Social Security Chief Says Insolvency Not So Bad
I'm sure I'm not familiar with every public pronouncement of Social Security administration heads, but I think it isn't that common for them to admit in the public press that Social Security's cash payout promises might not be met in full and in perpetuity, as Michael Astrue did in Esquire this month.
Check out page 16 of the slideshow of "Some Good News from 18 Experts and Big Shots" in which Michael Astrue's good news is: "a word about insolvency: What that means is that in 2037, the current estimate for "insolvency," we could pay only about 75 percent of benefits. So it's not like there's a cliff. And my bet is that in fact it'll be pretty close to 100 percent."
I'm sure that's great news for the American would-be retirees who actually don't trust the government's Social Security promises at all. But for those who actually might be expected to rely on them, in whole or in part, I imagine a 25 percent cut in prospective income might not be such "good news."
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If social security money does run out, they will still probably pay out 100 percent. All they have to do is print more money. Problem solved.
I wonder what would happen if I provided the IRS with the good news that I’ll only pay about 75 percent of my taxes this year…
It’ll be cool, just be sure to tell them that your bet is it’ll be pretty close to 100%.
It’s not like any of us deserve to keep any of our money, much less get any of it back.
I’m sure no one here give a damn and the this is wildly off-topic, but the United States is massively loved in Honduras as of about 10pm Eastern Time last night.
A national holiday has been declared and US National Team defender Jonathan Bornstein is literally a hero in all of Honduras. The Honduran government has offered Bornstein an all-expense-paid vacation in their country.
Considering soccer has sparked a war in that part of the world (1969), it may very well go a long way to ending the current troubles there. The country is absolutely mental with what happened last night.
Maybe things will get better.
that was great header in extra time. we went nuts at my house too.
Had the game been on after 10 my time, my extremely loud shouting after Bornstein’s goal probably would have woken up the neighbors in my apartment complex.
I give a damn. That was cool.
Never underestimate the power of bread and circuses. Even among Reason readers.
WTF?
I hated that we crushed (spirit, not score) Costa Rica like that though. I mean, I liked that we did, but it sucked for them. Hopefully they can rally and beat Uruguay.
What is this “soccer” you speak of?
Is that the “sport” where the local Indians kick a goat head through a stone hoop for trinkets and applause?
Landon Donovan is awesome, midfielder for USA and LA Galaxy
Yeah, but the injuries, we don’t need. We finally get a few world class players other than goal keepers, and they’re going down like tenpins.
This goes to show you how much it meant to Honduras (YouTubes of the radio & TV calls):
Honduran Radio call
Honduran TV call
I understand far too little Spanish, but it doesn’t matter. Sport at its finest.
All they have to do is ensure that benefits lag inflation and the problem will fix itself. You’ll get your money, but it may or may not keep you in dog food.
Most people my age and younger don’t expect to get anything. I think that 25%, especially if you graduated it where some who have big money get less and those have nothing get the full amount, would be more acceptable than you think.
The Fed and Treasury have been saying insolvency isn’t so bad for over a year. No surprise the SSA got on board, it’s finally safe for them to admit it.
I will be celebrating my 75th birthday in 2037, and I will be pleasantly shocked if I get any of my social security “contributions” back. I will simply keep buying gold between now and then, and make no plans to retire.
So it’s good news that, though things will get worse, there is no “cliff” we will go off. This is a vivid example of something I have long maintained: people generally tend to apply completely different standards of performance to government (and to their own religion) than they do to other agents, individual and collective.
GMAFB. There’s accounting insolvency, and then there’s “gotta tap into the general fund” insolvency. Who gives a shite about 2037. 2016 is the only meaningful date. Cut the crap, Michael Asfalse.
It’s ridiculous that the Commissioner of the Social Security Administration is allowed to make such bald faced lies in public like this.
If it’s “not so bad” then you won’t mind if I stop paying my FICA taxes, yeah?
Yeah right. Stop lying Mr. Astrue, I am wasting my money and you are laughing about it.
Indeed, 2037 means nothing. As soon as SSA starts redeeming Treasuries it’s going to hurt.
Timon19,
It’s the least we could do for the Hondurans, after officially trying to prevent their efforts to stop a socialist coup d’?tat.
I’m 54 with a retired military stipend. I’ve expected and planned on my SS benefits being reduced before I turn 62 and start collecting. My SWAG is 20% of retirement pay will be deducted from my SS payment.
Unlike Gerald McEntee, I don’t believe in magical rainbow shitting unicorns.
“I don’t believe in magical rainbow shitting unicorns.”
A stance that does you well, sir.
You cannot depend on SSI for your retirement. We’ve known this for a while now. So you do what people have been doing for ages; take care of your retirement needs yourself.
I can definitely agree with taking care of my retirement needs. The problem is, I would like to be able to do it with the money I’m currently sinking into SS. Doing both is expensive.
What will really be cool is when they incorporate your private retirement savings into the federal system. That will really be cool, huh?
Yeah that would work just fine if I was allowed to keep the 12+% of my money that gets sucked up by SS from each check. Lets see if I had that money plus the 8% that goes into a 401K that would mean I was saving 20% a year for retirement. I think I would be just fine with that. So where is the form to decline and opt out of SS? Oh thats right one does not exist. Oh and you better make sure you fucking live long enough to collect as well otherwise the government hits BINGO and your family won’t even get close to what you put into the system if they get anything at all. My dad died 2 years before collecting SS and now my mom gets a whooping $50 a month from his SS that he paid into for over 40+ years. She had a seperate pension plan she she is not able to collect his SS. So effectively the government has stolen a large percentage of my families money simply because my dad died to young to collect. Had this been a private account with a bank or investment my mother and I would have inherited ALL that money. But no we are FORCED to be in the government plan and as such we are just plain fucked. No passing along of wealth it all just goes to Uncle Sugar to spend on someone else.
Honestly it makes you want to take the $250 they give you for death benefit from SS and go buy a cheap pump 12 gauge and a few boxes of shells and walk into the local SS office and blow some peoples heads off. Then you would have government spend Tens of Thousands of dollars on you every year to keep you locked up.
It is robbery plain and simple.
So Seward it can be a hard thing to save for retirement knowing SS will not be there when SS is fucking taking the very money you should be saving. My paycheck is only 100% before I see it then about 70% when I get it then another 10% goes to sales tax alone so what am I supposed to live off of while I am saving all this money for retirement?
END FUCKING SS. Pay off those that are in now and end this pyramid scheme it is going to colapse not if but when.
There’s no opting out of SS taxes because the prime purpose of them for years has been to raise revenue for current spending not for paying retirement benefits. There’s no opting out of SS any more than any other tax.
You didn’t really think they were taking that extra money to “save” for the future, did you?
What the designers of SS eithe failed to anticipate ar blithely ignored was that the whole demographics of the thing would turn so topsy turvy.
They really believed that they could go on for years with a huge windfall from the “Social Security Surplus” to spend on today’s vote-getters whilw laying out a pittance to the tiny portion of geezers who managed to survive beyond sixty-five.
I often enjoy my commute to work. I did today. I listened to Neil Diamond’s Greatest Hits, which is always refreshing if I don’t listen to it more than once or twice a year.
Then I get to work and I’m faced with a quandary: do I greet my dull co-workers in a cheerful tone when I see them, or say nothing? I’m not capable of going halfway.
Once I settle down to my desk with coffee, I go online to check out the good news of the day. I can always count on Reason to provide it. Thanks, Reason!
If you liked this run over and read Radley’s post from earlier.
I’m reluctant, but I will.
Conspiracy theory: The Chinese told Geithner that they’re worried about our entitlement commitments, this is the first of many small signals that the gummint don’t intend to pay, so that the chicoms will keep buying T-bonds a little longer.
I’m not worried about Social Security because I’m a jerk.
When the money coming in isn’t enough I already know that politicians will raise taxes or print money in order to meet the obligation. therefore my retirement income is guaranteed even if the next generation has to suffer for it. 🙁
These cuts don’t apply to us do they?
Everybody likes trains.
I assume you’ve never read this:
http://www.ssa.gov/OACT/TRSUM/index.html
The annual cost of Social Security benefits represented 4.4 percent of GDP in 2008 and is projected to increase to 6.2 percent of GDP in 2034, and then decline to about 5.8 percent of GDP by 2050 and remain at about that level. The projected 75-year actuarial deficit in the combined Old-Age and Survivors and Disability Insurance (OASDI) Trust Fund is 2.00 percent of taxable payroll, up from 1.70 percent projected in last year’s report. This increase is due primarily to the recession, slightly lower estimates for real GDP after the economy recovers in 2015, and faster reductions in mortality rates. Although the combined OASDI program passes our short-range test of financial adequacy, the Disability Insurance Trust Fund does not; DI program costs have exceeded tax revenue since 2005, and trust fund exhaustion is projected for 2020. In addition, OASDI continues to fail our long-range test of close actuarial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2016, and will be sufficient to finance 76 percent of scheduled annual benefits in 2037, after the combined OASDI Trust Fund is projected to be exhausted.
Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 16 percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two. Ensuring that the system remains solvent on a sustainable basis beyond the next 75 years would require larger changes because increasing longevity will result in people receiving benefits for ever longer periods of retirement.
I assume you’ve never read this:
BAHAHA! This is Hit & Run fella. Don’t get all seriously wanting commentators to read articles first.
TL;DR
I don’t really care whether SS is sustainable or not. I just want to be allowed to opt out.
“These cuts don’t apply to us do they?
Everybody likes trains.”
You fucking lucky bastard.
Speaking of Social Security….
I read that this year the seniors are getting no COLA (Cost of Living Adjustment) increase to their payments for the first time since 1975. Apparantly, the COLA index actually saw deflation in the third quarter.
What is the government’s response? Not to celebrate the fact that inflation isn’t devaluing seniors incomces. Not to celebrate not having to spend more on entitlements. But rather, to write them all a check for $250 each.
We can’t have those seniors going without their cost-of-living adjustment! Even if the cost of living isn’t actually rising!
Yeah, we’ve actually had slight deflation for 3 of the last 4 quarters I think. (too lazy to go find the link)
We can’t let a small matter like deflation interfere with the annual cost-of-living adjustments. Those seniors are ENTITLED to annual increases in their payments, inflation or no inflation.
You and I know very well that the cost of living has been rising well beyond what any CPI number will tell you. Just compare the cost of health care, housing, energy, or even beer to the cost of 10 or 15 years ago. CPI is bullshit, everyone knows it, and Congress damn well knows it so yes, they’re going to give seniors a bonus $250 to placate them. Whatever it takes to get them through 2010.
As long as you admit it’s to get them through 2010.
It is appalling and saddening that out political system has come to the point where the public treasury is being looted by this sort of barely concealed vote-buying. We’re living in a banana republic.
Here’s the link:
http://news.yahoo.com/s/ap/200…..ZmaWNpYWxu
I fucking love the twisted logic of this …
There will be no cost-of-living increase for more than 50 million Social Security recipients next year, the first year without a raise since automatic adjustments were adopted in 1975.
Blame falling consumer prices. By law, cost-of-living adjustments are pegged to inflation, which is negative this year because of lower energy costs. Social Security payments, however, do not go down even when prices drop.
The Obama administration, meanwhile, is pursuing a different way to boost recipients’ income. On Wednesday, President Barack Obama called for a second round of $250 stimulus payments for seniors, veterans, retired railroad workers and people with disabilities.
Damn … it’s not getting more expensive to live, so we’ll have to find some other way to increase entitlement payouts!!!
Social Security is extremely popular and is not likely to be ended.
The fact is that Social Security pensions can be funded simple with tax increases since they are simply transfers from taxpayers to beneficiaries.
But if one accepts the legitimacy of such transfer payments the larger question becomes, if taxes are going to be raised to finance benefits why are excess taxes being collected now?
Surely, by now, anyone can see that the “Social Security Surplus” has absolutely no impact on the agency’s ability to meet future liabilities.
We’re “investing in America’s future”, bro…. all this spending is going to make us super prosperous … in the future … at some point.
Does anyone else see the trend being established?
We’re simply enslaving future generations. We’re doing it with healthcare, retirement, national debt…
I’m 21 now, and I’m already having a quarter of every pay check going to taxes. I hate to imagine what my kids are going to have to deal with when they start working.
As far as the “life, liberty, and pursuit of happiness” thing goes, the next amendment of the constitution should be protecting the rights of future generations. As in, we shouldn’t be allowed to purposefully impose debt on the citizens that come after us.
Seriously, I don’t owe anything to you old codgers who are about to retire. I should be able to enter the work force, my life as a voting citizen, and muturity with a clean slate. Instead, I’m legally bound to give my money away to older generations to fix their mistakes.
Between social security, the national debt, and the current proposed healthcare bill it’s a pretty vicious cycle that we’re establishing.
You – 25%
Your kids – 45%
their kids – 65%
their kids – 95%
Beyond that, we’ll all be too poor to tax, so it won’t much matter.
Don’t you know it takes a village???
I still fume when the 2036 number comes up. WHO CARES!
The commenter above is right – 2016, or sooner, more likely, is the issue. That’s when SS will go red, and need to cash in those bonds. Only thing is, the money for those bonds isn’t put away somewhere.
75%? In 2016 maybe. But absent upping taxes, inflation or extreme dieoff, I’d bet by 2036 the payout is closer to 45%.
The fact that people use that 2036 number, and talk about the “bonds” in 2016, without mentioning the impact that MUST have on budget, taxation, etc. is borderline negligence.
If they were so frickin returded, I’d say its outright negligence, but as it is, its probably closer to incompetence.
Agree. Given that we’re currently spending the seocial security “surplus”, when that surplus ceases to exist and goes red, it’ll necessarily mean larger deficits.
My Social Security plan (I’m 48):
(1) Count on receiving $0 in SocSec.
(2) Get the fuck out of the wage-earning workforce as early as possible to avoid the massive tax increases that SocSec will require. I’m working up a bare-bones “retirement” right now that will involve some part-time work in perpetuity.
(3) Sit on the porch, and laugh at the people who refused to believe it would get this bad, and kept re-electing the Worst Political Class in Recorded History.
Mine too!
Exact same plan (and time-frame) here, RC.
I just need to draw down my my Roth IRA before they remember — “Whoa! That’s a lotta cash we can tap!” — and levy a tax on it.
Plus I’ve got me a little acreage/compound, so I got THAT goin’ for me, too.
Anyone counting on Social Security to feed them in retirement is a Darwin Award nominee in the making.
Get the fuck out of the wage-earning workforce as early as possible
LOL! Like that will be legal in 20 years.
Indeed, if they can force you to buy health insurance to subsidize the sick, they can for ce you to work to subsidize the retired.
marc h, right away I know not to trust that document you linked to for two reasons:
(1) Its signed by Geithner, Sebelius, and Solis.
(2) It claims there is a trust fund with assets of over $2 trillion.
Which really means, there is a pile of debt worth $2 trillion that will have to be paid from tax dollars in the future.
The commenter above is right – 2016, or sooner, more likely, is the issue. That’s when SS will go red, and need to cash in those bonds. Only thing is, the money for those bonds isn’t put away somewhere.
Sure it is. The money for those bonds is in your wallet right now.
The federal government’s “reserve capital” is YOU.
I’m not sure which bothers me more; that the SS “Trust Fund” is a fraud or that it’s so blatant and obvious that a ten year old ought to be able to see through it.
Seriously, the fact that for over seventy years so many people have bought into this idea of these imaginary bonds which can be “redeemed” no other way than through taxation or borrowing (guess which is more likely?) really bothers me.
SS needs to become a welfare program. Right now, 22 year olds making $23k a year are being taxed so 70 year olds with eight-digit net worths can spend more time on their yachts.
I generally do not support “progressive” ideas, but that situation is blatant bullshit.
The average monthly Social Security check is over $1,000. Which is more than a lot of 20-somethings I know make. These are the same people who are now going to be forced to cough up money to buy health insurance so that sick people who earn more money than them can be subsidized by forcing them into the insurance pool.
I agree Baked.
Furthermore it is also just plain false that people need to retire at some fixed age.
Means testing for SS should be based not only on need but ability to work.
So much of the retirement at 65 is based on an outdated notion that if we just moved the old folks out of the labor market there’d be more jobs for the young.
Bt then, there are still people who believe thew labor theory of value too, aren’t there?
So much of the retirement at 65 is based on an outdated notion that if we just moved the old folks out of the labor market there’d be more jobs for the young.
Bt then, there are still people who believe thew labor theory of value too, aren’t there?
We can create jobs by forcing people out of the workforce!
Means testing for SS should be based not only on need but ability to work.
First off, let’s call means testing what it really is – debt repudiation.
Secondly, ability to work isn’t the same as ability to gain employment. Or are we supposed to force seniors into service to the state?
It’s not just the SS problem. Many of my age gobble up way more every month in Medicare/Medicaid/Prescription Drug benefits than their SS checks. Those resources have to come from somewhere, too.
so 70 year olds with eight-digit net worths can spend more time on their yachts.
The amount of SSA dollars saved by repudiating that debt is miniscule. But if symbolism if your thing, go for it.
I’d be more pissed at the twenty-something Goldman Sachs employees getting bonuses direct from the public till. It’s a larger amount.
But didn’t you hear? GS is gonna donate $1b to charity!
I am 24. I figure I will receive no SS in retirement, and even if I do it will be partially due to debt monetization. I just consider FICA and OASDI a 14.2%* tax with no benefits.
A remaining ~12% of my income (including my employer’s match) is socked equally into Roth and traditional IRAs, so my only real hope is that Congress doesn’t start removing tax benefits from the Roth side.
So yeah, a quarter of my income is invested for retirement each month. Yet, a substantial part of my ability to retire will be dictated by the aggressiveness of government retirement programs.
* [2 * (1.45% + 6.2%)] / [1 + 1.45% + 6.2%] = 14.2127%
Your employer pays half and you pay half, so you can add the employer’s share to both numerator and denominator.
The sad thing is that 14.2% will not come close to covering SS/Medicare/Part D/ObamaCare. More like 30%, I reckon. And that’s not even counting the likely astronomical interest on the current debt.
But it’s true. There is no ‘cliff’. It’s just a slow, slow internal rot. And after 50, 75 years or so, we’ll look around and wonder where the rot started and why no one did anything about it.
But it’s true. There is no ‘cliff’. It’s just a slow, slow internal rot. And after 50, 75 years or so, we’ll look around and wonder where the rot started and why no one did anything about it.