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Oh really? Sociall Security won't be there for me? - King Rat
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Oh really? Sociall Security won't be there for me?
Okay, so one of my pet peeves is people repeating stuff that just isn't true. I don't mean rumors that I'm sleeping with Jason's ex-girlfriends. Hell, that sort of thing is perfectly okay. Tell all sorts of rumors, true or not, about me that you want. No, I mean things like you can't get ticketed for driving too fast in Montana. Stuff that just isn't true.

One of the ones that I heard last week was that Social Security will be bankrupt before we retire.

Under reasonable assumptions, it's just not true. What do I mean by reasonable assumptions? Like we leave the laws around it alone. We could always make Social Security into a dishwasher funding law, but I'm assuming we won't.

Right now, under the Social Security Trustees projections, Social Security is fully funded through 2041. Under the Congressional Budget Office projections, it's fully funded through 2046. What does that mean? It means that all planned benefits can be fully paid. Benefits go up faster than inflation, actually. That's important for what happens after 2041 (or 2046, under slightly more optimistic projections). At that point, benefits can be paid out at 75% of what's currently planned for those years. 75% of plan at that point is better than if current benefits were indexed to inflation. In other words, retirees after 2041 will be collecting more money, adjusted for inflation, than current beneficiaries.

That's with no changes whatsoever.

Let's also point out how far out that actually is. 2041. I will turn 65 in 2035. I will be 71 when Social Security goes bankrupt. 33 years from now. Social Security was in worse shape in 1986 than it will be in 2041, and with a decent change was fixed. 22 years ago. It's had a surplus since then and we won't even be dipping into the surplus for another 20 years or so.

This point is so far in the future that if we make really minor changes to the funding (I know, my assumption was no changes, we're moving on to another part of the argument), like lifting the cap on wage income that is subject to the tax, it will be fully funded forever. Right now if I made 150,000 a year, only the first 90,000 or so would be subject to F.I.C.A. (the tax used to fund Social Security). Poor people pay a higher percentage of income for F.I.C.A. than rich people do.

However, if the economy does as well as it did in the 1970s and 1980s, no changes will be needed. We don't even need to assume that the economy will be as good as the Clinton years. The economic assumptions in the Social Security Trustees projections assume we won't do as well as the 1970s. They are extremely conservative (not in the political party sense) assumptions.

To sum up: don't panic.

Congressional Budget Office Projections

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14 comments or Leave a comment
geekalpha From: geekalpha Date: April 17th, 2008 06:33 am (UTC) (Link)
"Excluding debt service"

That's an important and foreboding proviso, considering that a "budget surplus" is an impossible faerie tale, and years of deficit spending are just growing the interest payments. And rest assured that if a balanced budget were ever passed or some unexpected windfall occurred, the Congress would spend that shit faster than a drunken sailor in Olongapo on payday.
gkr From: gkr Date: April 17th, 2008 06:48 am (UTC) (Link)
Has very little to do with Social Security though. That's a problem with other spending. Even so, debt service isn't big by historical standards when adjusted for inflation or the size of the economy. If anything is going to really mess with the budget, it's health care spending. That's what is driving up the costs of medicare and medicaid. And that will actually run out of money in about a decade. Fix the health care system, and you get a fixed budget out of it.
geekalpha From: geekalpha Date: April 17th, 2008 07:34 am (UTC) (Link)
"you get a fixed budget out of it."

Or, more money to spend.

But yeah, health care is the killer, but how does it get resolved?
gkr From: gkr Date: April 17th, 2008 07:41 am (UTC) (Link)
Doesn't matter to Social Security. Any more than it matters to funding for military bands.
geekalpha From: geekalpha Date: April 17th, 2008 04:36 pm (UTC) (Link)

I think you missed the agreement and subsequent subject change, or is the lack of answer to my question your answer (it seems to be effectively everyone else's answer)?
gkr From: gkr Date: April 17th, 2008 04:43 pm (UTC) (Link)
Correction, attempted subject change. Subject changes require new LJ postings.
geekalpha From: geekalpha Date: April 17th, 2008 05:31 pm (UTC) (Link)
That isn't anywhere on my requirement list, especially considering that your comment opened the rhetorical door by saying "fix healthcare, fix the budget." I just wanted to establish that the first value was other than NULL.
gkr From: gkr Date: April 17th, 2008 06:07 pm (UTC) (Link)
I forget you are of the 9 subject 30 page variety.
geekalpha From: geekalpha Date: April 17th, 2008 09:12 pm (UTC) (Link)
I have a white paper on the very subject of the format for the standard nine subject thirty page response, and eight other topics I believe.

It has bullet-points.

So, are you going to give a spoiler and answer yes or no to there actually being an answer to fixing health care (in such a way as to unfuck the projected costs to our government without simply throwing people to the wolves)?
gkr From: gkr Date: April 17th, 2008 10:07 pm (UTC) (Link)
Fine. I'll make a post about that.

geekalpha From: geekalpha Date: April 17th, 2008 10:22 pm (UTC) (Link)
It's a yes then?
hazel_ From: hazel_ Date: April 17th, 2008 08:38 am (UTC) (Link)
(sorry, bad typing mistake)

Tiptoeing into here, I am following this thread/post with interest.
In Italy we have had and still have plumbeous scenario that seems to be without solution (in short: no more money in the future for retired people, ever, for nobody, we give our Retirements State Funds Service and Social Security half of our grosso wages and we are sure we won't get anything back when we retire, simply because this money is already covering debts). Reading about US though is really interesting. Thanks.
nplusm From: nplusm Date: April 17th, 2008 10:15 am (UTC) (Link)
When you say "fully funded to 2041" that does make a series of assumptions. Government spending and government payouts are intrinsically linked and are not individually kept. The Federal Government keeps unified budgeting numbers, which leaves the question of how much faith can somebody put in the government's bonds that it issues to itself. Effectively, the bonds held in Social Security Trust are just the government writing IOUs to itself. While the United States has yet to default on bonds, the possibility exists, especially in the face of increased financial instability on a national and global scale. We also assume government projections are correct and not based around some incorrect assumptions (such as the amount of people collecting Social Security (including family assistance, unemployment, etc) vs. the number of people paying into it (see unemployment, depression), or the amount of people requiring OASDI payouts.)

The reality is, Social Security is bankrupt...heck, technically the entire federal government is bankrupt, if we held governments to the same standards as normal economic entities. However, we don't hold them to that standard, and the long reach effects of pronounced deficit spending are still to be determined.

I honestly think, at this point, any long term forecasting of funding, the economy, or any other such highly volatile public/social entity is going to be wildly inaccurate. Saying Social Security is going to be around in its current effective form or saying it won't is a stab in the dark.
gkr From: gkr Date: April 17th, 2008 02:15 pm (UTC) (Link)
Social Security is not bankrupt. It's only going to be bankrupt if the government defaults on the bonds. Again, as I pointed out to geekalpha, the problem is not Social Security. We don't need to fix social security to fix the budget. We need to fix health care spending. If we do that, the government does not go bankrupt.
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