Tuesday, April 24, 2012

Government Projections on Social Security Take a Beating

The Social Security Administration (SSA) recently published its annual report for 2012. The single most important finding from this report is that the SSA will have exhausted its funds for Social Security by 2033 (p. 3). This is in contrast with the 2011 annual report, where the SSA only projected last year that we had enough funds until 2036. The biggest factor for hastening the exhaustion of funds is unquestionably the weak economy, although other factors include increased life span, more recipients, increased cost-of-living adjustment (COLA), and rising disability costs, the latter of which is putting a strain on SSDI to the point where the disability program is going to have its funds exhausted by 2016.

A few other perturbing findings from this year's SSA report:

  1. The SSA ran a deficit a $148B in 2011, and is projected to have a $165B deficit in 2012 (p. 2).
  2. Through the perpetual projection beyond 75 years, there are $20.5T of unfunded liabilities (p. 15).
  3. The "actuarial deficit," which projects shortfalls in funding for the next 75 years, is slated at 2.67% of the total wage base, which puts the total wage base at $9.1T (p. 64). In layman's terms, this says that if we set $9.1T aside now, when it grows with interest over 75 years, we could pay off Social Security. Who has $9.1T lying around? The U.S. government surely doesn't have that kind of money. To add insult to injury, the "actuarial deficit" only a couple of years ago was at 1.92%, which means that the amount was only $5.7T (p. 3). 
  4. In order for Social Security to be solvent for the next 75 years, the 2012 annual report projects that either there need to be alternate sources of revenue, benefits would have to be reduced 16.2%, or the payroll tax will have to be increased from 12.4% to 15.01% (p. 4).  
For those who are anti-reform, they tell us not to worry because we can sustain Social Security without cutting benefits. If they are looking at the same numbers that I am, the numbers clearly do not resonate for them as they do with me because they keep saying that Social Security is solvent. For anti-reformers, it's simply a matter of raising revenue, which is Left-speak for "let's raise taxes, especially on the rich." Ahhh, the good-old "tax-and-spend"method. Like I didn't see that one coming. 

And it's not merely the government figures themselves that bother me. It's knowing the fact that when the government projects something, such as the overstated benefits of Obamacare, it will most probably not be as good as it sounds. Even when the government says "Social Security exhausts its funds in 2033," we shouldn't be at all surprised if it collapses beforehand. Although 2033 might seem like the distant future, it will come before we know it. We are aware that this is a problem, and if we come up with actual Social Security reform, we can mitigate the issue. However, I have the unsettling feeling that politicians will simply kick the can down the road and screw over future generations.

1 comment:

  1. its really good post to read as i like the way you written your post thanks and regards !!!

    Security Traning