury’s General Revenue is the biggest economic story of 2009 that is largely being ignored by mass media.
According to both the budget proposed by the White House in February and projections issued by the Congressional Budget Office (CBO) in March, for the first time since 1984, Social Security benefits will exceed Payroll Taxes! Decades of political promises and accounting fraud are finally reaching the road of reality. The government’s IOUs in the OASI must be redeemed by Treasury’s Credit Card or by printing more money which is politically more palatable than cutting benefits or raising payroll taxes. Instead of spending surplus OASI taxes on roads to nowhere and putting IOUs in the Trust Fund, the politicians will have to invent new ways to mislead the public they have sworn to serve.
With the US Deficit sky-rocketing to $1.42 Trillion in 2009, http://www.reuters.com/article/politicsNews/idUSTRE52J3SR20090320 redemption of OASI Trust Fund (retirement) IOU’s could not occur at a worse time. The housing bubble, credit crunch, and employment crises compounds the complexity of finding common sense solutions. These events were not only predictable, they were avoidable; but no one would listen.
A SUMMARY OF THE 2008 ANNUAL REPORTS Social Security and Medicare Boards of Trustees “The financial condition of the Social Security and Medicare programs remains problematic. Projected long run program costs are not sustainable under current financing arrangements. Social Security's current annual surpluses of tax income over expenditures will begin to decline in 2011 and then turn into rapidly growing deficits as the baby boom generation retires. Medicare's financial status is even worse. This year Medicare's Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures than it receives in taxes and other dedicated revenues. The difference will be made up from general revenues which pay for interest credits to the Trust Fund. Growing annual deficits are projected to exhaust HI reserves in 2019 and Social Security reserves in 2041. In addition, the Medicare Supplementary Medical Insurance (SMI) Trust Fund that pays for physician services and the prescription drug benefit will continue to require general revenue financing and charges on beneficiaries that grow substantially faster than the economy and beneficiary incomes over time. Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 14 percent in payroll tax revenues (from 12.4 percent to 14.1 percent) or an immediate reduction in benefits of 12 percent or some combination of the two. Ensuring that the system is solvent on a sustainable basis beyond the next 75 years would require larger changes, because an aging population and increasing longevity cause the projected current-law OASDI cash-flow deficits to be substantially larger after the 75-year projection period than they are on average during the period.
The projected actuarial deficit in the OASDI Trust Fund over the infinite future is 3.2 percent of taxable payroll (1.1 percent of GDP), or $13.6 trillion in present value terms. The system could be brought into actuarial balance over this time horizon with an immediate increase in payroll tax revenues of 26 percent (from 12.4 percent to 15.6 percent) or an immediate reduction in benefits of 20 percent, or some combination of the two.”http://www.ssa.gov/OACT/TRSUM/trsummary.html
OASI Employment (payroll) Taxes and Benefits for February 2009
The most recent Social Security Administration’s release reveals FICA (OASI) income of $46.186 billion and expenditures of $45.786 billion. With unemployment rising and Baby Boomer’s retiring, the actual payroll shortfall will occur in the next few months and will likely accelerate after that. The Social Security Funding issue is only symptomatic of a much larger issue.
Our new President is the most charismatic, gifted orator that I have ever observed. His abilities to articulate soothing messages to calm public fears are inferior to none. However, he appears to be blind to common sense solutions to the issues addressed, above. Also, his selections of advisors offer no solace since they almost unanimously embrace and embolden systemic faults that have evolved since the last Great Depression. If encouraged to persist on the current path, I think the “Tech Bubble” and the “Housing Bubble” will be miniscule compared to the economic and social chaos that is now being created. With all his genius, charisma and good intent, the new President can no more defy gravity than he can turn the tide against compounding debt in the various US governments’ Trust Funds.