The skinny on Social Security

Dan Mitchell hits one out of the park and makes Mark Walsh look like a partisan hack in this clip. Yes, Sweden, the country that liberals love to hold up as the paragon of civilization, has Personal Retirement Accounts and they have not fallen into the ocean, folks. Sooner or later, we are going to have to do something about Social Security.

Accounting gimmicks and Social Security

Despite what Paul Krugman and Dean Baker have been telling you, the Social Security trust fund is in bad shape. Robert P. Murphy at LVMI explains.

Hoping for a rich uncle

From Boston.com:

WASHINGTON — Social Security will pay more in benefits than it receives in payroll taxes in the current fiscal year, six years earlier than expected, the Congressional Budget Office reported yesterday.

Last spring, Social Security trustees reported that expenses would exceed revenue beginning in 2016. Since then, applications for benefits have increased because people are retiring early due to the recession, and that, combined with high unemployment, means fewer workers paying taxes.

“There’s so much unemployment,’’ said Robert Pozen, chairman of Boston-based MFS Investment Management. “There’s less going in, and more people are taking early retirement.’’

The CBO projects that the trust fund will be $29 billion in the red during the fiscal year ending Sept. 30, and will run deficits for the next three years. After projected surpluses in 2014 and 2015, the trust fund again would have deficits from 2016 onward.

VH: I'm shocked.

Need tax revenue? Collect it from social security benefits! What fun!

A little–noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.

Social Security benefits are off–limits to creditors, such as credit–card companies and banks. But the U.S. can collect debts to federal agencies by "offsetting," or withholding Social Security and disability payments.

The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student–, farm– and small–business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.

Previously, the U.S. hasn't been able to withhold Social Security payments to recover most debts delinquent for more than ten years.

But a provision in the 2008 Farm Bill lifted the ten–year statute of limitations on the government's ability to withhold Social Security benefits in collecting debts other than student loans—for which the statute of limitations was lifted in 1997—and income taxes, where the limit remains 10 years.

A provision in the 2008 Farm Bill? I can only think that this was added as a revenue generator to offset the cost of Farm subsidies

This means that a person who defaulted on a small–business loan in 1995, for example, and who is receiving Social Security could be notified that his benefits may be reduced each month until the debt, with interest, fees, and penalties, is paid. The Treasury can withhold 15% of the benefit, though it can't be reduced to below $750. Tax debts have no floor.

The change will add more than $6 billion to the $75 billion in delinquent debt individuals owe the government, according to the Financial Management Service, the Treasury's debt collection unit.

In 2003, the U.S. began withholding $173 a month in Social Security benefits from Annie Brown, a paralyzed 75–year–old widow living in a nursing home to repay a defaulted $8,823 student loan the Education Department says she took out in 1989. The offset reduced Mrs. Brown's benefit to about $980 a month.

Mrs. Brown said a granddaughter had forged her signature on a loan application. Her daughter and a lawyer spent more than four years disputing the debt with the owner of the loan, United Student Aid Funds, a student–loan guarantor that also was acting as one of the Education Department's 21 debt collectors.

Read it all here.

VH: I don't know what to think about this except to repeat my thoughts on entitlement programs: Citizens that freely allow themselves to be wards of the state will reap what they sow. The state can and will hold your livelihood and well-being hostage to its greater political ends. Ask yourself, why the hell does the 2008 Farm Bill have anything to do with Social Security? It only does when one group is deemed worthless enough to be thrown under the bus for another group that is better connected and has better lobbying: The whims of the State change with the political winds. Who in their right mind wants to take a chance in their golden years with the state holding your livelihood in its grubby hands while listening to apologists for social security utter: "mistakes can happen, but over all, the process works?" I'm afraid too many. It is very sad that some of the senior citizens in this story have had to deal with the perniciousness of raw bureaucracy.

Milton Friedman - The Social Security Myth

Not an Austrian but still great.

It may come to pass--means testing for social security benefits

Bryan Caplan tackles means-testing for entitlement programs (social security mainly) and Dave Henderson retorts.

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.

Obama wants to cut a $250 check to seniors

Since the Social Security Administration won't be adjusting it's payout upwards due to negative inflation, President Obama proposes a one-time payment of $250 to senior citizens. First thought, does he really think $250 is enough? I mean, that's less than 5 bucks a week...that's hardly enough for a gallon of milk. Secondly, now that the value of a dollar has started to slide (partly due to our massive deficit spending) and commodities have started to rise in response because of inflation fears, the $250 bucks amount will essentially amount to squat by the time the bill for it gets through Congress. Thirdly, the funds for this "one-time payment" has to come from somewhere: It's going to come from borrowed funds ("The White House put the cost at $13 billion.") that will have to be paid back with interest. This "one-time" payment is going to be royally expensive and not very effective in reducing economic pain for seniors. Of course, the propaganda from Democrats and the White House is going to be in full tilt for this one. There's nothing like feigning compassion for a powerful voting bloc by granting them funds that is taken from some other group. It works like a charm and it's difficult to argue against.

This leads me to believe that this may be a political ploy by Democrats and the WH to try to pin Republicans (who may resist this one-time payment idea) as being cold, angry, and anti-senior citizens. The timing is interesting because of the health care fire that's dominating Washington right now. And afterall, some of the "brown shirted thugs" at the town hall protests were grandma and grandpa, what better way to win some of their support than to grease their palms with "compassion" bucks. Never underestimate the power of an emotional argument.

The Coming Storm

This video is a Ron Paul political advertisement but I think that it is still relevant. Baby boomers will start to retire in great numbers, they will begin to tap into Social Security and Medicare. Bottom line--The U.S. can not afford these liabilities AND all of the ponzi schemes Obama and the Democrats are proposing for our economy.

Social Security and Medicare hit the fan

Oh crap! Social Security and Medicare are in trouble. Again. What a surprise. I'm so caught off guard. Can I have all the money I paid into these ponzi schemes back now? I wonder how in the world Obama thinks that he is going to fund a single payer national health care plan AND solve the Social Security/Medicare financial debacle? This is going to get very interesting.

Social Security Disability--Your Tax Dollars at Work

You just wait till Democrats start fattening up all of those entitlement programs they are so fond of in order to garner votes.

HT: Liberty Pen

Milton Friedman on FDR and Social Security

HT: Liberty Pen

Obama's social security tax plan