Another Year, Another Social Security Shortfall

Before I say anything about this subject, I want to make it clear that I consider Social Security to be an essential program which should not touched by those eager to "privatize" it.

That said, Bruce Krasting has something to say to those of you who believe that not only is Social Security sacrosanct, but it also pays for itself and will do so until 2033 or some other unimaginable date.

The bold text is Krasting's.

Social Security (SS) has released its estimates for the December data for benefits payed and taxes received. With this info, I can estimate the 2012 results that will be formally reported in five-months. It was a ho-hummer of a year for SS, it tread water vigorously, and ended up with a cash deficit of $46.7B, just a tad more red ink that 2011’s $45.6B...

The $46.7B annual cash deficit is the third in a row. The 2012 shortfall confirms it; SS will never see a cash flow surplus again. Every dollar of the cash shortfall MUST be funded by selling additional debt to the public.

I hope this is clear. I’ll repeat it. Social Security is adding to the debt held by the public. It is forcing the country to borrow more to fund current operations. When Senate Democrats, like Dick Durbin and Harry Reid say, “SS does not add a penny to our debt.” – they are lying.

The Tax on Benefits is up to a meaningful $27.1b (+15%). The increase is the result of many newly retired folks who are  getting SS, and also have other income (investments and pensions). This forces them to add the SS income into their tax base. THIS IS A “MEANS TEST”.

I emphasize this fact as there is very strong opposition to the concept of a means tax for SS by Democrats in Washington and the liberal press (Dean Baker). But it already exists!

Liberals don’t like means testing because it undermines the principals of SS. It makes it appear that SS is a form of welfare. The fear is that if SS is labeled as welfare, the popularity of the program would quickly wane. So the staunchest supporters of SS are avoiding a fix that could patch the finances for the worst reasons. They are supporting Roosevelt’s dreams, at the expense of the base they say they are trying to protect...

The problem with the existing Tax on Benefits is that it does not cut deep enough to fill the bucket. I advocate that the tax bite for [high-income] seniors be increased. I will go further, and state that the means test for SS benefits should be based on assets, not just income that can be manipulated...

The yearly social security deficits are relatively small, but the point that needs to be emphasized is that there is no "trust fund" of ready cash to cover them. That money has already been spent. The essential theft (or raiding, or looting) of those trust funds by the Congress, the reserve funds which American taxpayers paid for, was ongoing over many years. It is a fait accompli. This is the approximately 5 trillion dollars that the government owes to itself.

Krasting goes on (and on) about what should be done to further protect social security, but I don't want to get into the politics. We already know that Americans believe in Santa Claus and the Tooth Fairy. We already know that Americans live in Disneyland. But on the subject of social security, there is no end to lies, distortions, irrational ravings, bat-shit craziness, and the like.

So I'll leave it at that.

Comments

[JohnWDB]

We frittered away 3 trillion dollars of SS surplus and now Krasting poor-mouths about how it's broke and how the "wealthy" seniors should pay just a little more to help "fill the bucket", as if it's their fault the bucket is empty and they should feel guilty for not "paying their fair share".

Doubtless, wealthy seniors would include my 70-year-old mother, who supported us as a single mom on a teacher's salary for 30 years before retiring to total pension/SS of about 35 grand per year plus the simple IRA, she responsibly socked away at 50 bucks a month for years and years. Since she owns a car and a tiny house outright due to decades of penny-pinching, she should have to pay a tax on those assets, dammit! She should be ashamed of herself for having a bit more when other people have a bit less. God forbid we direct attention back to elected thieves who spent the money she sent them every month before it ever had a chance to be deposited in a trust fund.

[Ben]

How did the money get stolen?

[Don Levit]

Treasury borrowed the money to pay for current expenses.
How they were able to do this, I do not know. They pull similar tricks with 28 other trust funds. Sort of a way of internally financing the government's expenses.
If an insurer did this, it would be placed in receivership.
Don Levit

[JohnWDB]

@Ben, it's more like the money was never really put in the trust to begin with. It mostly got spent before it was even received, and IOU's got deposited in the trust. Those now total some 2-3 trillion bucks. The point of the trust was for the "greying" of the population after the baby boom and times of economic hardship (when revenues fall). When social security runs a deficit, it should be covered by the trust, but the trust contains not money but debt.

This is why people say it's like a ponzi scheme. As long as revenues cover the payouts, no one is the wiser. When revenues fall below payouts, such as when the population is getting older and/or unemployment is high, social security is said to "run a deficit". Some like to pretend this needs a tax-payer funded solution, such as old people paying more taxes on their benefits, when in fact, the trust was supposed to cover this very thing. It's like Bernie Madoff telling old ladies he robbed that they need to chip in a bit to help pay off his massive debts, and making them feel guilty for wanting to keep some money for themselves.

[James]

JohnWDB: If you point at the politicians who spent the money, how can you not hold culpable the people who elected (and re-elect) them? At the end of the day, the ignorant electorate is every bit as culpable. We have a broken system of the stupid and the corrupt. The vulnerable just get hit the hardest because its easy.

And, yes, it is terribly, bitterly, ironic that the problems SS face today are exactly the problems the SS trust fund was originally designed to address. The Bernie Madoff reference is particularly appropriate as Washington has no problem finding trillions to bail out the financial industry and fund the super wealthy, but hems and haws over how to scrounge up repayments (because they have already paid in) for senior taxpayers.