Notes on the 2010 Social Security Report: Day 2
by Bruce Webb
Exactly a month ago I put up a post If a Social Security Annual Report Vanishes into the Forest noting that not only was the Report months overdue but that nobody seemed to notice or care that there was no official announcement about the reasons for the delay or a new release date. The date that had been floated back in April was June 30th, then later some were saying ‘July’ and then when July rolled around word around the Capitol was ‘August’. But nobody who knew anything was talking on the record. Then last week of all papers it was the Spokane Spokesman-Review that reported August 5th. But that news was only semi-officially confirmed this week when it was announced that AEI was having a briefing on the Report on Friday the 6th (today) and NASI was having a bigger event on Monday the 9th. But as for any official announcement there was nothing, not at SSA, nor at Treasury or HHS or Labor. Nor was the Report up on the web Thursday morning. It wasn’t until an hour before official Report release that Labor issued a news release with a link to the pdf of the Report. Well I was ready, a live link to it was up here at 11:22 Eastern, beating the official time by 38 minutes. But all of this leaves this question. Why the secrecy? Three Cabinet Secretaries and the Commissioner of Social Security were scheduled to release a public Report that had implications for every worker and retiree in the country and yet no one knew nothing.
Well the Report appeared and proceeded to make about as little noise as it did when in vanished into the woods, as I type a search on ‘2010 Social Security Report’ turns up no MSM links in the top ten, unless you consider HuffPo MSM, and two of the top six results are to my posts here. Now Heritage and the Washington Times (which I don’t consider MSM) had what appear to be canned pieces up claiming that the Report confirmed their gloomy views but didn’t seem to address the actual numbers but for the most part there is very little coverage.
Now you can call me a cynic but some of this secrecy and effective non-coverage may stem from the fact that the Report did not match the current narrative of ‘Crisis’. Instead Trust Fund depletion remained pegged at 2037, the date that cash surpluses vanish moved from 2016 to 2015 while the 75 year actuarial gap actually dropped significantly from 2.00% to 1.92% putting it right back to 2001 levels. Meaning that a decade of ‘Crisis’ has gone by with no action at all and Social Security emerges unchanged. Which leaves all the “we can’t afford to wait!” “delay will only make the cost larger and more abrupt!!” folk with a little egg on their faces. Social Security-still not broke.
More notes and an interesting graph under the fold.
For those joining this party late the ‘Trust Fund Ratio’ is the Trust Fund balance expressed as a percentage of cost in any even year with the offical target being a TF Ratio of 100, meaning one year of reserves. This is called by the Trustees ‘actuarial balance’. Although we generally talk about THE Social Security Trust Fund, there are actually two, the OAS (Old Age/Survivors) and the DI (Disability) Trust Funds. In this figure OAS is the dark line and DI the light one. Additionally though we also tend to talk about Social Security going deplete in some future year or being able to pay out some percentage of benefits at that date in doing so we are generally referring to what the Trustees call the ‘Intermediate Cost Alternative’ in this figure denoted as ‘II’. However they also give us two other Alternatives, a more pessimistic one called ‘High Cost’ here ‘III’ and a more optimistic one called ‘Low Cost’ here ‘I’. Low Cost and High Cost are fairly artificial in construction as each takes each of the variables that together determine solvency and varies them in the same direction, either better for solvency in the case of Low Cost or worse for High Cost. Since in practice it is not likely that every economic and demographic variable will move in the same direction in the same magnitude these two alternatives have to be regarded as being on the extremes of the probability spread. On the other hand this depends crucially on whether Intermediate Cost has in fact captured the true mean for each variable, if Intermediate Cost can be shown to be on the whole too pessimistic then Low Cost outcomes become more probable, and of course the converse is true. But that will have to be the subject of future posts.
A very common claim about Social Security is that there is no way that we can grow out of ‘crisis’. Well this figure puts that claim in doubt, because while Low Cost may not be totally likely it is at least possible and if it comes about OAS projects to never have a TF Ratio lower than 300, and since the target is only 100 can be said to give a result of ‘over-funded’, if it seems to be coming about then the policy question in the year 2020 will begin to revolve around when to cut FICA and by how much to get that tail pointing closer to 100 than to 450 and rising as it leaves the projection period, Because oddly enough an over-funded Trust Fund is in its own way a bigger threat to Social Security long-term than an under-funded one. (I can point to some older posts on this if anyone cares).
Which brings us to an important point. While it may well be that Low Cost is unlikely, it is not an optimal outcome anyway, instead the sweet spot is somewhere between I and II in this figure and to get there we don’t have to hit every number of Low Cost, just enough of them in the right magnitudes to pull II’s tail up so that it intersects 100 at the end of the projection period or at least dips below actuarial balance (the same thing) as far in the future as possible. And many of those numbers are susceptible to deliberate policy choices. For example Social Security outcomes improve with higher immigration and higher fertility, and since immigrants, at least those from developing countries, tend to be more fertile sticking to a policy of closed borders, while maybe appealing to younger Teabaggers in the here and now, plays a certain amount of hell with their future retirement outlook. Equally Social Security solvency is positively correlated with more employment and higher real wage although the effect is offset by the fact that the increased income also results in increased costs in the form of higher benefit checks. But from the perspective of the worker this is all good, it means that any future percentage cut in benefits would be from that much higher a baseline, which means that solvency effects aside a deliberate policy targeting employment and real wage will result in a better Social Security outcome. (Minimum wage increase anyone?). Similarly improvements in productivity, even if they don’t pass through perfectly to Real Wage, increase affordability by holding down the percentage of GDP needing to be devoted to Social Security, or perhaps assisting us to achieve Prof. Jamie Galbraith’s appeal to enhance Social Security benefits rather than cut them.
Which suggests a second prong to the NW Plan. The first prong simply assumes Intermediate Cost numbers and programs in the revenue increases needed to target actuarial balance, the second would be to advocate for policies that make some or all of those tax increments unnecessary. The right answer is not to just passively accept our fate and schedule benefit cuts prematurely, the numbers needed to substantially cut the payroll gap even in the absence of tax increases are by no means out of reach, add a few tenths of a point to productivity and a good deal of ‘crisis’ simply vanishes.
Paul Krugman reported on it in passing, but maybe someone with his audience needs to make a big deal of the report.
The High Cost projections you refer to show that the SS surplus peaks in 2011 (starts in 50 days….) and it peaks around 2.6T.
Look at the assumtions used. The next 24-36 months economic results will be substantially less than those assumed by the Fund in the High Cost. in other words, SS will top out very soon now. No sense of urgency there. Right Bruce? What the heck. It is about 1.4T shy and five years early. No problem right?
Why are you assuming High Cost? Everyone else officially works off of Intermediate Cost.
And this is garbled:
“The High Cost projections you refer to show that the SS surplus peaks in 2011 (starts in 50 days….) and it peaks around 2.6T. “
High Cost shows surpluses peaking at $114 bn in 2012, a point at which the TF balance will be $2.8 trillion, but with continuing though shrinking surpluses through 2019 at which time the TF balance will be at its peak of $3.3 trillion.
http://www.ssa.gov/OACT/TR/2010/IV_SRest.html#271967
Plus Social Security uses Calender Years and not Fiscal Years.
So I have a ‘What the heck’ question myself. What the heck Report are you reading? Not to mention that you have fatally confused the concepts of ‘surplus’ and ‘trust fund balance’. And even if you are thinking cash flow, High Cost doesn’t show that going negative again until 2015.
Methinks you started your gloating a little early here. (Or maybe Happy Hour comes early in your time zone).
Bruce
you give Krasting a better answer than he deserves. The peak of the Trust Fund, even under High Cost Assumptions means exactly zilch. Some day, sooner or later, the Trust Fund is going to run out of money (down to the one year reserve). then Social Security will return to normal business as usual with what looks like a tenth of a percent increase in the payroll tax from time to time. That’s about eighty cents per week about every four years according to present estimates. It is VERY unlikely it will ever be much more than that, and more than likely it will become a lot less than that as the Baby Boom dies off, and the increase in life expectancy reaches asymptotically to some natural limit.
Krasting is like most of the innumerate people in this country. He hasn’t the slightest idea what he is talking about, but big numbers, and “running out” work powerfully on his endocrine system so he treats us to his sweaty thoughts. Unfortunately he has powerful friends and a hapless country which has been taught to believe THE END OF THE TRUST FUND is a LOOMING CRISIS1. It isn’t even a problem… except for the hysteria that comes from letting them frame the issue this way.
Bruce-This is a great post. I was wondering if have ever spoken with any of the report’s actuaries? After looking at TableII.C1 and then at Section V. ,I was wondering if the actuaries have run numbers using a variety of asumptions such as HC unemployment with LC mortality with IC productivity? I am concerned that the current “recovery” will become the New Normal. A future somewhere between IC and HC possibly? But as Dale will remind me in a minute, IT DOESN’T REALLY MATTER! Thanks.
The numbers in the trust fund are important for 2 reasons:
1. It shows the amount of money that the trust funds can withdraw from the Treasury, without an appropriation.
2. When outgo exceeds income, excluding interest, additional Treasury securities will have to pay the deficit, through the taxpayers, debt issued to the public (unless there is a surplus).
There is no cash in the trust funds. They demonstarte no ability to pay benefits in the future.
And, yes entitlements are on the table, both those “paid” through payroll taxes, as well as those paid by general revenues, such as Medicaid, food stamps, and other entitlements.
When I say entitlement, I am defining it as people who qualify for the programs are entitled to benefits.
CBO predicts in 10 years, Social Security, Medicare, and Medicaid will consume 90% of our revenues.
Don Levit
Well no I have never been in direct contact.
They do run a Long Term Sensitivity Analysis that measures how the models move for each major variable which gives you some insight into which ones are key. And in 2003 they introduced the Stochastics where they run 5000 simulations and then combine them into one set of probability measures. I don’t understand the methodology, if you have a stronger statistical background than me (which frankly wouldn’t take much) maybe you can make sense of it.
http://www.ssa.gov/OACT/TR/2010/VI_stochastic.html#103970
“CBO predicts in 10 years, Social Security, Medicare, and Medicaid will consume 90% of our revenues.”
Yes, of course . . . . How about those Bears.
Don under the law the Special Treasuries in the Trust Fund are better than cash. Unless of course you got your training at Glibertarian U where they taught you axioms like “governments can’t hold their own assets”. Well they can and do, unless of course we accept made to order legalisms designed to support the ‘crisis’ narrative.
And I don’t think CBO projects any such thing. Certainly this from their last Long Term Budget Outlook doesn’t support that.
Bruce:
What source can you support that says the special Treasuries are better than cash?
Special Treasuries are paid through the taxpayers, i.e. debt to the public.
Since when was debt better than cash?
Don Levit
Don,
Government debt is deferred taxes, lest no one would buy it. Are there deferred taxes behind the dollar bills in your pocket?
Government debt, unless the government is corrupt which may have been the case since Reagan, is better than cash.
Allow me a thought exercise.
When Argentina devalued its currency which was better an Argentine government bond or an Argentine peso note?
What value is cash? In fact what is cash?
Cash is only valuable if there is a sound government. If the US government reneges on the SSTF then by definition there is no sound government, which was the case from 1980 through 1992 and from 2001 to 2009.
If the SSTF is defaulted what value to the US $?
The gen X’ers and Y’ers won’t have anyone to lend their gumint anything and it will go the way of all corruption.
Devaluation of currency precedes default. The reason Greece is in trouble: it cannot devalue the Euro, the Germans would not go along, so it is a default risk.
We could do a similar exercise: suppose the US treasury did not want to raise taxes to pay out principle and interest on the SSTF special treasuries, they would sell new T-Bills.
If no one bought do you suppsoe the US treasury could sell any debt that year?
Just a few what ifs and some extensions.
Bruce,
Thanks for the charts.
What is the premise for keeping the rate of “other non interest spending” the same through the “outyears”. Forgive me I have spent a lot of my life working the warfare state cabal budgets.
In the 2010 unified budget the war machine takes 20% approx of the outlays within a percent of SS and more than Medicare.
In the UK the ministry of defence, which is less a minitruth label than national (epmpire) security, plunders just 7% of their unified outlays.
Suppose those charts showed that empire security robs 7% of the unified budget outlays in 2012? And other corporate welfare is reduced from 20% to 8%.
In that case the SSTF which is accumulated deferred taxes from the general funds can be redeemed instead of the cash being wasted on the empire and corporate welfare.
I propose that if the rate of “other non interest spending” remains the same for a few more years the goose which lays the golden eggs will be dead and SSTF will not matter.
The US can abide just so much plundering before it is wasted.
Entitlements are 57% of unified outlays in 2010.
The empire security aparatus and corporate welfare which are a command economy dependent upon the taxpayer for succor consume the remaining 43%.
Entitlement go to people and hospitals for food, services and health care that benefit millions of individuals.
The war machine takes resources away from producing things for people and makes aircraft carriers to go and make ‘shows of force’ to the Red Chinese who have missiles and such so that those useless shows of force could become expensive if the Chinese sink one of our carriers.
So, let’s forget the ‘show of force’ to intimidate the Chinese who hold more than a trillion in US debt and worry about taking care of the millions of citizens who make the country, despite the factthe owners are making money on Chinese slave labor.
How can the US have a war machine to intimidate the holders of our debt?
And that war machine be so harmful as to make the vicious circle where US has to imprt from the object of the war machines fear and intimidation?
Forget empire, take care of Grandpa.
CBO mostly works on a ‘Current Law’ basis. I think the assumption here is that currently authorized programs, at least ones that are not sunsetted, are likely to be reauthorized. Either that or they are just relying on Paygo rules that assert that new spending has to be offset by cuts to old spending (or by taxes).
Special Treasuries pay interest. Federal Reserve Notes don’t.
That Benjamin in your pocket only retains its value because of an implicit promise by the Federal Reserve and the Congress w/White House to keep inflation in check. Which is the same government that is promising to payback the Special Treasuries with interest. In the end both simply come down to Full Faith and Credit of the United States.
When is debt better than cash? When that debt is in the form of the safest investment on the face of the planet and your point of view is as a Trustee with custody of the note.
Don Levit
I have had in my life to face the fact that I was never going to be any good at some things I would have like to be good at. It turned out that giving them up was not a loss but a gain. You need to try it. You are never going to be very good at understanding the way the Trust Fund works.
Your problem seems to be that you begin with the assumption that it isn’t real and you reason from there and interpret everything you read in the light of that “insight.” You remind me of our old friend Brooks. Hard to believe there are two people in the world who begin with a misunderstanding and then perseverate trying endlessly to explain it to an uncaring world.
Bruce and Islm:
Thanks for your comments.
Bruce, you are correct, it comes down to faith in the government to honor its obligations.
Are you aware there are 4 levels of obligations the government has, and that Social Security and Medicare are the 4th level, the lowest rung.
Apparently, the government doesn’t consider its obligations to social Security and Medicare, at least from a legal perspective, very seriously.
It doesn’t consider having any liabilities for the 2 programs past the current year.
And, because taxes are non exchange revenues, the government believes it is doing the citizens a favor by paying benefits.
Don Levit
SS is considered to be a pension by many Americans, after all they pay in so they should get something back in retirement. If a private pension fund was run as SS has been the trustees would all have been fired and most likely in jail for fraud. Now I understand the “vogue” idea about US debt is that it doesnt matter, let’s just sell more treasury’s in perpetuity to fund everything (primary dealers taking down decent chunks of recent auctions only to sell it back to the fed a few weeks later), however this sounds very much like the idea that property prices in the US can never go down all at the same time. I believe SSA said that they would be able to pay 78% of benefits due once they run out of money, through current year tax revenue and, as you say, fund the rest by issuing Treasuries. I haven’t run the numbers, but but in that state how long before entitlements soak up the entire budget?
Peter
There is no reason to expect the Social Security Adminstration to fund the 22% shortfall after 2036 by borrowing. Indeed it has no authority to do so. Congress can, if it is smart enough, fund that shortfall by raising the payroll tax a tiny amount per year between now and than. Ulitmately the tax increase would reacy 2% of payroll, while payrolls would be approximately double what they are now. So those future workers would be paying a little more while they are working in order to live better and longer when they retire. Not a bad deal. Not a bad deal at all.
Don’t confuse the “deficits don’t matter” of Dick Cheney, with my “the death of the Trust Fund doesn’t matter.” Those are very different things. In fact, almost opposite things.
Even your saying “when they run out of money” shows how confused you are… how succesful Peterson has been in selling his lie. The Trust Fund being fully paid back is NOT the same as Social Security running out of money. It is only a coincidence that when the Trust Fund is fully paid back that the tax rate would need to be raised. The Trust Fund is taking care of the Baby Boomers, but meanwhile life expectancies are going up. The projected tax raise is because of the longer life expectancy.
What Peterson has going for him is that the average american is too stupid to understand that a small “tax raise” in this case is money he is paying himself: he needs to save more because he expects to live longer after he stops working. Social SEcurity is just a way to insure his savings.
Social Security and Medicare will never soak up the entire budget, because they are off budget. They are money you pay yourself. There is a huge difference between actual accounting and nightmares you get after listening to the Petersons crying WE’RE ALL GOING TO DIE!” It would help if you had a grasp of the facts.
I’ve read your reply 3 times and it make’s absolutely no sense. Last time i checked SS and medicare were actually in the budget. Care to talk about demographics?
Peter:
You’re absolutely correct.
Social Security and Medicare are on budget. That’s why the surpluses in the trust funds have made our debt look smaller.
A few posts up, you can find the CBO’s projections for the next 10 years for Social Security, Medicare, and Medicaid.
Under the Mid Range Assumptions, they are running about 14% of GDP.
Revenues are about 18% of gDP, so those 3 programs could consume almost all our revenues.
Factor in interest, and you’re probably ar 100% of revenues.
The link is : http://cbo.gov/doc.cfm?index=2517&type=0.
Don Levit
Peter:
I just noticed that report was from 2000.
The 2010 report shows Social Security, Medicare, Medicaid, Chip, and exchange subsidies and interrst to be about 75% of revenues.
Go to:
http://cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf.
Don Levit
Better to discuss productivity and how it cancls out the need for more people working.
This idea: “Now I understand the “vogue” idea about US debt is that it doesnt matter” has been around for decades and touted by most economists. Not sure how you disown it when it comes to SS.
As far as SS notes . . . go ahead and default on one and see if the world believes in full faith and credit on their notes. Default on SS notes has far greater implications globally than domestically. It won’t happen.
The solution to yours, dons, and keating’s dilemma? Put more people back to work and increase tax revenue. Yur solution is little more than a race to the bottom for the populaation without recognizing the skewing of productivity gains.
Also better to discuss the gap whih decreased rather than increased.
peter
nope. they are off budget. for a reason. can’t account for what makes sense to you.
btw, the demographics are fully accounted for in the Trustees Report. Like I said a quater of a tenth of a percent per year increase in the payroll tax will pay for the demographics.
Don,
and garbage collection fees have been going up shockingly.
“Are you aware there are 4 levels of obligations the government has, and that Social Security and Medicare are the 4th level, the lowest rung.”
Citations are good.
Don can you site a page reference? Because the figures I posted from the LTBO show you are talking out your ass.
So has the amount of garbarge produced.
Peter
yes. that was my point.
Well my point was that you are producing garbage.
Peter
there is such a thing as facts.
just throwing numbers against the wall and seeing scary faces in the splatter marks will not help you understand what is happening. what they are trying to do to you.
you might notice that the official sources agree that Social SEcurity is likely to cost about 6% of GDP in 75 years, up from about 4% today. Then you might wonder how a 2% of GDP increase over today is going to eat up 100% of the budget. You might, if you are sitting down, reflect that this 6% of GDP is going to go to feed and house and provide modest comforts for about 25% of the population. Then you could look at your paycheck stub and see that 6.2% of it is withheld to pay for your Social Security. Your boss matches that with another 6.2%. So you see, 12.4% of your wages are being applied to Social Security. I don’t expect you to understand how pay as you go works, but essentially you are providing the money today to pay for the expenses of the already retired, just as they provided the money to pay for the expenses of their parent’s generation, just as your children’s generation will provide the money to pay for your expenses. This is no different from what happens when you buy a bond or a stock or just put the money in the bank, but it’s hard for some people to understand. Meanwhile none of this has anything to do with “government” expenses. So even if it eventually costs us as much to buy groceries and pay rent in our old age as it does for the government to buy submarines to fight terrorists, that is not “100% of revenues.” It would be as if you took part of your paycheck and gave it to your wife for grocery money and kept part of it for you “sports car fund.” And, then called the two of them together your “unified budget.” Then as your family grew you noticed that after the birth of your next child the grocery budget would be as big as your sports car budget. So you ran around yelling at your wife she is going to have to cut back on grocery’s because the grocery budget was going to be 100% of “revenues.” Your math would be bad, but not as bad as your logic or your morals.
Don has a fundamental misunderstanding of the whole thing. Sean Hannity has sold some of this stuff as ‘SS is an item in the federal budget’ and then concludes its all the same, which is simply the fungible money argument.
To think SS is on budget is simply silly in a legal sense, and to assume, on the other side that sources of tax money do not matter because the general fund does not track the money by source (ie as in tracking fed money used for abortion related expenses in the current health care money distribution) is never part of the argument by the fungible people.
I don’t think Don thinks it important because we COULD have set up SS from general revenue (income tax?) to begin with, and simply ignores how it was set up in the first place to be workers paying in (qualifications) for workers retirement. His basic premise is that it is welfare BECAUSE the government handles the money, and how one taxes does not matter.
Hence it appears to be perhaps Hannity points of understanding, which are not accurate and do not involve how things work in a reasonable way since they simple mental leaps with little intervening circumstances.
Even a large company company that operated on these lack of distinctions…who cares what department has revenue, it is all company money and simply accounting tricks to keep it separate as the money looks the same in the company…after all, trading money is still green and looks the same as bank function money…does not matter.
The revenue stream matters not in this view, and apparently only applies to the feds as a law.
Similar CBO figures as in 2000 by the way. Perhaps you do not understand the limits of CBO projections either if that is your source for accuracy and not simply broad trends.
LOL…be serious please Peter. Such basic errors of knowledge are not proposed by ‘reformists’ who understand the structure, from Concord to AEI.
Good luck coberly
You’re living in lala land. I’m guessing from your discouse that you really never went to school. Self tought economist are you ? Cheers Mate and good luck with the tv remote and wifi recliner function on your chair.
Don I posted the relevant graph from that CBO Report above. It shows no such thing within the 10 year window you specify.
And simply pointing to a multi-page document without actually referencing a specific page, table, or figure is just laziness. Where is the precise source for your data point? Waving your arm and saying “Yonder” doesn’t do it.
Shorter Peter: “Dale just because you showed that I was an ignorant nincompoop that doesn’t mean I can’t sneer down at you”
Peter you are tying to sneer down from the bottom of the well. Dale knows what he is talking about, his numbers have been observed and tested by a large number or professional economists at Angry Bear and elsewhere and nobody who knows anything about the actual operation of Social Security has challenged them on the merits. (Although a couple of people have mistaken the incidence of the tax increases he is suggesting).
Angry Bear allows a pretty high level of name calling back and forth, but if and only if it is backed up by something. We have commenters that are in my view wrong about just about everything but mostly they at least TRY to make some argument besides “that’s garbage” “get thee to your recliner chair”.
Call this fair warning from a Moderator. Bring SOMETHING to the table or your comment(s) will go away without further notice.
Don: “Peter:
You’re absolutely correct.
Social Security and Medicare are on budget.”
Don once again you have fallen into the trap of too little knowledge. “On budget” is a technical term used by OMB and CBO. That Social Security surpluses are included in the annual deficit figures typically reported in the MSM doesn’t put them ‘on budget’.
You might want to download and browse through the following document from OMB:
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/concepts.pdf
BUDGET CONCEPTS AND BUDGET PROCESS
If you do and read the definition of ‘off budget’ and ‘on budget’ on pg. 134 and then followed up with the following from pg. 137 you might stop stepping all over your argument.
Every year since 1971, however, at least one Federal entity that would otherwise be included in the budget has been declared to be off-budget by law. Such off-budget Federal entities are federally owned and controlled, but their transactions are excluded, by law, from the rest of the budget totals, which are also known as “on-budget” totals. When a Federal entity is off-budget by law, its receipts, budget authority, outlays, and surplus or deficit are separated from all other (on-budget) receipts, budget au-
thority, outlays, and surplus or deficit. The budget reflects the legal distinction between on-budget entities and off- budget entities by showing outlays and receipts for both types of entities separately.
Although there is a legal distinction between on-budget and off-budget entities, there is no conceptual difference between the two. The off-budget Federal entities engage in the same kinds of governmental activities as the on- budget entities, and the programs of off-budget entities result in the same kind of outlays and receipts as on-budget entities. The “unified budget” reflects the conceptual similarity between on-budget and off-budget entities by showing combined totals of outlays and receipts for both types of entities.
The off-budget Federal entities currently consist of the Postal Service Fund and the two Social Security Trust Funds: Old-Age and Survivors Insurance and Disability Insurance. Social Security has been classified as off-budget since 1986 and the Postal Service Fund has been classified as off-budget since 1990. A number of other entities that had been declared off-budget by law at different times before 1986 have been classified as on-budget by law since at least 1985.”
And note that “unified budget” is in quotes, this is because there is no such thing as that in current law, it is simply the most convenient way to report the overall status of the budget to the public. And Social Security is included in it. I don’t blame you for being confused, this stuff is confusing. But don’t assume that you can bring an ordinary language understanding to a technical discussion, terms that seem to have a simple meaning, for example ‘public debt’ and ‘on-budget’ on examination are not that simple.
Bruce:
You’re rigght.
That was my mistake for not providing the page number – number 5.
Don Levit
The Social Security Trust Fund represents the money loaned to the Republicans in order to hide the real deficits they created when granting tax cuts, primarily to the rich. The bonds held by the trust fund are the same as the bonds held by the Chinese and the savers in the United States and in other places. The money is owed by the people who got the income tax cuts. And it is owed to the workers who saved a share of their wages in the trust fund. The money must be paid back by the wealthiest because they got the bulk of the tax cuts that were funded by the FICA tax payers. When the workers attempted to show that increased FICA taxes during the Reagan years were merely a tax shift from the wealthy to the lower middle class, the Republicans said, “NO WAY”, those are savings to address the demographic bulge. Now the Republicans want it all in the same pot. How very typical.
Bruce,
I’ll refer to my original post which I thought innocuous. My point was that if SS was run like a private pension fund it would be long gone along with all it’s managers. I’m sorry if I offended your readers however you must take note that “Dale” coberly
also has a fairly condescending attitude if you don’t agree with him/her. If this forum exists simply to regurgitate government statistics then I am in the wrong place.
Tara.
That whole “if SS was run like a private pension fund” is bullshit. You put it up as obvious and then bitch at us. What you dismiss as “innocuous” is nothing of the sort, instead resting on a whole nest of asumptions. If you want to bring all of them to the surface and then proceed to defend them then great. But as far as i can see you have brought nothing but talking points.
Got substance?
Don you would try the patience of a saint. Page 5 shows the same two graphs I posted up above and they show no such thing by 2020. Which was your original claim.
Folks:
I just got a glimpse of the interchange I had with Bruce on Saturday.
I wrote:
Are you aware there are 4 levels of obligations the government has, and that Social Security and Medicare are on the fourth level, the lowest rung?
Bruce asked for a citation.
From a paper entitled “Federal Debt, Answers to Frequently Asked Questions, an Update, published by the GAO:
Page 65 Q “Debt is one liability of the federal government. What are other potential ways to look at exposures or implicit commitments of the government?”
A “Debt held by the public is the largest explicit liability of the federal government. However, the federal government undertakes a wide range of programs, responsibilities and activities that may explicitly or implicitly expose it to future spending. These ‘fiscal exposures’ vary widely as to source, extent of the government’s legal obligation, likelihood of occurrence, and magnitude. Given this variety, it is useful to think of fiscal exposures as a spectrum extending from explicit liabilitiies to the implicit promises embedded in current policy or public expectations. (See Table 2).
Page 66 Table 2 Selected Fiscal Exposures: Sources and Examples
Type Explicit Liabilities – Publicly held debt, Military and civilian pension and post-retirement health, Veterans benefits payable, Environmental and disposal liabilities, Loan guarantees.
Type Explicit Financial Commitments – Undelivered orders, Long-term leases
Type Financial Contingencies – Unadjudicated claims, Pension Benefit Guaranty Corporation, Other national insurance programs, Government corporations, e.g., Ginnie Mae.
Type Exposures implied by current policies or the public’s expectations about the role of Government – Debt held by government accounts, Future Social Security benefit payments, Future Medicare Part A benefit payments, Future Medicare Part B benefit payments, Future Medicare Part D benefit payments, Life cycle cost, including deferred and future maintenance and operating costs, Government Sponsored Enterprises, e.g., Fannie Mae and Freddie Mac.
Go to: http://www.gao.gov/new.items/d04485sp.pdf.
Don Levit
Coberly wrote:
Social Security and Medicare will never soak up the entire budget, because they are off budget. They are money you pay yourself.
We have already discussed the budget part.
When you say it is money you pay yourself, what does that mean?
According to a paper entitled Reports and Studies, The Committee on Economic Security, Social Security in America, Part 2, Old-Age Security, Chapter 10:”
“Benefits are paid based on the status of a worker, measured by wages. Should no taxes be paid, the worker still gets his annuity.”
“The original bill made the receipt of benefits contingent upon paying taxes. Under the Social Security Act, there is no interdependence between the taxing and the appropriation of benefits paid. Even if no taxes are paid, he still receives his benefits.”
Go to: http://www.ssa.gov/history/reports/ces/cesbookc10.html.
Don Levit
RDan wrote:
I don’t think Don thinks it’s important because we could have set up SS from general revenues (income tax). His basic premise is that it is welfare because the government handles the money and how one taxes does not matter.
It is not my premise that it is welfare. It is my premise that benefits are paid from general revenues. for the actual cash payments are made from the Treasury.
The FASAB, which is the accounting advisor for the federal government has these views in a paper entitled “Accounting for Social Insurance, Revised”
Page 87 “A non exchange transaction
arises when one party receives value without directly giving or promising value in return. In regards to social insurance benefits, the federal government gives value to beneficiaries without receiving value in return. The fact that benefits paid are not based on the amount of taxes paid confirms the nonexchange nature of social insurance.”
Go to: http://www.fasab.gov
Click on Exposure Drafts and Documents for Comment.
Don Levit