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Unread 02-03-2010, 12:07 PM   #1 (permalink)
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Bailout II: Electric Boogaloo - Social Security

Allan Sloan - Social Security could be next to need a bailout

Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.

But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.

To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.

Social Security Bailouts Begin in 2010 | The Foundry: Conservative Policy News.
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Unread 02-03-2010, 12:24 PM   #2 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

I am glad to see that you separated this issue from Medicare. Most people put the two together, which is wrong since they have different missions and challenges to the budgets. But you are right. The bell is ringing, ignoring it won't help.
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Unread 02-03-2010, 12:30 PM   #3 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

Too many people get SS benefits who never put anything into it. I wish I could get all that money back.
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Unread 02-03-2010, 12:35 PM   #4 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

In before the Lock!

I just wish I could write myself an IOU for 1,000,000.00, take it to a bank and use it for collateral on a loan 1,000,00.00.

IOUs are not collateral. The government can't write IOUs and call them collateral any more than I can. Read a book called "The Social Securty Swindle" by Erwin Schiff.

It is the biggest ponzi scheme ever.

These guys steal from us as easily as stealing candy from babies. They use the the word "Insurance" in the titles of the statutes and such but they never use that word in the body of the text of the stautes. The fact is it does not matter what the titles of the statutes are, only the body of text of the statutes constitues law. And the fact is all the money collected through employer paid taxes and employee "contributions" go into the general fund to pay the government expenses.

In other words LIES, all of it. Any body else devising such a scheme would be brought up on fraud charges.

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Unread 02-03-2010, 12:45 PM   #5 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Originally Posted by geochem1st View Post
I am glad to see that you separated this issue from Medicare. Most people put the two together, which is wrong since they have different missions and challenges to the budgets. But you are right. The bell is ringing, ignoring it won't help.
Definitely true.

Change will come to social security. They will drop the illusion that it is some kind of retirement plan and means test it at some point, and also skyrocket the taxes. Right now income over a 100G or so is not taxed for social security.

It is already a reasonably significant burden, constituting roughly 15% of wages up for everyone up to 100G or so (half is paid by the employer).
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Unread 02-03-2010, 12:49 PM   #6 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

This seems like a real possible answer:

"If Social Security's problems haven't changed since the Bush years, neither have the possible ways to fix those problems: Raise taxes (the Social Security payroll tax would have to be nearly doubled to keep the program afloat), cut benefits by as much as 25 percent or allow younger workers to invest privately.

We could always raise taxes or cut benefits enough to bring the system into balance. Some have suggested removing the cap on income subject to the payroll tax. But while that would be the largest tax increase in U.S. history, at least $1.3 trillion over the first 10 years, it would increase Social Security's cash-flow solvency by just seven years. Raising taxes or cutting benefits will make an already bad deal worse for younger workers, many of whom will end up paying more in taxes than they receive in benefits. And raising taxes will do nothing to fix the fundamental problems of ownership, inheritability and choice.

The only workable solution still is to allow younger workers to invest privately a portion of their Social Security taxes through personal accounts so as to take advantage of the higher returns earned through investment in real assets, and offset the reduction in government benefits that will be required to bring the system into solvency.

Critics undoubtedly will point to the collapse of the stock market in 2008 and suggest that private investing is just too risky. However, studies show that long-term investment remains remarkably safe. If workers retiring today had been allowed to start privately investing their taxes 40 years ago, they obviously would have less money than those who retired a couple of years ago, but they still would have more than Social Security promises. Remember, someone retiring today would have begun contributing to his or her retirement account 40 years ago, when the Dow was at less than 1000.

Not every worker would want to take on the risks and volatility of private investment. Some might prefer the political risks of today's system despite its looming insolvency. But that's why personal accounts have always been - and should continue to be - an option. Those who want to remain in the current system should do so, but those who wish to invest a portion of their money privately should be given that choice.

Not surprisingly, a great many would do so. A survey taken last year by Sun Life Financial at the nadir of the market's decline found that 48 percent of American workers would opt out of Social Security even if doing so meant the loss of all future Social Security benefits (something far more drastic than is being proposed). Among workers younger than 30, the number wanting out of Social Security was a startling 59 percent. "

Project on Social Security Choice
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Unread 02-03-2010, 12:52 PM   #7 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

Raising taxes would only decrease overall tax revenue. They need to cut gov't spending across the board at least 20% and let the private sector grow on its own through tax cuts. Small businesses are f'd in the a.
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Unread 02-03-2010, 12:56 PM   #8 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Raising taxes would only decrease overall tax revenue. They need to cut gov't spending across the board at least 20% and let the private sector grow on its own through tax cuts. Small businesses are f'd in the a.

I was referring to this part:

"The only workable solution still is to allow younger workers to invest privately a portion of their Social Security taxes through personal accounts so as to take advantage of the higher returns earned through investment in real assets, and offset the reduction in government benefits that will be required to bring the system into solvency. "
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Unread 02-03-2010, 12:57 PM   #9 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

Young workers would be better off keeping all that SS money and investing in a CD at the local bank... that or more Gibsons.
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Unread 02-03-2010, 01:19 PM   #10 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Originally Posted by Pwozzie View Post
Raising taxes would only decrease overall tax revenue. They need to cut gov't spending across the board at least 20% and let the private sector grow on its own through tax cuts. Small businesses are f'd in the a.
I agree with cutting spending, but new biz growth is not from their own tax cuts. In theory it is, but only slight. The private sector grows with demand of innovation (using mfg as an example for ease) and grow do to new construction, which can only happen if banks are letting the money go.

My uncle used to employ a 20 man framing crew. As of right now he hasnt taken a payday in 4 months. He is signed for a 5 mil contract, but TD Banknorth cant cut the check to start the job.

Tax cuts for small biz is great, but most biz is like the one I am employed with, you get done more with less people and with tax cuts just puts more money in the bosses pocket. I will still pay in 35% of my pay and my bonuses will still get whacked at 48%. So lets say I make 80k per year gross and get a 10k bonus, that makes it 90k I take home 32000 at the end of the year, and that's if I don't end up paying more at the end. This is not including my wife in the equation who makes 38k, and is taxed about the same.


Then there is the gas tax and then there is the sales tax and then there is there is the 6-700 a year to register the cars so on and so on.

The economy is stimulated from the bottom up, not the top down. Top down only allows for inflation and not growth.
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Unread 02-03-2010, 01:30 PM   #11 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Young workers would be better off keeping all that SS money and investing in a CD at the local bank... that or more Gibsons.
+1 Agreed!
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Unread 02-03-2010, 01:30 PM   #12 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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I agree with cutting spending, but new biz growth is not from their own tax cuts. In theory it is, but only slight. The private sector grows with demand of innovation (using mfg as an example for ease) and grow do to new construction, which can only happen if banks are letting the money go.

My uncle used to employ a 20 man framing crew. As of right now he hasnt taken a payday in 4 months. He is signed for a 5 mil contract, but TD Banknorth cant cut the check to start the job.

Tax cuts for small biz is great, but most biz is like the one I am employed with, you get done more with less people and with tax cuts just puts more money in the bosses pocket. I will still pay in 35% of my pay and my bonuses will still get whacked at 48%. So lets say I make 80k per year gross and get a 10k bonus, that makes it 90k I take home 32000 at the end of the year, and that's if I don't end up paying more at the end. This is not including my wife in the equation who makes 38k, and is taxed about the same.


Then there is the gas tax and then there is the sales tax and then there is there is the 6-700 a year to register the cars so on and so on.

The economy is stimulated from the bottom up, not the top down. Top down only allows for inflation and not growth.
Trickle up poverty?
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Unread 02-03-2010, 01:44 PM   #13 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

So how long can tax payers pay for benefits paid to taxpayers? I do not understand the math, I pay more taxes to get tax money back? Why don't I just keep my money and not expect a benefit? It is like recyling the same money over and over again with the debt that has to be paid delayed more and more. Borrow from Peter to pay Paul PLUS interest.
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Unread 02-03-2010, 01:53 PM   #14 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Trickle up poverty?
My point is that the economy is driven by people having money in their pockets, not companies. I believe we should tax companies to the highest possible limits who mfr overseas, and tax the hell out of every import product. But the engine is consumer spending no matter what, a close second would be USA innovation and developing a market for whatever brainstorm. That is what this countries economy was founded on..


As for ssi, I say let that crap sandwich system stb, and stop taking my money.
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Unread 02-03-2010, 02:06 PM   #15 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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My point is that the economy is driven by people having money in their pockets, not companies. I believe we should tax companies to the highest possible limits who mfr overseas, and tax the hell out of every import product. But the engine is consumer spending no matter what, a close second would be USA innovation and developing a market for whatever brainstorm. That is what this countries economy was founded on..


As for ssi, I say let that crap sandwich system stb, and stop taking my money.

The War Machine is what has driven our economy historically. The cold war years and arms races, the 'good ole days' of Reagans 80's was supported by a $2.2 Trillion dollar increase in 'defence' spending. During the 90's the economy shifted towards consumerism and Free Trade which has gutted us.
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Unread 02-03-2010, 02:12 PM   #16 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Right now income over a 100G or so is not taxed for social security.
perhaps i am misinterpreting this, but i pay a shit ton of SS tax.
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Unread 02-03-2010, 02:27 PM   #17 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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The War Machine is what has driven our economy historically. The cold war years and arms races, the 'good ole days' of Reagans 80's was supported by a $2.2 Trillion dollar increase in 'defence' spending. During the 90's the economy shifted towards consumerism and Free Trade which has gutted us.
My point (which is not very good in text) is innovation the beans the bullets and bandages, thats what the US has developed (broadly painted) and marketed throughout the world.
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Unread 02-03-2010, 02:31 PM   #18 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

American businesses have little to no investment capital in this economy. They are waiting for the "rules of the game" to be determined with all the health care, cap n' trade, etc before they think about hiring or moving overseas.
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Unread 02-03-2010, 02:33 PM   #19 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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perhaps i am misinterpreting this, but i pay a shit ton of SS tax.
Me as well...that statement does not hold water.

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Unread 02-03-2010, 02:38 PM   #20 (permalink)
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Re: Bailout II: Electric Boogaloo - Social Security

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Me as well...that statement does not hold water.

BB
The 2009 cap on SS taxation is $106,800. If you make more than that during the year, they stop taking out for SS. The medicare portion, however, has no cap.
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