Eliminate the Social Security tax cap. And only give COLAs everyother year.
Did a quick search for a Social Security thread to put this in. I didn't find one (at least active in the last two years), so I figured I'd start one.
Apparently Social Security is going into deficit no, 6-7 year before it was predicted. This is made all the more interesting because the rest of the goverment is running astronomical deficits, and will now have to find the money to repay SS to keep it's benefits flowing.
Social Security to See Payout Exceed Pay-In This Year
By MARY WILLIAMS WALSH
The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.
This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.
Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.
The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.
Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances.
“When the level of the trust fund gets to zero, you have to cut benefits,” Alan Greenspan, architect of the plan to rescue the Social Security program the last time it got into trouble, in the early 1980s, said on Wednesday.
That episode was more dire because the fund could have fallen to zero in a matter of months. But partly because of steps taken in those years, and partly because of many years of robust economic growth, the latest projections show the program will not exhaust its funds until about 2037.
Still, Mr. Greenspan, who later became chairman of the Federal Reserve Board, said: “I think very much the same issue exists today. Because of the size of the contraction in economic activity, unless we get an immediate and sharp recovery, the revenues of the trust fund will be tracking lower for a number of years.”
The Social Security Administration is expected to issue in a few weeks its own numbers for the current year within the annual report from its board of trustees. The administration has six board members: three from the president’s cabinet, two representatives of the public and the Social Security commissioner.
Though Social Security uses slightly different methods, the official numbers are expected to roughly track the Congressional projections, which were one page of a voluminous analysis of the federal budget proposed by President Obama in January.
Mr. Goss said Social Security’s annual report last year projected revenue would more than cover payouts until at least 2016 because economists expected a quicker, stronger recovery from the crisis. Officials foresaw an average unemployment rate of 8.2 percent in 2009 and 8.8 percent this year, though unemployment is hovering at nearly 10 percent.
The trustees did foresee, in late 2008, that the recession would be severe enough to deplete Social Security’s funds more quickly than previously projected. They moved the year of reckoning forward, to 2037 from 2041. Mr. Goss declined to reveal the contents of the forthcoming annual report, but said people should not expect the date to lurch forward again.
The long-term costs of Social Security present further problems for politicians, who are already struggling over how to reduce the nation’s debt. The national predicament echoes that of many European governments, which are facing market pressure to re-examine their commitments to generous pensions over extended retirements.
The United States’ soaring debt — propelled by tax cuts, wars and large expenditures to help banks and the housing market — has become a hot issue as Democrats gauge their vulnerability in the coming elections. President Obama has appointed a bipartisan commission to examine the debt problem, including Social Security, and make recommendations on how to trim the nation’s debt by Dec. 1, a few weeks after the midterm Congressional elections.
Although Social Security is often said to have a “trust fund,” the term really serves as an accounting device, to track the pay-as-you-go program’s revenue and outlays over time. Its so-called balance is, in fact, a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays. The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue, year after year.
Now that accumulated revenue will slowly start to shrink, as outlays start to exceed revenue. By law, Social Security cannot pay out more than its balance in any given year.
For accounting purposes, the system’s accumulated revenue is placed in Treasury securities.
In a year like this, the paper gains from the interest earned on the securities will more than cover the difference between what it takes in and pays out.
Mr. Goss, the actuary, emphasized that even the $29 billion shortfall projected for this year was small, relative to the roughly $700 billion that would flow in and out of the system. The system, he added, has a balance of about $2.5 trillion that will take decades to deplete. Mr. Goss said that large cushion could start to grow again if the economy recovers briskly.
Indeed, the Congressional Budget Office’s projection shows the ravages of the recession easing in the next few years, with small surpluses reappearing briefly in 2014 and 2015.
After that, demographic forces are expected to overtake the fund, as more and more baby boomers leave the work force, stop paying into the program and start collecting their benefits. At that point, outlays will exceed revenue every year, no matter how well the economy performs.
Mr. Greenspan recalled in an interview that the sour economy of the late 1970s had taken the program close to insolvency when the commission he led set to work in 1982. It had no contingency reserve then, and the group had to work quickly. He said there were only three choices: raise taxes, lower benefits or bail out the program by tapping general revenue.
The easiest choice, politically, would have been “solving the problem with the stroke of a pen, by printing the money,” Mr. Greenspan said. But one member of the commission, Claude Pepper, then a House representative, blocked that approach because he feared it would undermine Social Security, changing it from a respected, self-sustaining old-age program into welfare.
Mr. Greenspan said that the same three choices exist today — though there is more time now for the painful deliberations.
“Even if the trust fund level goes down, there’s no action required, until the level of the trust fund gets to zero,” he said. “At that point, you have to cut benefits, because benefits have to equal receipts.”
Stephanie Strom contributed reporting.
Eliminate the Social Security tax cap. And only give COLAs everyother year.
Might buy a few years, but doesn't solve the underlying problems. The demographics were going to crush it as it was before. Not the problem has been significantly accelerated.
Increase retirement age and do some backtracking. See what was funded using appropriated SS funds and GET THAT MONEY BACK.
Waaaayyyy to late for that. The money's gone. In the end, it was used to float the rest of the gov't. The majority of it was probably used to keep Medicare and Medicaid from collapsing.
That's the trap. SS itself was fine as long as it ran a surplus. But that's over, now it's a liability itself, and isn't helping with the other liabilites. At some point, the losses will have to be cut, and the fact that these programs are unsupportable be faced.
Oh, and the concept of floating these programs by borrowing is looking dicier by the minute.
Clearly the budget needs to be slashed... but what politician has the guts to do that with all the special interests are in their ears & pockets.
What I would do.
1. Start by cutting all govt subsidies to profitable & profligate industries, such as forest products, mining, water, energy & beef (farming). Let those commodities reflect their actual, non-subsidized cost and we would have a far greater incentive to be conservative rather than profligate in our use of shrinking resources (and live in a healthier, cleaner country). Instant surplus.
2. Cut all military aid to first world countries that have their own able militaries (i.e., $3billion/year to Israel)
3. Legalize & tax recreational marijuana in all states.
4. Close tax loopholes that allow hugely profitable firms (Goldman) to pay a much lower than the standard corporate tax rate.
5. Increase the minimum government retirement age to 65.
6. Add a sustainability tax to all foreign commodities/products that enter this country that do not meet specific environmental/social standards.
Last edited by RandySavage; March 27th, 2010 at 01:27 PM.
Will it be messy? Yep. I guarantee that portions went to deserving programs like Education and Health Care, but much probably went to ill advised public works and othe pet projects.
[quote]That's the trap. SS itself was fine as long as it ran a surplus. But that's over, now it's a liability itself, and isn't helping with the other liabilites. At some point, the losses will have to be cut, and the fact that these programs are unsupportable be faced.[/uote]
Until people stop having 2.4 kids, SS will still be "supportable". What needs to be changed, and they are doing it, is age eligability, and salary as well. The point of SS is to make sure our elderly do not become a direct burden to individuals. That their contribution to our society os rewarded by that society helping them through their last years.
But, with people living 20-30 years after retirement, this is becoming a dream. There needs to be some other method of administration that takes into account the needed end. A retired person that can live a comfortable life until death.
The gov't is now admitting the problem
CBO: Social Security to run permanent deficits
By STEPHEN OHLEMACHER Stephen Ohlemacher 1 hr 33 mins ago
WASHINGTON – New congressional projections show Social Security running permanent annual deficits unless lawmakers act to shore up the massive retirement and disability program.
The Congressional Budget Office said Wednesday that Social Security will pay out $45 billion more in benefits this year than it will collect in payroll taxes, further straining the nation's finances. The deficits will continue until the Social Security trust funds are eventually drained, in about 2037.
Previously, CBO said Social Security would start running permanent deficits in 2016. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.
More bad news.
Note the 2037 date which is about 10 years earlier than had been predicted a couple of years ago, is incumbant on the availability of funds from the SS trust fund. Since this is 100% invested in US treasury securities, and the treasury is running something like a 1.5 trillion dollar deficit, the question becomes where is it going to get the money to cover the trust fund draws.
Social Security fund will be drained by 2037
By STEPHEN OHLEMACHER, Associated Press Stephen Ohlemacher, Associated Press 2 hrs 26 mins ago
WASHINGTON – Social Security's finances are getting worse as the economy struggles to recover and millions of baby boomers stand at the brink of retirement.
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year, but the CBO said at the time that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.
The outlook, however, has grown bleaker as the nation struggles to recover from the worst economic crisis since Social Security was enacted during the Great Depression. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.
The deficits add a sense of urgency to efforts to improve Social Security's finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs. Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.
"It means that Social Security is increasingly adding to our long-term fiscal problem, and it's happening now," said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.
It's a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.
A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security's finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel's recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.
"I take the president at his word when he says he's eager to cooperate with us on doing all of it," McConnell said.
Social Security experts say news of permanent deficits should be a wake-up call for action.
"So long as Social Security was running surpluses, policymakers could put off the need to fix the program," said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute. "Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform."
More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.
The program has been supported by a 6.2 percent payroll tax paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 — unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.
Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds. "It's an IOU that is backed by Treasury bonds and the faith and credit of the United States government," said Sen. Bernie Sanders, I-Vt. "It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor."
What they need to do is look at the average lifespan for people passing the age of 30 and compare THAT over the years.
I am sure we are living longer than we were 30 years ago, but how MUCH longer? How much of an actual burden is it?
We need to start looking at social security not as an extended vacation plan, but as a plan that helps people when they can NO LONGER work for themselves.
If that means delaying the age to 70, 75, so be it.
It was never truly intensioned to give old people a reason to play golf while their swing was still halfway decent. It was something to ease their burden when they could no longer work those extra hours or side jobs to make ends meet.
^I posted this over on the income inequality thread, but it belongs here. And it dovetails with what your saying.
So maybe it should be reworked as something of a disability program. If you can show you're not in good enough shape to work, you get benefits. If you can still work, you don't. This is basically using the SSI model in place now for disability under Social security.
I think one of the things that's going to come out of the financial crysis, especially with it lining up with the baby boomers aging, is the death of the concept of retirement being an extented, government subsidized vacation, from late middle age to death.
I think you may just be off on your last statement.
Few see retirement as a government subsidized vacation. Many who depend on SS do not have enough $$ to do anything you woulr consider recreational.
If you remove that last bit of slanting from your position, you might get more people to agree with your other statements. But leaving it there makes it seem like you are being flippant to the many that really need SS to survive, not the few that found out a way to abuse it.
And I'm not sure of your concept of middle age (or even late middle age), but from what you write it doesn't seem to comport with the generally accepted period of years.
Even the earliest retirement age of 62 as allowed by the SSA is beyond the upper boundary of middle age.
The current minimum age for receiving full benefits (66) is well outside that boundary of middle age.
I'd say that for a number of years the more popularly accepted range in the US has been young age @ 0-18, middle age @ 18-65, old age @ 65 and beyond.
Given the change in US life expectancy over the past 100+ years, how should that demarcation be altered?
We can argue the bounderies of middle age, but it misses the point, which is that people between, say, 62 and 75 (or older), are quite often capable of productive work and able to support themselve with such. They may not want to. They may want to take the rest of their life off. Many/most see it as a reward. If they can do it on their own nickle, fine. But should it come with the gigantic level of government subsidy it now has? Especially when that money could be used in much more productive ways.
I don't think it should be a matter of age, it should be a matter of capability. How do determine that would, of course, open up a huge can of worms.
Yes, only the government could decide that. Just as they do now.
Not a pretty picture to get rid of it all together and let folks fend for themselves, no matter the consequences.
I agree that changes need to be made. But saying to the populace that the only other option is to give their savings to bankers and traders and hope for the best will take us down a very bad road.