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…and society inscribe on its banners: From each according to his ability, to each according to his needs!
-Karl Marx, “Critique of the Gotha Program.” (HT: Wikipedia)
Every so often an unlucky Federal actuary gets tasked to take the pulse of the moldering cadaver of a welfare program known as Social Security. This year’s news was predictably grim. The Social Security Trustees Report Summary had the following information.
Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession ….This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly as the baby boom generation’s retirement causes the number of beneficiaries to grow substantially more rapidly than the number of covered workers.
To Senator Harry Reid, self-anointed protector of the unmanageable American Welfare State, this was reassurance enough to pronounce Social Security completely off the table when budget-cuts come up for discussion. Perhaps he meant to say it was passed out in a ditch. What Reid intentionally elides, is that this program will never go back in the black after 2014. It will never go black again, even given that the SSA was ordered to report an optimistic estimate. Their estimate assumed a robust economic recovery from the current recession. That’s great news! Who’s hiring?
Assuming the Animal Spirits of Keynesian Lore don’t arise from the Pet Cemetery and scare the US back into robust GDP growth, we can expect a long, Great Depression-Like string of years that are similar to 2009 and 2010. In BY09, Discretionary Spending equaled $1.3T, Entitlement Spending = $2.0T, and the deficit = $1.4T. BY10, was no improvement on the budgetary hara-kiri.
Senator Harry Reid is refusing to consider reductions to a portion of the budget that equals approximately 60% of our annual expenditures. Unless you, like the SSA, believe in Santy Klaus and The Toof Fairy, this is pretty much where the dog has pooped us for at least ½ of the next decade.
In other words, if we only discuss reductions in the portions of the Federal Budget that Harry Reid is willing to discuss, we could sell the E-vil Pentagon to Home Depot, lock, stock and barrel and close about ½ of our annual gap. We’ll just be forced to rely on that handy-dandy Social Security Trust Fund….
Ahem, you mean the IOU list that Congress has put in the so-called lockbox instead of cash receipts? You mean that Social Security Trust Fund? Newsburgler describes how this brilliant scheme works.
As a result of the tax increases instituted by the 1983 Amendments, over the last 25 years the Social Security system has collected more taxes than it has paid out. Excess Social Security receipts are “invested” in special securities issued by the federal government. These securities are held in the (OASDI) Trust Fund. The Social Security receipts that are exchanged for these special Treasuries have been spent by Congress on general budget items over the last 25 years.
So, from 2014 on, we are expected to fund this program off of a trust fund that’s a special, magical trust fund with no money in it. It just has IOUs that a lot of really honest politicians swear are magical IOUs that will always get successfully redeemed by Puff the Magic Dragon over at Treasury. In plain English, Harry Reid is arguing that we should never change Social Security because it has a trust fund poised to disburse $16T of funds that it currently does not have.
So some poor, unspecified SOB gets used as an ATM to start withdrawing that $16T from 2014 onwards. Regrettably, our honest, hard-working politicians like Senator Greed, oops, I mean Reid, just haven’t gotten around to identifying the magical funding source that will flood the broke-axed Social Security Trust Fund with $16T. That means, in accordance with the Calculus of Federal Revenues, you and I are the payers.
“But Noooo! I invested in Social Security for lo the years and my employer matched those investments.”
Thanks for playing. You and your employer were taxed. That money was paid to someone else’s Grampaw. I assure you he’s a swell guy, but your investment has already been vaporized. He really enjoyed that cruise he took to Tahiti last February.
And furthermore, there’s the volitional aspect of this “investment.” I’m writing the IRS tomorrow and explaining that I won’t be paying any more SS taxes. You see, I’ve been watching Zerohedge.com for days and following the Treasury Auction bid-to-cover ratios like a hawk. So I’ll just take that 6% to 7% of my swag, and buy my own T-Bills to retire on. I’ll save poor, tired Uncle Sam all the hard work searching for bargains. I’m sure they won’t mind in the slightest. What do you mean “quit BSing?!”
I mean if I owe this crap to the government, and its actuarially unlikely that I’ll ever see a dime of it again, isn’t it more of a tariff or a Poor Tax than an actual investment? Yes, I believe that’s exactly what I’m paying. A Poor Tax that some honest and hard-working politician is calling a societal investment instead.
So how do we avoid the coming fiscal train wreck? What can staunch the budgetary sucking chest wound that is Social Security? The easy answers are a means test and a dose of honesty. Tell the American People that Social Security, as it currently stands, is actuarially hosed. Alan Stafford and Bernie Madoff both got jailed for introducing private sector versions of this sort of bunko racket. Most of the money you have paid in, will never make it back out prior to your reclining for the proverbial dirt nap.
However, what can be salvaged here; is a decent old age insurance program for the working poor. It will be Communism for the not-quite compos-mentis. Here’s how that much can be flensed off this beached whale of a socialist boondoggle.
We rank potential recipients in inverse order of their net worth. Those who have worked a requisite number of years, say at least 12, qualify, at age 65, for Gubbermint Cheese. We pay the most broke qualifying payees first and pay everyone 1/12 of an amount that puts an individual 25% over the poverty line, in cash, each month. We pay this out until we disburse an amount equal to that budget year’s SS projected collections, and no more.
That’s the new Social Security. It sucks because it’s a Communist Plot. But unlike the current Social Security, it never runs a significant debt, it pays the most helpless working members of society first, and it sucks in all its honest glory, without the pretense associated with “national investments.”