So-Called Social Security ‘Crisis’ Solved With Facts

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So-Called Social Security ‘Crisis’ Solved With Facts

February 6th, 2013 3:08 pm Jason Sattler

If you’ve been following the debate over a so-called “grand bargain” to cut the long-term deficit, you may have been surprised to hear Social Security mentioned by both the GOP and the president, as if the program is part of what Republicans call our “spending problem.” It isn’t.

“Under the law Social Security is not supposed to be part of the budget,” writes Dean Baker, an economist and the co-director of the Center for Economic and Policy Research. “It is an entirely separate program financed on its own.”

And as a self-funded program, it has sufficient funds to pay full benefits until 2033. After that, it is funded to pay 75 percent of obligated benefits.

Basically, there isn’t a crisis now and won’t be for 20 years.

The problem is, not enough Americans seem to know this. But a new study from the National Academy of Social Insurance (PDF) shows that when citizens are informed about the realities of Social Security, they’re comforted and willing to make changes to make the program solvent into the future.

A majority initially responded that Social Security was in “crisis.” But once informed of the slight increase in payroll taxes needed to save the program, 3 out of 4 said there is no crisis.

And while 82 percent of Americans are willing to pay higher taxes to save Social Security, there is, of course, an even more popular alternative.

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Tags: Chained CPI, crisis, grand bargain, Payroll Taxes, Social Security

http://www.facebook.com/people/Rich-Birkett/100000480147182 Rich Birkett

If Social Security is solvent, why did President Obama say Social Security checks would be delayed if the debt ceiling isn’t raised? Either Obama is trying to scare voters into backing the raise, or he doesn’t know all the facts, or he’s lying.

Urbane_Gorilla

Probably trying to fire up retirees to make the GOP look bad….As if they could look worse. Politics. But your point about the President not knowing all the facts, or lying applies equally to Congress.

14th Amendment : Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

In other words, if Congress has approved debt, they can’t not pay it.

Facts don’t seem to get in the way of Congress these days do they?
http://www.facebook.com/dominick.vila.1 Dominick Vila

Social Security is solvent inasmuch as its revenues cover current outlays. The problem is that demographic changes, which already started with the retirement of baby boomers, and the fact that the contributor/beneficiary ratio is now at a breaking point, will strain the system to the point that it will have to rely on general funds to cover outlays unless something is done soon to ensure its solvency for many years to come.
I suspect President Obama’s prediction concerning issuance of SS checks if the USA defaults on its debt was influenced by the fact that if we don’t meet our debt obligations, borrowing would come to a halt, and the government would have no choice but to prioritize services. In other words, we would have to choose between paying the military and intelligence agencies to guarantee our national security, pay air traffic controllers, medical researchers at the CDC, the border patrol and other such services and honoring the obligations associated with paying seniors the benefits they were promised in exchange for the contributions they made during their productive years.
Bear in mind that our contributions were not set aside for future use, the SS checks issued today are backed up by the contributions our young make today, the same way we paid for the SS checks our parents and grandparents collected long ago.

http://www.facebook.com/BaronSieggy Siegfried Heydrich

From a rather cynical demographic point of view, the poor health and habits of the baby boomers now retiring makes this a largely self-solving problem. I live in SW Florida (a retirement Mecca), and when I see the number of obese, wheezing retirees who essentially stop living when they retire, on one hand I am sad, and on the other, aware that their early departure from this vale of woe reduces the long term burden on the SS system. However, this is offset by the increased demand on Medicare / Medicaid. Oh, well . . .

CPAinNewYork

So, what is your point?

jnap

I am sorry Dominick but you are wrong. Social Security, when it was enacted, required all money, in excess of what is paid out to beneficiaries to be invested in Special Issue Treasury bonds. The fund has about 2.3 trillion of these bonds and can case them in to pay benefits when it is needed. These bonds are no different than bonds sold to China, banks, pension funds and other countries. The problem is that when these bonds are cashed in the money will have to be borrowed to pay them off.
But that also applies to all bonds that reach maturity.
Congress needs to worry about all of the other problems it has and worry about SS in about 5 years. As many people have pointed out just raising the rate by 1.3% solves the problem.

johninPCFL

Current paycheck contributions don’t pay for all of the current outlays, so money is now borrowed to pay current retirees. Do you want to pay the army or granny? Do you want Saturday mail delivery, or pay granny? Do you want safe air travel or pay granny? Do you want to repair that bridge, or pay granny? Do you want your fire department trained or pay granny?

It costs about $500B to run the federal gov’t, about $700B to run the military. The rest of the $3800B in federal expenditures is SS, Medicare and Medicaid. This year’s deficit will be around $900B, so to keep the SS checks solvent without exceeding the debt ceiling, most of the federal gov’t and military would have to be shut down. Or, alternatively, keep the coutry secure and slow the SS payments.

Which would you do?

jnap

Pay granny! She paid into the fund and deserves to be paid back. I paid into the fund for 50 years and, in fact I’m still paying into it. If you don’t pay granny or me; what do you expect us to do live in the streets?
We are not getting anything more out then we were promised.

johninPCFL

You realize, of course, that this month’s check is the last one you’ll ever get once you disband the military because you can’t pay them? You sure the country’s security isn’t more important than you, maybe just this once?

Sand_Cat

The problem isn’t that the Republicans won’t raise taxes: it’s that they hate Social Security as the last surviving New Deal “Liberal” program and want to destroy it, along with Medicare and Medicaid. But first they want to milk Social Security for all their Wall Street owners can get by “privatizing” it.

http://www.facebook.com/bob.brindell.7 Bob Brindell

Generally I have difficulty agreeing with you. But Sand_Cat you are on target here!

jimjf

The “crisis” part is that the Social Security Trust Fund has all been lent to the general fund and spend. It will have to be repaid from general revenue. Removing the cap on the income that is taxed would greatly help long term solvency also.
http://www.facebook.com/dominick.vila.1 Dominick Vila

Increasing FICA contributions by 1.4% would keep the program solvent for many decades. The only question I have is: why don’t we raise the contribution cap from the current $106K to $200K to achieve the same goal without impating the middle class? Oh, I forgot, those making $250K a year are middle class…wink, wink.

http://www.facebook.com/bob.brindell.7 Bob Brindell

Raising the cap is not a bad idea. Only problem is that it would only fund the additional payout to cover increased benifits paid to those earning $106K and $200K. Benifits paid are based on average of your highest 5 years of income. Increase still needed.

http://profile.yahoo.com/UHE4MJP5FHMFIEAOGEQHETUGDQ Rvn_sgt6768

In the future there will be many more low average workers retiring than any of those whose average earning were between $106K and $200K. Remember the money taken in each year funds the ongoing SS payments which has so far generated a surplus of over $2.3 Trillion which Congress has borrowed from. I do not see a scenario where those high earner’s payments will ever drain that surplus if we increase the cap.
Poiks

Benefits are not capped?

http://profile.yahoo.com/HGC4BGWVYXV76PHZBPSPOOU5GA Independent1

Actually, there should be a “net worth limit”, above which no benefits should be payable. CEOs whose net worth is in the multi-millions should not receive SS benefits at retirement.

Poiks

I totally get your point, there’s just something that makes me uneasy about telling people they get nothing out of what they paid into for all those years.

http://profile.yahoo.com/HGC4BGWVYXV76PHZBPSPOOU5GA Independent1

I don’t think that’s necessarily so. A lot of those whose earnings are over $106k would not live long enough to fully recover the extra monies they paid in by they and their companies paying the SS taxes on their income past the 106k current limit. Those “unpaid out funds” would then go to providing benefits for others (including retirees who earn a lot less than 106K).

http://www.facebook.com/BaronSieggy Siegfried Heydrich

WHAT?!? And impoverish the ‘job creators!?! Oh, the pain, the pain . . .
http://profile.yahoo.com/KV2YCNDU755CHTULDVEIFTW7GE steven c

Im sure that if you were making 250,000 a year your would be here saying raise the cap. Your one of Obamas people that wants to “redistribute the wealth” but doesnt think you have to work for. No original ideas or hard work to get what you want just gimme gimme gimme. People that make 250,000 a year are not rich they are well off in most circles. These people get trapped in the middle because they make more than the average person, but less than the millionaires. Obama wants to raise taxes on these people to take care of the people on welfare andf the unemployed and uneducated. Sure its easy to take from peter to pay Paul, that is until Paul doesnt have anymore to give. Here is a better idea, bring American manufactures back to America. How hard would it be? Most of these companies moved overseas because the government placed high taxes on them for manufacturing goods in America. Corporations are in business to make money so why not ship jobs overseas to countries where no employee protection laws impede profit, and the taxes are low. Most companies can afford to make and ship products in foriegn countries for a lot less than the U.S. and make twice the profit. Offer companies a lower tax rate if they can prove they have created a certain amount of jobs in America. In contrast make tariffs on imports higher if the company shipping the product is an American company. Make it viable for manufacturers to create products in the U.S. Tear up NAFTA and put import limits on products from China until they import the same amount of products from us. Finally penalize companies like Walmart and Target for not buying American products. These companies steal from the American people by buying Chinese products and selling them to the American people for huge profit.

http://www.facebook.com/kate.kolaske.9 Kate Kolaske

I have heard and don’t know if it is true, but has the government borrowed against the social
security funds and have not been able to pay it back? Perhaps we should be looking at this !

http://www.facebook.com/BaronSieggy Siegfried Heydrich

Much of the SS Trust Fund has been invested in T-bills. Personally, I don’t see the problem, but hey . . .
jnap

The SS fund, by law, must buy Special Issue Treasuries with money remaining after benefits are paid. This has been the law since SS was enacted. SS has about 2.3 trillion in its fund and that money belongs to SS recipients.

http://profile.yahoo.com/RCV6PTTSY3NRJKVOBMMRXMJ6NA Barbara

Years ago I remember people were happy when they made more than 50,000 a year
so they wouldn’t have to pay into SS anymore. Later, if you made more than 70,00, you
stopped paying the SS tax. Now it is 110,000. Why not just raise the amount to 125,000
or whatever amount is appropriate to keep SS funded?
stcroixcarp

There is a huge pot of money out there. Can you imagine the additional profits if employers didn’t have to pay anything into social security?

jnap

Employers actually consider money paid into Social Security a contribution to the employees pension fund and they get to deduct the payment from their corporate taxes.

http://www.facebook.com/jgodiska John E. Godiska

Why don’t we lend our SS money to ourselves, similar to a 401 K ? You could borrow a thousand bucks for a freezer or whatever, and pay a hundred bucks a month for 12 months, in order to pay it back quickly. 25 bucks a week coming directly out of your paycheck or SS check. All the interest would be going to insure the SS system is solvent, and it would not be going to Bankers and Capital one, for their pleasure.

http://www.facebook.com/bob.brindell.7 Bob Brindell

That would work. Oh! the Repubs would not like it, it makes sense.
http://profile.yahoo.com/7ZCSXZFKCPCCNTXWY7PKX4VPOA jg

Lending to yourself from your retirement funds is like what happened when people started delving into the value of their homes with second mortgages. It’s so easy to keep taking those loans instead of saving or repaying. Many people simply don’t have the discipline to ever pay themselves back. Next thing you know a job loss or a real financial emergency arises and you are a goner.

I believe we have already lent out our FICA money to the government. It’s all held in U.S. Treasury bonds. The Fed’s stimulus programs are basically paying zero interest on those bonds.

http://profile.yahoo.com/AO5XGV65KYB5J75FJVYGKPHZOU L. Roy

All of the media misinformation on this doesn’t explain that the Republicans want to rob people of what they’ve earned in order to pay off the indebtedness incurred in two unpopular MidEast Wars

FredAppell

True, but it goes way beyond that. Republicans have been trying to dismantle Social Security since it was first enacted. The information is really easy to find since Republicans are really proud of the fact that they oppose it. Every couple of election cycles the Repubs like to trot it out and use it as part of their platform to rile their base. They change the wording but the message is always the same. Now, if they can somehow create a situation that makes Social Security look inadequate then that is what they’ll do and that is what they have been doing for some time now.

Tallboy52

Sand Cat has a point, and is right on the mark. The fact is that Republicans have been looking for ways to gleen more money out of Social Security. Could you imagine what would have happened for example if they had succeeded in privatizing Social Security into the Stock Market. Then it would have been a real crisis. When the market crashes so too does Social Security. One resolution to solving potential problems is to close the lid on Social Security and not allow Congress or Government to tap the funds. Congress borrows from the fund and does not re-pay it. And no matter what we have to continue to pay into the program as we have. No Holidays. Second, Congress needs to repay Social Security the money borrowed. If Congress had left the program alone in 1965 we would not be in trouble today.
m8lsem

An alternative to higher payroll taxes for everyone would be graduated payroll taxes, that is, 3% of wages up to poverty level, 7% from poverty to middle class, and something like 10% to 15% on incomes above that … one would adjust that highest number to the one that would achieve liquidity ‘forever’ for the Social Security Fund.
quasm

Mr. Sattler;

When people were informed of the SS funding were they also told that all the reserve funds are in government obligations which must be met by either taxes outside of SS or just printing money which would drive hyperinflation? The problem with SS is that it is a government program which elected officials have and will continue to use to buy votes.

It has been removed far from its intended purpose and is now just another program to transfer wealth from those who create it to those who have not earned it. And this reaches deep into middle income earner’s pockets.

Dik Thurston
Colorado Springs
artolga

Republicans have always been a “I’ve got mine, so don’t raise my taxes for those who have not” party. What I don’t like about FICA tax is that if you earn up to 110k you pay 6.25% on every dime you earn, and your employer matches it—but someone like Payton Maning earns 18m but only pays on 110k, which is matched by his employer. THEY SHOULD REMOVE THE CAP BEFORE CUTTING BENEFITS!
http://pulse.yahoo.com/_KOPKDFAUQPIIRAFI3HEXNMSHLQ Ed

And raising the limits on contributions would make it solvent forever; but then you would be requiring our elected officials(who don’t really need it anyway) to pay more. Any way, the facts are that there is no crisis, just another product of the right wing gloom and doom machine. Much as the debt crisis is. How many know the difference between the “debt” and the “deficit”?
http://www.facebook.com/mrfun9153 Tom S Brown

To make social security secure, remove the revenue collection cap then 100% of the people paying into FICA will be paying on 1oo% of their wages or taxable income.
Poiks

I’d be interested in knowing what the new “cap” would need to be in order to make Social Security sustainable. Removing the cap entirely would be politically difficult, but raising it probably wouldn’t.
montanabill

This is a story for dummies. Mostly true, but not complete. The government does not save our Social Security taxes for future retirees. Congress borrows this extra money and uses it to make up for deficits elsewhere in the budget. Thus the Social Security trust fund contains nothing but IOUs the government has written to itself. And when Uncle Sam goes to repay those IOUs, you know who pays the bill: we do. That means that in order to repay those IOUs, the government will have to either raise taxes or cut programs.
Social Security is already the biggest tax that most workers pay, but to keep the system afloat payroll taxes will have to rise even higher—to 20 percent of each worker’s wages.

Around 2018, Social Security will start to spend more than it receives in payroll taxes. At that point, it will begin to cash in the bonds in the trust fund. Where will the money come from?

According to the OMB, there are only four sources that money can be drawn from. Congress could repay the money by raising other taxes. It could also authorize the Treasury to just borrow the needed funds. Another alternative would be for Congress to reduce other federal programs and to use the money that was to have been spent for them to redeem Social Security bonds. Finally, Congress could reduce Social Security benefits.

jnap

Montana, it is not just Social Security Special Issue Treasuries that mature; billion of dollars of other Treasuries mature every year. Those maturities are far greater than SS Treasuries.
The Federal Government will just borrow the money just as it has been doing for many years. I don’t care if it is SS bonds or China’s bonds that mature both have to be financed by new borrowing. SS bonds should not be considered to be worth less than China’s bonds.

montanabill

So who do you suggest we borrow more money from?

http://pulse.yahoo.com/_XQV2E2E7VGHH5S2E2HEEGKMEAE Chas

Higher income earners are taxed on their social security income as high as 85 %. These taxes go into the general fund but it would make more sense if it would go back into the social security trust fund.

jnap

No Chas, benefits are not taxed at 85%. 85% the benefits received may be subject to income tax but the rate is never above 39.5%

http://profile.yahoo.com/GGHNYPK4GNCRYZLXWVZ447WHJM Plznnn

Trouble with raising taxes again, that will just burden taxpayers more, and do nothing to really solve the growing problem. Eventually the Federal Government will have to again and again raise taxes to fund this, and with Baby Boomers reaching the age of 65 in 2011 at the rate of 10,000 per day, and Amnesty for Illegals, this is just kicking the can down the road. By giving Americans false hope that this problem is minor, for political reasons is just going to hurt us all and those in the fiture.
ObozoMustGo

While Jason Sattler, useful idiot du jour, may not think there’s a problem, the actual Trustees of SS and Medicare BOTH are ringing the warning bells. Newsflash: There is NO money left in either program. Current benefits are paid out of current taxes. Once they reach the tipping point, then they have nothing but government IOU’s to redeem from an already bankrupt country. I’m not sure why you leftists can’t do simple math. Either that or your taking the ostrich methodology of problem solving with your heads firmly planted in the sand with the ol’ “we’ve got plenty of time, nothing to worry about” state of mind like Sattler displays in this article for morons.

Too many people are too dependent upon the government now. The problems will not be solved by policy but by force of economics which will be much more painful. This is unfortunate, but true.

[click image to enlarge]

Have a nice day!

“The task of weaning various people and groups from the national nipple will not be easy. The sound of whines, bawls, screams and invective will fill the air as the agony of withdrawal pangs finds voice.” — Linda Bowles

jnap

Fuc you obozo, People earned the right to collect SS. We paid into the system and deserve to collect the benefits that were promised. Let’s quit starting wars we can’t pay for.

ObozoMustGo

jnap… I’m with you on the wars thing. Bring them all home… NOW! Put them along the boarder to secure that.

Re: SS… People put money into Bernie Madoff, too. While they deserve to get it back, that doesn’t mean the reality of no money there can be overcome. So, if we want to save the program for those seniors who most need it without forcing current workers into slavery to pay for it, then changes must be made. You have bought the lie that there is money there when there is not. SS is a Ponzi Scheme. Sorry dude, but it’s just a matter of simple math.

Have a nice day!

“Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.” — Frederic Bastiat, French economist (1801-1850)

judgeglenda

the gov has been stealing from social security for years. social security is not now in trouble.
http://profile.yahoo.com/KV2YCNDU755CHTULDVEIFTW7GE steven c

The problem is that the Social Security system had a huge surplus in the 1970s. The government in their infinite wisdom decided they could “borrow” from the program and then pay it back later. Unfortunately the government is not very good at paying back its debt (big surprise) and now the “IOUs” that the federal government wrote the pension plan are not worth the paper they are printed on. Privatization of Social Security would be a nightmare because it would be tied to the stock market. I guarantee that if the stock market goes up that the social security recipients would not see an increase because of some loophole in how the contracts are written, but when the stock market goes down so would recipients payments. The biggest problem that we the people have is assuming its Democrats against Republicans. Its not its us the people against them the government and the big money people. As long as they keep us pointing fingers and placing the blame on “the other party” they win.

Jim_n_Panama

The “IOUs” you refer to are called US Treasury Bills. You know, the safest “IOU” in the world? And as with a T-Bills, the Treasury pays the Social Security fund interest effectively when the Bills mature. Would you feel better if the SSA kept the money under a mattress somewhere? As far as “the government is not very good at paying back its debt” ….excuse me, but could you name one instance just ONE wherein the Treasury has defaulted on a note? Never mind, you don’t like facts

Eastoceanview1

What about the 4.4 trillion that the government has borrowed from social security? We are the largest creditor of the US government.

Jim_n_Panama

The Social Security tax has been raising more money than is needed to pay for current benefits, in order to build up a surplus to help finance the retirement of the Baby Boom generation. All of this surplus is lent to the U.S. Treasury when the Social Security Trust Fund buys bonds from it. The money is then used to finance the federal deficit, just like any other money the government borrows. The bonds held by the fund pay the same interest as bonds held by the public. These bonds are every bit as real as the bonds held by banks, corporations, and individuals. Throughout U.S. history the federal government has always paid its debts. As a result, government bonds enjoy the highest credit ratings and are considered one of the safest assets in the world. Thus the fund has very real and secure assets.

jstsyn

So why do we let these fool politicians constantly LIE to us and refuse to do what the biggest majority of people want? Americans need to grow some balls and demand our politicians do what we want. They don’t understand nice. What is wrong with everyone?
http://www.facebook.com/tom.young.547 Tom Young

How about the thieving basturds paying back what was borrowed(STOLE) from SS and it would be solvent without doing a dam thing !!!!!!
http://KIDK.com Racyman

Unfortuanately, the GOP doesn’t deal in facts.
onedonewong

When this same group of people are informed that illegals and those who have never paid into the system are eating at the trough with impunity. Allowing people to opt out of SS is preferred by the majority of taxpayers and opposed by those who don’t pay taxes
http://www.facebook.com/richard.patterson.9659 Richard Patterson

If the founding fathers of the Social Security Administration, could hear how everybody is talking about Social Security, they would turn over in their graves in disgust!!!! The Social Security Administration is as famous as our American flag!!!! It was created to stay here as long as this country is here. That’s why it was created, for hard times, retirement, senior citizens and people disabilities. Talking about cutting their benefits, even one dollar, shows we have no class as a nation. Don’t pick on the weakest!!!!
vippy

Pay more in, are you kidding? When congress sees a pile of money they will find a way to take it all. They did already rob from the Social Security Program and put worthless IOUs in place which now are part of the budget and now they don’t want to pay up! We need a law that congress cannot use SS Funds EVER! Raise the cap of SS and the problem is solved! Why don’t they ever do the right thing?

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