Tuesday, February 16, 2010

Social Security funds low

From USA Today:

WASHINGTON — Social Security's annual surplus nearly evaporated in 2009 for the first time in 25 years as the recession led hundreds of thousands of workers to retire or claim disability.

The impact of the recession is likely to hit the giant retirement system even harder this year and next. The Congressional Budget Office had projected it would operate in the red in 2010 and 2011, but a deeper economic slump could make those losses larger than anticipated.

"Things are a little bit worse than had been expected," says Stephen Goss, chief actuary for the Social Security Administration. "Clearly, we're going to be negative for a year or two."

Since 1984, Social Security has raked in more in payroll taxes than it has paid in benefits, accumulating a $2.5 trillion trust fund. But because the government uses the trust fund to pay for other programs, tax increases, spending cuts or new borrowing will be required to make up the difference between taxes collected and benefits owed.

VH: Social Security turns citizens into wards of the state with all of the implications that this imposes---like the raiding of funds for use in other government programs and being held hostage to the whims of the political class who will change eligibility requirements and benefit amounts when they deem necessary. Politicians that have and continue to push for entitlement programs like Social Security, always fail to mention the downsides to such programs.

Lastly, I continue to be amazed at the amount of times that the government actuaries tend to be wrong in their long term projections. You would think that the American public would be more cynical about their projections.


askcherlock said...

There is merit to what you are saying about future consequences of entitlement programs. The question remains: What to do with these people? What do we do about the poor and disabled? We cannot turn into Scrooge and ask where are the poorhouses and orphanages. As a former social worker, I have witnessed much suffering. If not for these programs, there are many who would perish. Is that the future of America?

VH said...

Cher, you ask a great question. I certainly would not advocate completely eliminating these programs overnight; there are simply too many people that were promised benefits and who had their wages taken away from them to satisfy some politicians ideal of a social good. However, all of these programs, at the very least, need to be reformed or they will grow in their burden on our economy to a point that will cripple us and then we will ALL be screwed. Let's take Social Security, for example. Liberals love to hold up Scandinavian countries as a worthy model for health care reform. Yet, countries like Sweden and Iceland have personal retirement accounts; Chile has a semi-private Social Security system that has worked wonderfully. When any talk of Social Security reform is breached, the argument quickly becomes "They want to make you live on the streets!" So nothing substantive ever gets done.

Older folks that have being paying into Social Security for decades should be grandfathered into full government subsidy while younger workers should be slowly steered toward putting their retirement funds into private retirement accounts. Eventually, over some years, Social Security would then be moved away from public finances where it should have never been in the first place.

Jeff Perren said...

"You would think that the American public would be more cynical about their projections."

That's the most puzzling thing of all to me, why the public hasn't wised up long ago to the Ponzi scheme and put a stop to it.

To approach an answer Cher's questions:

We can, since we're not responsible for the suffering of those individuals, a significant portion of whom are there through a failure of self-responsibility. (Why does everyone assume the majority of the poor are innocent?)

But, for those who suffer through no fault of their own, private charities and insurance would cover all but a miniscule number - if the money were not first removed by taxes, and wealth-creation hobbled before it begins by regulations. The free market continually makes goods and services less expensive, when it's allowed to do so.

But, at the very least, why is the Federal government involved at all? Shouldn't those functions, at worst, be a local/state issue? Why should I support individuals in Louisiana or Illinois?

Cracked World said...

I tend to agree with VH and JP on this. Lets not forget that George W Bush brought up the idea of privatizing SS and it was quickly spread that he was out to get the OLD people.

Fact is Social Security is insolvent and that will become more and more evident over the next few years as the current red ink continues to flow.

The only reason politicians really want to continue on with this madness is because Social Security has become a government slush fund tapped into for other things they can't otherwise fund.