Let's just face the facts: we have squandered the opportunity to deal with our entitlement crisis when it was most opportune to do so. That would have been during a booming economy when the retirement of the baby boomers was still far in the distance. I won't play the blame game here, though I am tempted to do so.
Now the bills are coming due just as the country can least afford them. The President-Elect says he will have more to say on the topic in February when he presents a "budget outline."
Let me just give you a few figures that illustrate the problem.
You can find Social Security's cash flow by looking at this chart.
If you exclude "interest income" which is basically one part of the government paying interest to another part of the government, you are left with Social Security's cash flow. I'll save you from doing the calculations and tell you the bottom line now: The Social Security surplus peaks next year and will decline forever more.
Even though it is still in surplus, Social Security's problems are already showing up in the budget in the form of declining cash flow. By 2016 Social Security will be in balance on a cash flow basis and in deficit from then on.
Medicare? It is in much worse shape. The entitlement problem is here and we'll have to deal with it in a major way as soon as the economy has begun to regain some traction.
Comments
This blog entry seems to have touched a nerve. I'm just wondering, don't you all think there is an even greater role now for a program like Social Security which offers a fixed payout in retirement?
The idea of the wealthy paying their "fair share" of social security by paying more than the 102,000 cap is ridiculous. They will pay more and not get any higher rate of social security than someone who pays the $102,000.
The idea here is to pay them the same maximum amount of social security that is available now and get more money from them to make the SS fund viable because the people we voted into office spent it.
An example of this would be a person making $102,000 per year paying around $7000 a year into social security and collecting the maximum $24,000 per year versus a person making $500,000 a year paying $35,000 per year and collecting $24,000. The fairness issue is not logical.
If one wants to say that the wealthy should be forced into paying more than their fair share just "because" then that is another story.
Oh sure. Bankers get a trillion dollars and don't even have to tell us how many mansions & parties they spent it on.
GM fatcats show up in their private jets for a sack of cash and get paid to build more rusting gas-guzzlers.
And even that "Girls Gone Wild" scumbag & other pornographers head to Washington DC with their trick-or-treat bags.
But the blame for the deficit (and the punishment) is going to be placed on the laps of the elderly and the disabled, who are simply trying to eke out an existence with what little they get as it is from Social Security.
Thanks for nothing, Obama. Thanks.for.nothing.
The idea of removing the cap on the amount of wages which social security is collected will NOT change the status quo. Why? The government will then be responsible to pay benefits on higher wages. Consider two wage earners. One earns an inflation adjusted equivalent of the "cap" each year for 40 years, and another wage earner earns an inflation adjusted equivalent of double of the "cap" each year for 40 years. All other things being equal, they will receive the same retirement benefit. If the second wage earner in the example paid social security tax on more of her income, she would be paid a higher Social Security benefit. Therefore, the higher collections would result in higher obligations and no net effect on solvency.
I voted for Obama because he's black, but this is ridiculous.
Remove the limit on Social Security tax that is set at 102,000 for 2008. Meaning if you make more than 102,000 you pay no Social Security tax on the exess.I dont have any figures, but I'm sure this would go a long way towards making the system more solvent.Let the wealthy pay their share.
Social Security is not "in surplus." The cash that is called "surplus" is money that is supposed to stay the Social Security Trust Fund.
It's funny how the government can treat a national pension fund as "surplus," mad money to be spent on everything but retirees. As is pointed out too seldom, if business owners treated their pension funds like Congress treats Social Security, they'd be put in jail.
The Social Security "fund" now is IOUs for more than $2 trillion of Social Security taxes spent on other things. When the government wants to cash in these IOUs, it will have to do the same thing it would do if it had no IOUs at all. It will have to tax and borrow for that more than $2 trillion.
And guess what? There might not be that many trillions left to tax or borrow.
In October 2007, Hillary Clinton said Social Security was not "in crisis." Her ludicrous position was the Democratic position, because President Bush said it WAS in crisis.
Now with total power, the Democrats have to tell the truth or make things even worse.
Can we opt out and save the money ourselves?
Wasn't the original plan to provide for people who had no other means? I wonder how many who do not need SS actually decline it. And if one does not apply for it, is later access possible in case one gets madoffed?
75 is the new 65. When SS was created life expectancy was 5-10 years beyond retirement age. Nowdays it is more like 15-20.