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Rep Marsha Blackburn’s snow job. Explains how Social Security money flows

I was watching C span Washington Journal this morning.  Rep Marsha Blackburn was the guest.  I got to listen to her explanation of how the Social Security funds flow and just had to post the clip.   Copied from the transcript of the clip:

THEIRS MONEY THAT GOES TO MEDICARE AND SOCIAL SECURITY AND I THINK IT IS JUST IS SO INAPPROPRIATE THAT THE FEDERAL GOVERNMENT DOES NOT USE THAT AS A TRUST FUND BUT THEY MOVE IMMEDIATELY TO THE GENERAL FUND AND STACK UP IOU’S THAT ARE SITTING IN A CABINET IN WEST VIRGINIA.

What she says should not be allowed to stand and if C-span were half of what it used to be, she would not have had the following go uncorrected.  Thus I leave it to the Angry Bears to correct her here and thus document her ignorance of the subject. 

I have not watched this lady before.  I could not help but think she is just a more polished version of Sarah Palin. She is totally capable of pulling off what we used to call a “snow job” when writing their essay.

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Social Security Monthly Balances: Nov update

How is Social Security holding up given the terrible employment numbers? Well not as bad as I had feared.

OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214.9 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

Sept 30th/Q3: OAS $2.177 trillion// DI $219 billion

Oct 30th/Five-sixths: OAS $2.187 trillion// DI $218 billion

Nov 30th/Eleven twelvths: OAS $2.197 trillion//DI $217.5 billion. So what does all this mean? Well nothing really. Mostly the outlook is unchanged, which is why I’ll keep the brief discussion below the fold.

The DI (Disability Insurance) Trust Fund is more or less holding its own with the balance in recent months dropping by less than a billion a month. A reasonable year end estimate for this fund would be something over $216 billion which would put it below both Intermediate Costs projection of $219 billion and Low Cost’s projection of $221 billion. Not great news but maybe what you would expect in the face of an extended downturn, if you had managed to stay in the regular work force during the boom but really would qualify for Disability the 2007-2008 period might be the right time to make the transition. But spin it how I will, and putting on a happy smile through gritted teeth, there is little doubt that the 2009 Report will show some degradation in the outlook for DI. And this true even though the year over year balance is still positive.

As for OAS. Well it is still running a surplus, but then a good part of that is accrued interest. And the same will be true for December, the Treasury will still be crediting interest on the existing portfolio of bonds and so we can expect some uptick, but a fair estimate is that OAS is kind of on auto-pilot right now. Still we can expect about an additional $10 billion in the TF by years end taking the total balance up to maybe S2.207 compared to Intermediate Cost projections of $2.216 trillion and Low Cost Projections of $2.221 trillion. So once again we will probably see a miniscule deterioration in outlook come the release of the new Report come March. But once again the net year over year effect is to show continued surpluses.

You have to wonder how many other multi-trillion dollar funds saw slightly less than expected but still positive returns over the last year.

Bottom line. Social Security is not immune to periods of economic crisis, how could it be. But it is buffered by being tied to real wage on the one hand and CPI on the other and calculates its health from the top down rather than the bottom up. That is a change in unemployment for 4.5% to 6.9% computes to more than a 50% increase when examined from the bottom up. And if you are out of work that may be the right metric. But from the point of view of Social Security that just means a drop from 84.5% to 73.1% of covered workers paying in, meaning that payroll tax based worker retirement can never take the hit that individual workers do in any given year.

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