Green Room

For the millionth time, Social Security adds to the deficit

posted at 6:28 am on October 4, 2012 by

In a bit of new old news, Social Security adds to the federal deficit.  This non-shocking piece of news continues to be either ignored or underreported since the political class is petrified of having the geriatric brigade occupying the front lawns of their homes.  The current unfunded liability of Social Security is $8.6 trillion over the next 75 years.  It adds $165 billion to the budget deficit. This is all due to the payroll tac cut, a dismal economy, and an incremental number of Americans entering retirement age.  So, the real question, which has been asked 576432 times, is when will we do something about this.

When Social Security was instituted the average time between retirement and death was two years.  With advancements in medical fields and pharmacology, we have been able to increase American life, and retirement age, by two decades.  If such developments were factored into the methodology of how benefits were distributed – and on an incremental scale – then this wouldn’t have been such an issue.  That is the pain would have been felt to a lesser degree.

However, Democrats aren’t going to budge.  Andrew Biggs of the American Enterprise institute and former principal deputy commissioner of the Social Security Administration wrote on Real Clear Markets on October 3 that “in late September, 29 Senate Democrats signed a letter opposing Social Security benefit cuts, for either current or future retirees, as part of any budget deal. Senate Majority Leader Harry Reid said, ‘Social Security has contributed not a single penny to the deficit. So we can talk about entitlements as long as you eliminate Social Security.’ The AARP is nine cents less hardline, with CEO Barry Rand merely claiming, ‘The fact is, Americans pay for Social Security, and it hasn’t added one dime to the deficit.’

Concerning the AARP claims, Biggs wrote that:

Budget wonks use two main measures of the budget deficit: the “on-budget” balance, which includes everything except Social Security and the postal service, and the “unified budget,” which merges the on- and off-budgets together. If, for example, the on-budget was running a deficit of $100 billion while the off-budget ran a surplus of $100 billion, the unified budget would be in balance.

The unified budget approach is by far the most common for both budget wonks and the media. As a 2005 AARP policy analysis stated, “The [Congressional Budget Office], the U.S. General Accounting Office, and other agencies that produce budget documents and analyses think that the unified budget concept gives the most complete picture of total federal revenues, spending, surpluses, and deficits.” When you read that the Obama White House projects a 2013 budget deficit of $901 billion, that’s the unified budget deficit they’re referring to.

And on a unified budget basis, when Social Security’s financial position worsens the budget deficit grows. Social Security today contributes about $53 billion to the budget deficit-$165 billion if we include the temporary payroll tax cut designed to stimulate the economy-rising to $100 billion by 2020 and never looking back. It’s as simple as that. Is Social Security the main driver of today’s $1.3 trillion unified budget deficit? Of course not, and no one said it is. But it’s not pennies or dimes either, as the left would have you believe.

By the way, AARP is the lobbying group that swindled the taxpayers out of $2.8 billion dollars and blocked health care reforms that would’ve save their members $415 in premiums.  Stay classy folks.

However, for the executive leadership at the AARP and the Democratic Party, it’s time to face facts.  It’s not 1940.  A time where there was 42 workers for every retiree.  Now, it’s a paltry 3.1 worker per retiree.  By 2030, when all the baby boomers are retired, it’ll be 2.1 workers per retiree.  As George Will noted in a lecture at the U.S. Naval War College in Providence Rhode Island in February of 2011, those numbers, especially the 2030 figure, is based on the assumption that our country will maintain a healthy level of immigration – both legal and illegal.  Today, tomorrow, and every day for the next two decades 10,000 baby boomers will became eligible to receive Social Security and Medicare  benefits in their respective states.  The population that is classified as “very elderly,” people who are 85 or older, are the fastest growing demographic in the country  as a percentage of the population.  That also spells trouble for Medicare, but that’s a different story.

Biggs wrote that “in the end, Social Security is similar to other federal programs-the government collects money in a given year and it pays it out the same year… Congress shouldn’t change Social Security rules precipitously -after all, older Americans have made their retirement plans and reform shouldn’t pull the rug out from under them. But most reforms would be implemented only gradually.”

We can start by raising the retirement age to at least 69 and, as George Will has advocated, “change the indexation of benefits from wages to inflation and half of the unfunded liability disappears.”

 

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The kicker is, when SocSecurity was running a surplus, it was making the deficit worse because the rest of government was borrowing against said surplus.

Time to wind it down.

Steve Eggleston on October 4, 2012 at 8:23 AM

The entitlements as they are designed are a form of enslavement that forces people to go to work for others. When it gets to 3:1, it will be unbearable given the current level of other taxation.

aniptofar on October 4, 2012 at 9:16 AM

That $8.6 trillion number is WAY under reality, by at least half. Realistic studies by real economists have put the social security/medicare/medicaid unfunded liabilities well over our ability to tax or grow our way out of it.

Social Security is really close to 20 trillion than 8.6 trillion.
Medicare/medicaid $80 trillion and every time it is looked at each year it grows by large amounts.
Prescription drug program $20 trillion.

The 16 trillion we have in debt… if interest rates go back to their normal non subdued by the fed rates between 4 and 5% per year, if we do not repay the interest on those along, by 2060 that will amount to 132 trillion alone.

I do not think any of the above numbers account for interest on the debt for those unfunded liabilities, so you can probably double or triple them in the real world scenario.

Of course, looking out to 2060 or even 2087 is pointless, we will not make it past 2020 with Obama as president and not past 2024 with Romney unless he does more to cut the deficit as President than he is letting on right now.

astonerii on October 4, 2012 at 10:20 AM

The entitlements as they are designed are a form of enslavement that forces people to go to work for others. When it gets to 3:1, it will be unbearable given the current level of other taxation.

aniptofar on October 4, 2012 at 9:16 AM

in 2010 there were 1.75 private sector workers for every retiree. It has gotten worse since then.

astonerii on October 4, 2012 at 10:21 AM

Of course, this entire essay by Matt Vespa assumes the truism that Social Security is constitutional, and ergo should be allowed to continue — period. I reject that assertion.

gryphon202 on October 4, 2012 at 10:34 AM

As the above poster stated, entitlements are slavery.

They are designed to force others to work for the benefit of a special class of citizen.

This has a far more damaging effect on the nation than just simply increasing the national debt though.

This is the government replacing the responsible parties for caring for older people.

Responsibility chain of responsibility: Self, Immediate Family, Extended Family, Community and Charity, Local Government, State Government, Federal Government.

First and foremost, the self should be saving money for rainy days and retirement. If they do not feel secure in their own ability, they will extend the base from which to have security by having children and remaining close to their family and community. This structure should be able to catch and cover pretty much 100% of normal situations people get into.

The local, state and federal government should be there only for extraordinary circumstances. A massive fire, an earthquake, hurricane, drought, medical epedemic and so forth and then only do the bare minimum even in those circumstances to allow people to help themselves get back to their lives.

But with the Federal government taking so much to redistribute to others, this chain of responsibility has been broken. This can be seen in the death of 53 million children, the excessively large numbers of divorces, the amount of birth control used, the disgustingly poor education parents allow their children to be subjected to.

Government has replaced the chain of responsibility and made making a better future no longer a great endeavor for the current generation. Instead they spend everything they can and borrow even more. Why not, they will not be expected to pay it back, and it will be handed off to other peoples’ children for repayment.

Social Security destroys the economy. Taking out of the workforce people who are in their highest producing years leaves the economy in worse shape. The younger people who have to fill those jobs likely earn less and produce less. The fact that a large number of people are not in the workforce but buying things puts stresses in the supply/demand side of the economy. Fewer workers creating less for more people wanting to consume more.

Romney is wrong to want to make these things last into future generations. They are an abomination to the nation and should go the way of the dodo, the sooner the better. Those people who voted to enslave younger generations should not expect much compassion for their plight. They should be preparing to get their slothly selves back into the workforce and into the good graces of their families and local community.

astonerii on October 4, 2012 at 10:36 AM

what a load of horsepucky.

For over 70 years Social Security ran a surplus originally intended to be managed as an investment vehicle for future payouts just like any other pension plan.

It is certainly NOT the fault of current and future recipients that greedy/cynical politicians stole the income as well as principle of that pension system and replaced that actual cash with worthless IOU paper.

Nor is it their fault that other greedy politicians added numerous raids on this public teat to the system like “disability” to win votes.

Now that current payouts surpass income into the system we have trolls like you all who think the system is broken. It is not if SS had been employed as originally intended.

Time for government to pay up on all those billions of IOUs now isn’t it ? This is not rocket science. This is all your fat ass chickens coming home to roost.

BioBob on October 5, 2012 at 1:24 PM

BioBob on October 5, 2012 at 1:24 PM

Bob, stop whining about the fact that people are pissed that you F^CKED every generation after you.
You spent 16 trillion dollars more than you freaking produced. You knew the law stated that the money coming from your paycheck was going to the general fund, not into some secure savings account. Then you hired politicians to raid that money, to the tune of 16 trillion dollars above and beyond. You needed them to pay for your f^cking environmentalism. You needed them to pay for you f^cking education department. You needed them to f^cking fund your 4 and 5 year old’s daycare. You needed them to pay for your f^cking welfare state because you were to god forsakenly lazy to do charity on your god damned own! You hired them to pay for you f^cking piss christ art. You hired them to pay for f^cking big god damned bird! There was no wasteful spending to disgustingly evil to say stop. Hell the only place your generation has ever found a freaking penny that needed to be cut has been the actual factual constitutional portions of the federal government like the military.

Generation Baby boomer and their parents have had absolute control over the politicians and were the actual people in office passing these laws, now you want to argue you were scammed? What a freaking lark! I certainly hope at your most absolute vulnerable point in life they cut you off the teet of government. Then come begging to me and my daughter and see how nice we are to you. She will not be brainwashed into thinking you earned a penny of your wealth transfers.

astonerii on October 5, 2012 at 5:35 PM

I was a bit aggressive in the above post.

Then again, the idea that anyone over the age of 45 was forced into the system is completely destroyed by the fact that there was never any sizable number of voters or even general groups who stood up and first explained how these programs were evil and worked against the better welfare of the nation and then demanded through their votes and through calls and letter writing campaigns to get their representatives to close them down, either cold turkey or over a short period of time, 20 years say.

A: Yes. Under the 1935 law, what we now think of as Social Security only paid retirement benefits to the primary worker. A 1939 change in the law added survivors benefits and benefits for the retiree’s spouse and children. In 1956 disability benefits were added.

Keep in mind, however, that the Social Security Act itself was much broader than just the program which today we commonly describe as “Social Security.” The original 1935 law contained the first national unemployment compensation program, aid to the states for various health and welfare programs, and the Aid to Dependent Children program. (Full text of the 1935 law.)

So why haven’t they demanded it be changed? Because they are lazy or selfish. http://uashome.alaska.edu/~jfbm/ss.pdf Ida paid $22 in total social security taxes and received over just shy of $21,000. Recent retirees still get more back than they paid in. But soon that will no longer be the case. Once the Baby boomers who voted for theirs are retired, the following generations are going to be screwed all the way through. Then again, a decade later, hopefully enough of the old codgers will be dead and less powerful politically and the younger generation can screw me and cut mine and older people’s Social Security off cold turkey.

astonerii on October 5, 2012 at 7:38 PM

so sorry, manure for brains astoneri

I am a tea party jacksonian libertarian and never took a buck from the feds in my entire life and paid in SS for 40 years. But the feds are going to pay out every dollar they owe from the SS IOUs down to the last fed employee from the dept of education, agriculture, homeland security, commerce, etc. including every focking dept not mentioned in the constitution,and their pensions too. I don’t give a tinkle bout those poor idiot bureaucraps. SS has first dibs to the ponzi money.

And that’s the way it needs to be – PERIOD.

BioBob on October 6, 2012 at 3:36 AM

BioBob on October 6, 2012 at 3:36 AM

Just so long as your willing to admit that your an immoral hack of a piece of shit moron, I guess I am happy.

Your generation spent those IOUs dumbass. That is why there is 16 trillion in debt.
Your generation voted into power Obama, through your own votes, along with the exceptionally poor education you gave the children.
Hell, your generation in fact educated Obama to be the glaringly obvious political hack that he is.

Your generation make all other generation look great by comparison, including the 1800 to 1860 southern state generations.

astonerii on October 6, 2012 at 9:58 AM