e: The tranisiton costs would be recovered by the fact that there would be less obligation to pay out to future retirees. I never abandoned any such argument.
Yea, what's the break even point for the incremental $1Trillion, 2099?
In a very real sense the break even point is immediate. We give up one form of obligation for another equal or smaller obligation.
If you finance a house for 15 years instead of 30, and you get a lower interest rate in the bargin your net worth doesn't go down. The net interest you will have to pay over the corse of the loan goes down a lot. OTOH you will have to make bigger mortgage payments for the next 15 years. Your net worth is the same either way at the moment when you sign the loan papers. But as your payments under the 15 year loan reduce your future obligations much faster you will soon be better off under the 15 year loan, if you can make the payments and if there is not another much better oportunity to use the money.
That's not a long term trend, it's a temporary demographic blip.
No it is a trend and it has continued since the begining of social security. Its big enough that the retirement of the baby boomers is just a blip up ahead of the trend line and the death of the baby boomers will just be a blip back the other way way against this long term trend. Less and less workers will be available to support each retiree. The reason for this trend is simple people keep living to a longer average age but the retirement age is only set to go up a tiny bit. There are only two ways to end this trend. 1 - The average life expectancy needs to stop going up, or 2 - We need to continue to increase the population at a very rapid rate, with continuous exponetial growth. Neither of these things seems likely to me. You might have a different opinion, but if you think either of these things will happen you should say so explicitly and also you should realize that either change would have a lot of impact on areas besides social security.
mwhodges.home.att.net
mwhodges.home.att.net
S-U-R-P-L-U-S. What other government program has been EARNING MONEY for years.
The program earns money because it has a tax directly associated with it. Its easy to make money when you can take it way from other people legally. The problem is that the amount that social security (also medicare which we have not been talking about as much but which may be an even bigger problem down the line) spends will increase faster than the likely growth rate of the economy. It will consume more and more of our economy. You could keep it in surplus by continueing to increase the social security tax but that doesn't man the program isn't doing any harm. If we keep the program in surplus by increasing social security taxes the harm will be very similar to that done by paying off the projected future deficits through future increases in income tax. Either way you are pulling more and more money out of the private sector. It will only be sustainable if we cut benefits, or increase the retirement age, or have a great multi-decade run of fairly rapid economic growth, or some combination of these three things.
Man, you guys love to attack SS. Everything that government does is an "off book" obligation. Talk about "off book" obligations... let's talk about Iraq.
Iraq doesn't have an off book obligation in the same sense that Social Security does. We have costs in Iraq, and we meet those costs by current on book government spending. Even if Iraq was like social security the costs are a lot lower, are not growing in the same way that social security costs are going to grow, and are likely to end at some point.
Do you think we will still be in Iraq in 100 years? Even if you do think that do you think that we will be spending almsot twice as much as a percentage of the much larger GDP that we will have in 100 years. Or perhaps you expect the US to grow its population at an enormous rate over the next 100 years or you expect that the growth in life epectancy will stop. If you expect wither of those things will happen than it is understandable that you expect social security to not be an enormous problem.
The CBO estimates that Social Security and Medicre will consume over 20% of the GDP some time in the next century if the programs are not changed. Medicare is actually a bigger part of the problem in the long run then Social Security but both of them have to be changed in some way to reduce future payouts.
More at
mwhodges.home.att.net
"Clearly Inconsistent
In their latest report, the Trustees project that Medicare spending will double from 2.3 to 4.8 percent of GDP by 2040. This forecast may appear pessimistic. But in fact, just the opposite is true. It posits a dramatic and permanent slowdown in real cost growth that, in the Technical Panel's words, is "clearly inconsistent with Medicare experience over virtually any historical period."
Over the entire thirty-five years since Medicare was founded, real spending per beneficiary (adjusted for age) has grown at the average rate of nearly 5.0 percent per year. Over no ten year period has it grown at less than 3.4 percent per year. Yet the Trustees assume that this growth rate will fall to just 1.3 percent after 2025, or to roughly the rate of growth in per capita GDP.
The Trustees do not point to any change in medical technology, or health status, or social expectations that might account for the slowdown. The only justification they offer is that Medicare spending cannot indefinitely grow faster than the economy. While this is true, it begs the real question: How will we keep it from growing? By implicitly incorporating a policy response into their baseline, the Trustees subvert its purpose. As the Panel reminds them, their projections should show the consequence of leaving current policy on autopilot--even if the consequence is fiscal and economic meltdown."
concordcoalition.org
concordcoalition.org
cbo.gov
"Today, 47 million Americans receive some form of Social Security benefit. As the baby-boom generation begins to retire, that number will rise considerably. Under the laws that currently govern Social Security, spending for the program will increase from about 4.4 percent of the nation's gross domestic product (GDP) now to more than 6 percent of GDP in 2030, the Congressional Budget Office (CBO) projects. In later years, outlays will continue to grow steadily as a share of GDP, though more slowly. Over the long term, paying the Social Security benefits scheduled under current law will require economic resources totaling between 5 percent and 8 percent of GDP, CBO projects.
At the same time, the federal revenues dedicated to Social Security will remain close to their current level--about 5 percent of GDP--in the absence of changes to the program. Thus, annual outlays for Social Security are projected to exceed revenues beginning in 2019. Even if spending ends up being lower than expected and revenues higher than expected, a gap between the two is likely to remain for the indefinite future."
cbo.gov
cbo.gov
"Social Security's financing problems are a result of its fundamentally flawed design, which is comparable to the type of pyramid scheme that is illegal in all 50 states.
Today's benefits to the old are paid by today's taxes from the young. Tomorrow's benefits to today's young are to be paid by tomorrow's taxes from tomorrow's young.
Because the average recipient takes out more from the system than he or she paid in, Social Security works as long as there is an ever larger pool of workers paying into the system compared to beneficiaries taking out of the system.
However, exactly the opposite is happening.
Life expectancy is increasing, while birth rates are declining. As recently as 1950, there were 16 workers for every Social Security beneficiary.
Today there are only 3.3. By 2030, there will be fewer than two.
The Social Security pyramid is unsustainable.
Moreover, even if Social Security's financial difficulties can be fixed, the system remains a bad deal for most Americans, a situation that is growing worse for today's young workers. Payroll taxes are already so high that even if today's young workers receive the promised benefits, such benefits will amount to a low, below-market return on those taxes.
Studies show that for most young workers such benefits would amount to a negative return on the required taxes. Those workers can now get far higher returns and benefits through private savings, investment, and insurance."
cato.org
"Too often policy makers and the media pay undue attention to the false signals while ignoring the key indicators. This has the effect of making Social Security and Medicare's long-term fiscal problems seem smaller than they really are and creates the impression that only minor adjustments are needed to ensure solvency. The key indicators tell a different, more realistic, story.
Trust funds do not pay benefits. Taxpayers pay benefits—either through the payroll tax or through general revenues. What really matters for the federal budget and the economy is not the trust fund balances of either Social Security or Medicare but their combined annual operating balance and their projected long range cost."
...
"s the Concord Coalition has often stressed, 75-year actuarial balance is a misleading measure of Social Security’s financial status because it is based on an accounting fiction. It implicitly assumes that trust fund surpluses today will help pay benefits several decades down the line. But that is not the case. Today's surpluses are invested solely in government bonds. When it is time for the trust funds to redeem them, the federal government must raise taxes, cut other spending or borrow from the public to raise the cash to do so—exactly what would need to be done if the trust fund didn't exist. (see e.g., Facing Facts, Vol. 3 No. 1, "The Myth of the 2.2 Percent Solution").
* On paper, interest income credited to the trust funds will keep the program afloat until 2022, at which point the fund balance will decline, reaching exhaustion in 2034
– two years after the date previously projected. But because the trust fund is an intergovernmental bookkeeping device it has no economic significance. The improvement shown in its "solvency" thus does not translate into an improved outlook for key indicators such as the projected cash deficits and the long-term cost rates. These indicators continue to show long-term deterioration (see Tables One and Two above).
* The cash from general revenues needed to make good on Social Security's annual deficits between 2014 and 2034 is roughly $8.3 trillion. If this amount had to be deficit financed, interest payments would push the total cost to nearly $13 trillion."
... Medicare ...
"# Finally, it is important to note that, despite historical experience, the trustees assume a dramatic slowing of per-beneficiary costs by the 2020s.
Since 1970 real per-beneficiary Medicare spending has grown at the rate of about 5 percent per year. Yet the trustees project that this growth will slow to under 2 percent over the next five years, and will eventually reach just 1 percent per year by the 2020s. This reflects the trustees assumption that Medicare costs cannot continue to rise at their historical rate, and will thus be brought under control. Left unanswered is how the rate of growth will be slowed (see Facing Facts, Vol. 5 No. 1, "Medicare's Long Fiscal Shadow").
concordcoalition.org
whitehouse.gov
"Greenspan told the House Budget Committee the nation would face "one of the most difficult fiscal situations" in its history as 77 million baby boomers begin retiring around 2008. Spending on the programs, now about 7% of the economy, will hit 12% by 2030."
"This dramatic demographic change is certain to place enormous demands on our nation's resources — demands we almost surely will be unable to meet unless action is taken," said Greenspan, who chaired a 1983 commission that addressed an earlier Social Security shortfall.
He repeated recommendations to reduce benefits for future retirees, such as delaying the Social Security retirement age, already scheduled to rise to 67 during the next two decades; using a more precise index to calculate annual cost-of-living adjustments, which means smaller increases; or increasing the Medicare eligibility age, which is now 65.
usatoday.com
" The demographic projections come from the Social Security Administration. They show the ratio steadily rising of persons aged 65 or older, who generally are retirees drawing benefits, to persons aged 20 to 64, who generally are workers paying taxes. In particular, these projections show the ratio going from roughly 20 percent in 2000 to almost double that by the mid-2030s. The demographics imply that should productivity grow within a plausible range, the relatively small number of workers would not be able to produce enough goods and services to adequately satisfy both themselves and the growing numbers of retirees. In other words, the economic pie would be too small.
Under a wide range of economic assumptions, this problem manifests itself in budget terms as a steadily rising share of the economy going to Social Security, Medicare and Medicaid. Thus, the budget solution requires too large a payroll tax increase to fund existing retiree programs or too large a cut in retiree programs to keep payroll taxes unchanged. However, the basic problem of the economic pie being too small remains no matter the budgetary outcome. Moreover, any proposal for dealing with the problem will not succeed unless it results in a bigger economic pie.
How large is the problem? Suppose the population and economic pie grow as the Social Security Administration and CBO, respectively, now project. Then, if benefits remain at their legislated levels, combined employer and employee payroll taxes in 2030 would have to increase by over 80 percent compared with their current levels. At the other extreme, if payroll taxes were fixed at their current rates, then average retiree benefits would have to be cut in 2030 by roughly 45 percent from what they would be otherwise.
Because of the source of projected budget deficits, it does seem likely that government policies will have to be changed to put them on a sustainable course. Although many things can be done to make the policies sustainable, we want the changes to also treat the underlying problem of the too-small economic pie. Policy changes then should elicit reinforcing private responses."
minneapolisfed.org
Hidden debt poses long-term threat, experts say
rgj.com
Tim |
