Social Security

The Real Beginning of the End of the 20th Century, or, Batten Down for the Silver Tsunami

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First Baby Boomer applies for Social Security–first check to arrive in Feb. 2008. Reuters reports:

Social Security Commissioner Michael Astrue said the agency is bracing for some 80 million Americans to apply for retirement benefits over the next two decades.

"We are already feeling enormous pressure from baby boomers being in their peak disability years and now we're preparing for so many of them to file for retirement," Astrue said at a press conference with [Kathleen] Casey-Kirschling [the first Baby Boomer collecting–yes, they held a press conference to note this momentous occasion].

……….

Social Security, which referred to the looming crisis as a "silver tsunami," is facing enormous financial pressures from the generation born in the aftermath of World War Two. The latest report by the program's trustees said by 2017, Social Security will begin to pay more benefits than it receives in taxes. By 2041, the trust fund is projected to be exhausted.
…………

"There is no reason to have any immediate panic," Astrue said. "I and most people who are really familiar with the situation are confident that there will be some pain along the way, but we will get there and Social Security will be there for future generations."

You got that? No reason to have any immediate panic. Nick Gillespie on some other ways Baby Boomers have ruined America here. A classic April 2005 debate on the possible future of Social Security between Tyler Cowen and James Glassman here.

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  1. Is a “Silver Tsunami” anything like a golden shower? Cuz I’m sure it will feel that way to us people under 30 years old…

  2. Nothing to see here folks. The trust fund is just fine. Please move along.

  3. Randolph Carter

    It feels that way already, doesn’t it? It does to me, anyway.

    /30

  4. “There is no reason to have any immediate panic,”

    Subtext: Current retirees and Boomers will be taken care of. Their kids and grandkids however, are fucked.

  5. Great to see it will be exhausted two years before I retire, but that I’ll keep having to pay into it anyway…

  6. My favorite was when one of the big 3 network news shows interviewed Casey-Kirschling. On her small yacht. Called “First Boomer”.

    Yep. Social Security. That “safety net”. Helping boomers make boat payments since 07.

  7. I think that we should just make some “Solyent Silver” and the problem will be solved; plus we can sell the Solyent to third world countries as a food source and make some dough on the deal.

  8. These numbers are bogus. Bush’s appointee, like the Reason staff, is hyping the most pessimistic projection in order to scare the public into thinking Something Must Be Done, so they can push through an ideological scheme that the public wouldn’t support on its merit. Just like Iraq.

    If annual economic growth averages 3.3%, there will never be a Social Security shortfall. Since the end of the Civil War – almost a century and a half, which includes the Great Depression – annual economic growth in America has averaged 3.4%.

    I thought Reason had gotten away from the scaremongering two years ago. Lemme go in to the archives and see if I can find that “yeah, the Social Security Scare was b.s.” article.

  9. “There is no reason to have any immediate panic,”

    Who’s worried? The federal and state governements take some of my paycheck and flush it down the crapper. Meanwhile, I make my own retirement plans, quite free of any social security benefits.

  10. Once the Trust Fund is exhausted, in 2041, the “problem” can be solved by letting SS benefits drop by 25%. No, the old folks won’t like it, but that is one way to solve it. I hereby give you permission to save a few more bucks by shutting off my oxygen tank.

    The real problem will occur in Medicare much earlier, around 2019 or thereabouts. But expecting Congress to act on either of these issues is a bit ridiculous. No one has the faintest idea of where the U.S. economy will be in 2041 or even in 2019.

    In the early years of Bill Clinton’s administration deficits were huge. A few years later, surpluses were huge. Excuse me, but who predicted that? No one, absolutely no one. Human beings, bless their short-sighted, greedy little hearts, will not make immediate sacrifices to satisfy the predictions of big-picture windbags, be they Newt Gingrich or Al Gore. And that’s a good thing.

  11. I’m just happy to note that I’m finally on the leading edge of a trend. That’s right, I’ll be 67 in 2041. My full retirement age is exactly when the fund will be dry. Get in line, Andrew G!

  12. There will be no “Silver Tsunami” until RP changes us to the Silver Standard with the stroke of a pen. Not so much as a by-your-leave to the Congress, mind you, just the magic pen of the Commander-in-Chief.

  13. If annual economic growth averages 3.3%, there will never be a Social Security shortfall.

    That’s kind of a risky attitude. Even if it has averaged 3.4 since the Civil War (which is admittedly a long time), it’s still risky.

  14. These numbers are bogus. Bush’s appointee, like the Reason staff, is hyping the most pessimistic projection in order to scare the public into thinking Something Must Be Done, so they can push through an ideological scheme that the public wouldn’t support on its merit. Just like Iraq.

    In 1997, the SS Trustees predicted a date of 2018. So was a Clinton appointee scaremongering?

    The actuarial numbers have not changed significantly in the last decade, because the trends have been relatively consistent. Nothing has changed about SS funding, and the demographics are still similar. So is your claim that the Trustees have been getting it all wrong for over a decade?

  15. MP, you know joe’s going to take the partisan hack approach to this. BUSH APPOINTEE!!! BOOGA BOOGA!!!

    Question for joe: Do you support the government spending SS receipts as they come in rather than “saving” them for their intended purpose?

  16. It is not like seniors pay into private health insurance proportionately to what they take out. That is probably a worse problem, and a more costly ones for those actually paying the bills.

  17. MP,

    So was a Clinton appointee scaremongering?

    The Social Security Trustees always publish three sets of figures – the optimistic, medium, and pessimistic projections. They did this under Clinton. They did this under Bush. They did this under Carter.

    What is unique about the Bush administration is their eagerness to hype the never-even-close-to-realized pessimistic projections as the only reliable ones.

  18. x,y,

    Federal law mandates that Social Security receipts in excess of that year’s benefits be applied to the national debt. That is their “intended purpose.” Because, once again, Social Security operates like every other branch of the federal government – on an annual budget.

    Do I think that we would be better off, keeping everything else the same, if those excess receipts had, instead, ben put in a bank account while that much more national debt continued to compound? No, I don’t.

  19. Anyway, x,y, that was a nice little bit of partisan hackery you put up there, but it would be a better thread if you’d just stick to the facts.

  20. I’ll be 67 in 2041. My full retirement age is exactly when the fund will be dry

    I think that we should just make some “Solyent Silver”

    Their kids and grandkids however, are fucked.

    Pessimism + snark = libertarian worldview. Shame.
    Defeatism by definition will not solve any of these problems.

  21. Defeatism by definition will not solve any of these problems.

    Solyent Silver will completely solve the problem. Oh, you thought I was kidding!

  22. What is unique about the Bush administration is their eagerness to hype the never-even-close-to-realized pessimistic projections as the only reliable ones.

    2017 is the Intermediate projection. 2021 is the Low Cost position, which has low (2.5%) odds.

    If the Bush administration was doing what you say, they’d be humping the High Cost position, which starts running a deficit in 2010.

    And none of this of course accounts for your fanciful numbers.

  23. If only secondhand smoke were as dangerous as its detractors say it is. Then Social Security would be in fine shape, since all the Baby Boomers would’ve died of lung cancer some twenty years ago.

    Do I think that we would be better off, keeping everything else the same, if those excess receipts had, instead, ben put in a bank account while that much more national debt continued to compound? No, I don’t.

    Yes, with our current low national debt, we’ve sure as hell reaped the benefits of this fiscal prudence, huh?

  24. Do I think that we would be better off, keeping everything else the same, if those excess receipts had, instead, ben put in a bank account while that much more national debt continued to compound?

    Most certainly, because of the transparency it would have provided.

  25. This story isnt new: governments spending way more than they have.

    Time-tested solution: the government pays the debts by printing money (i.e. counterfitting).

    Remember good old Supply and Demand? As supply goes up and demand goes lower each dollar becomes worth less. Keep holding that currency and one day you’ll be using it as toilet-paper because it will be of better use that way. (I cant wait to give Honest Abe a Dirty Sanchez).

    And the currency collapse wont be 10 or 20 years in the future. The US Gov has so much debt already that the baby-boomers are icing on the cake. The massive game of Dollar Hot Potato, WILL BE MUCH SOONER THAN YOU THINK BECAUSE ITS NOT WHEN THEY ARE FINISHED CIRCULATING ALL THE BOGUS MONEY DOES THE DOLLAR COLLAPSE- ITS WHEN PEOPLE ANTICIPATE THE CIRCULATING OF BOGUS MONEY.

    Throw in the interesting tidbit that THERE ARE 7 TRILLION DOLLARS IN FOREIGNERS HANDS AND THEY ARE GETTING TIRED of watching those dollars lose 40% of its value against other major currencies. Wouldn’t you? In fact, given the already large drop in the dollar, you could say that game of hot potato has already begun.

    Check into it and tell me where im wrong. Ill be glad to hear your comments.

    Best solution as i see it? Get out of dollars and buy gold (it just hit a 27 year high the other day). thats the markets whipering to you, “HINT! HINT! HINT!”

    Why gold? They cant print it on a printing press like a currency and it has been used as money for 5000 years.

    Check into it and tell me where im wrong. Ill be glad to hear your comments.

  26. Federal law mandates that Social Security receipts in excess of that year’s benefits be applied to the national debt.

    How exactly does that happen? Seriously, I’m curious about this.

    It was my impression that the “trust fund” “loaned” the money to the general fund, where it became part of the fungible pool of tax dollars, spent via annual agency budgets.

  27. Perhaps I should have said “ostensibly for their intended purpose” which is to pay SS benefits. I’m not an expert on SS, and I don’t claim to be. But could you show me, joe, where I said anything partisan?

  28. RC Dean,

    That was similar to my understanding too, though I don’t remember where I read or heard that. As I understand it, the trust fund is nothing more than IOUs, and the SS surplus went into the general fund (where it was spent). Can anyone clarify or send a link?

  29. …is hyping the most pessimistic projection in order to scare the public into thinking Something Must Be Done, so they can push through an ideological scheme that the public wouldn’t support on its merit

    I can’t put my finger on it, but that sounds like what some other group is doing for another issue in the political realm.

    Don’t tell me. Don’t tell me. It will come to me soon…

  30. From the American Academy of Actuaries:

    http://actuary.org/pdf/socialsecurity/sstrustfund_1200.pdf

    Under current law, Social Security trust fund assets are invested in nonmarketable special-issue U.S.
    government securities, which represent loans to the U.S. Treasury’s general fund.

  31. I would like the Feds to switch from cash to accrual (sp?) accounting so we could see the real debt numbers. Nothing like GAAP to show how bad things really are.

  32. Thank goodness there’s a trust fund. Piles of cash put away to pay for social security until 2040. Pile of good ol’ cash.

    What? It’s government bonds? Bonds that must be paid out of the general fund?

    Well, thank goodness the US government can just sell more bonds to cover paying for the bonds that are held by Social Security. Anyone want to buy more bonds? China? Great Britain? Saudi Arabia? Come’on, you know you want to.

    I guess we’ll just have to print more money to cover the bonds, which will burn the trust fund faster because SS benefits are tied to inflation…

  33. You’re such a cynic Xmas. Don’t you understand? A Bush appointee has said mildly cautionary things about SS’s solvency. A BUSH APPOINTEE!!

  34. Also from the American Academy of Actuaries (link above — written in 200):

    The American Academy of Actuaries is the public policy organization for actuaries practicing in all specialties within the United States. A major purpose of the Academy is to act as the public information organization for the profession. The Academy is non-partisan and assists the public policy process through the presentation of clear and objective actuarial analysis.

    Since the beginning of the U.S. Social Security program, its financing has been close to a pay-as-you-go basis. This means that virtually all costs are covered from current tax revenues, with excess income plus investment earnings held in a government trust fund. However, during the 1990s, the trust fund gradually built up substantial assets – a trend that is expected to continue until most of the “baby-boom” generation has retired. Actuarial projections based on the intermediate assumptions of the 2000 Social Security Trustees’ Report indicate that the trust fund will grow from about $1 trillion in 2000 to $6 trillion in 2025. Then in 2025, assets begin to plummet until the trust funds are projected to be exhausted in 2037.

    ===

    Unfortunately those trust fund assests represent public debt that must be repaid from the general fund. This requires either additional taxation (income tax or whatever) or reduced spending (bye bye to your favorite programs).

  35. Not to be a spoil-sport, but this whole “first baby boomer” thing is completely wrong. I know this because my mother is the first baby boomer. She was born May 15, 1946 (not at 12:01, though). This is exactly 9 months after V-J Day, and had always been considered the first day of the “post-war baby boom.”

    Unless Ms. Casey-Kirschling was born 5-months premature, she just doesn’t qualify.

    In 1986, Time Magazine’s “Baby Boomers Turn 40!” cover came out on my mother’s birthday (cover dated in June, 1986). Sometime between then and now, people forgot and moved it back to January 1. What was Katherine Casey’s father doing nine months before she was born? He certainly wouldn’t have just come back from the army.

    Poser.

  36. These numbers are bogus. Bush’s appointee Al Gore, like the Reason staff environmeltal left, is hyping the most pessimistic projection in order to scare the public into thinking Something Must Be Done, so they can push through an ideological scheme that the public wouldn’t support on its merit. Just like Iraq national health insurance.

    Partisan much?

  37. By Dan Froomkin

    http://www.washingtonpost.com/wp-dyn/articles/A16984-2005Feb11.html

    Social Security is indeed fundamentally a pay-as-you-go program. But ever since 1983, workers have been paying more in Social Security payroll taxes than was strictly necessary to cover benefits. The idea was to build up a reserve for when the Baby Boom retired.

    By law, the proceeds — and they have grown, with interest, to $1.76 trillion last I heard — are invested in Treasury bonds. Just like the proceeds of other Treasury bonds, that cash is then spent by the government for its programs — so it’s not just sitting there in a pile somewhere, just like Bush says. And, in fact, just like with other Treasury bonds, the government will have to raise the revenue down the road to pay them back eventually — which may not be easy.

    But does that mean the trust fund means nothing? That the 225 pieces of paper representing Special Issue U.S. Treasury Bonds in multibillion-dollar denominations that sit in a file cabinet in West Virginia are just so many czarist rubles?

    It may be a blasphemous thought to liberals, but the libertarian wing of the Republican Party has been arguing this point for a while.

    Former Bush speechwriter David Frum, appearing on MSNBC’s Hardball with Chris Matthews right after the State of the Union address, hailed Bush for being bold enough to say “that the Social Security trust fund isn’t there, and the problem begins in 2018, not so very far away.”

    In his blog, Frum later explained: “If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself — he’s created a reminder notice.

    “And that’s the situation of the Trust Fund.”

  38. carrick,

    The biggest thing I don’t understand about SS Trust Fund worshipers is their unflagging reliance on “Full Faith and Credit”, while completely ignoring the mechanism (taxation and/or printing money and/or borrowing from foreign creditors) which enables “Full Faith and Credit”. It’s a blind spot that boggles my mind.

    Even the SSA spews this nonsense.

  39. Only 37 comments? This “Silver Tsunami” must have been predicted by NOAA.

  40. I think Mr. Vanneman has it about right (and he’s also a damn fine movie critic). 30 years ago, inflation and unemployment was rampant (remember stagflation), and most commentators was saying the country was in eclipse.

    and besides, I start collecting in 10 years, spending it all on strippers, and will be long gone prior to 2041 – whoo hu!!!

  41. The biggest thing I don’t understand about SS Trust Fund worshipers is their unflagging reliance on “Full Faith and Credit”, . . .

    Without even gettig into the question of whether or not the US Government is a trustworthy debtor, there are very big practical issues about where the money will come from to repay the SS trust fund assets. The money can only come from the US taxpayers in one form or another.

  42. I have a two-fold solution the problem. First we legalize and tax the hell out of drugs, internet gambling, and prostitution. Second we import lots of able-bodied, spanish-speaking young men to pick up the trash and mow my yard, so I can spend my golden years enjoying drugs, internet gambling, and prostitution 😉

  43. The social security mess is basically an accounting problem, yet the fund exhaustion-deniers won’t do the math. On the other hand, many of these self-same folks call us global-warming deniers because we won’t fully accept controversial projections that may lead to problems even further down the road. Potential intergenerational “warfare” seems a little more scary than whether or not a 16 year old Inuit youth will be able to find a polar bear to kill and assert his manhood.

  44. creech,

    The difference I see is that the SS projections are not controversial. The most damning thing that can be said about them is that there’s a margin of error in determining when the “trust fund” will run out, which is pretty small all things considered.

    OTOH, global warming/cooling predictions have historically been wrong and I have no reason to believe are correct now.

  45. Thanks Chucklehead,

    I knew that phrase sounded familiar. 😉

  46. It’s my turn to be on top of this pyramid.

    I love this boats-for-votes program.

  47. The “trust fund” can’t “run out”, because there are no assets. Any surplus is automatically sent to the general fund, where it is immediately spent. Social Security is just another (really huge) entitlement program paid for out of current tax receipts. The only reason for this charade of a “trust fund” is to allow a separate social security tax with a cap on taxable income, thus limiting the tax on upper-income folks while making the percentage of the federal tax bite seem smaller than it really is.

    It not a crisis in the sense of running out of money in an actual trust fund with actual assets in it — rather, it’s a slow-moving crisis in the sense of an entitlement program that will steadily grow larger and larger as Boomers retire.

  48. Fix Social Security?
    Easy
    Just seize the 401ks
    Can be done “quietly” with changes in the tax law
    The Boomers can fund “their own” SS

  49. It seems obvious to me the “fix” will be raising the age to receive benefits. It’s a double-whammy, turning people in their late 60’s from receivers to payers. First 68, then 70, then maybe 72. “People are healthier and living longer”, “When Social Security was enacted, life expectancy was 65, now it’s 75”, etc.

  50. And the boomers, not content with FUBARing the planet will now deprive the rest of us of the resources we need to fix it.

    The Greatest Generation were truly awesome in the face of adversity, but they were lousy parents to stick us with this bunch.

  51. MNPundit

    The Greatest Generation also got a lot more out of the system relative to their contributions than the boomers will.

    Of course, that’s only retirement benefits. Medicare’s gonna be a wowzer.

  52. I’ve been paying into SS since I was 13 years old, and not by choice. Now they tell me the money won’t be there.

    If that is the case, Al Queda will be the least of America’s worries because I will have my pound of flesh!

  53. Is there some reason why this woman who has been paying into the system for many years should not apply for social security?

    The giant sucking sound is not social security entitlements which are funded by payroll deductions but by the war in Iraq which has never been funded but borrowed for.

  54. Thank you Leslie. Exactly right.

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