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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Steve Lokness who wrote (9354)	7/16/2004 10:19:03 AM
From: GraceZ	Read Replies (1) of 116555

They have no current liabilities because as you point out there has always been a surplus which is then used in the general fund. But they do have future liabilities considering that the government compels everyone to buy their retirement annuity and disability insurance, people naturally expect and plan on receiving those benefits. The surplus is put into special Federal bonds which accrue interest but aren't publicly traded and never will be. Eventually money from the general fund will be needed to redeem these bonds when in 2015 the trust fund peaks out and the outgoing exceeds the incoming. Right now the OASDI trust fund assets are around 1.48 trillion. The SSI or title 19 trust funds and Medicare trust funds have similar assets but are considerably smaller. ssa.gov The trust fund will peak out in 2015 with around 3.7-4 trillion. The unfunded (an amount that doesn't have offsetting bond assets in the trust fund to pay for it)liability will be around 3.8 in 30 years when 77 million boomers are retired. The trustees project that the payroll tax will need to be either raised to 19% from it's current 12.3% in order to fund the future liability. This is something which would add insult to injury considering that it would be difficult to impossible for them to even redeem the bonds in the trust fund. Consider that they already spend the surplus in order to pass the budget now (and to create the fake budget surplus in 1999). Take away the SS surplus and the budget is far deeper into deficit, add in the burden of redeeming those bonds and SS swallows everything else. Add the two liabilities together (the unfunded and the "funded") and you get a future liability of just under 8 trillion to see the boomer generation through the end of their lives. It's all here in the trustees report if you have trouble sleeping some night and want to read it. ssa.gov Putting whatever feelings we both might have about the wisdom of going into Iraq, the fastest growing budget item over the last 30 years has not been defense, it is HHS (health and human services) and that doesn't include SS and Medicare expenditures which are considered "off budget". Medicare actually presents a far more dangerous unknown future liability simply because it will be indexed to medical costs which rise at a rate far faster than inflation. Best to stay as healthy as possible for as long as possible and plan on working the rest of your life unless you have your own retirement money. This is the only light at the end of the tunnel, because SS will be limited severely I predict the Boomers will be forced to work far longer than their parents which means they will stay in the work force and contribute to SS far longer. Obviously the least healthy won't be able to do this. It's not feasible to fix SS by raising payroll taxes higher although I expect they will try.

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