Monday, May 7, 2012

Veronique de Rugy on Payments

Veronique de Rugy, formerly of Ed Crane's Cato Institute and now with  Mercatus Center, writes about Social Security payments:
You had better start increasing your personal retirement savings, because Social Security is fast approaching insolvency. According to the latest Social Security Trustees' report, released Monday, the program's combined trust funds will be exhausted by 2033 -- three years earlier than last year's projection and seven years earlier than projections made in 2006. 
This means that by 2033 Social Security benefits would have to be slashed significantly. Sounds bad, right? Well, it gets worse. 
Since 2010, Social Security has been running a permanent cash-flow deficit. This means that the taxes collected for the program aren't enough to cover the benefits going to retirees.
She then goes on to make the very important point that:
There's another reason why these trends are alarming. For years, the federal government has used Social Security's surpluses to pay for roads, education and wars. Now that the Social Security program will be demanding its money back from the Department of Treasury on an annual basis, the government will have to borrow more and more from investors, increasing the publicly held debt at a greater pace.
In other words, SS is broke now. The money demanded back from the Treasury, at an escalating pace, will mean that the Treasury will have to raise that much more in addition to its regular budget obligations. De Rugy knows very well that  the dam is about to break open.


  1. Infinite QE


  2. The best thing is that all those forecasts of when this or that fund goes broke assume a linear growth in GDP and benefits paid. We all know that things don't work like that and that one downturn will take those projects and throw them out the window. They also don't know if more people are going to opt for early benefits then today. They also don't know how many people are going to be added to the SSI disability roles. My guess is the date is closer to 2020 then 2030.