Sunday, January 13, 2013

The Truth about How Bankrupt the Social Security System Is

By Jim Quinn

Whenever I hear a liberal MSM talking head say that Social Security is not a problem, I want to throw something at the TV. Obama and Romney both declared the Social Security system sound. They lied to the American people that it will only require minor tweaks to keep it solvent for a hundred years. Liberals hate math. The Social Security System has an unfunded liability of $18 trillion. This means our politicians have promised $18 trillion more than they can possibly pay out. I guess $18 trillion is trivial to a liberal minded person like Krugman or Obama. Lucky for them that 99% of all Americans don’t understand what unfunded liability even means. The chart below gives the gory details. The Social Security system had a negative cashflow of $47.8 billion last year, after running a $48 billion deficit the year before. You may notice that 77% of this deficit was created by the SSDI program, where the depressed masses gather after their 99 weeks of unemployment run out. Do you have a headache? Are you depressed because liquor stores don’t accept food stamps? Did you pull a muscle getting on your government provided rascal? Trouble hearing your Obama phone? Then you are eligible for SSDI.

The funniest line item on the chart is the Assets at End of Year line, which shows the Social Security system having $2.7 trillion. Even using this funny number, the SSDI will be broke in three years. Al Gore told us this money was in a lockbox. They take it out of your paycheck and put it into a fund, waiting for you to retire and collect what you’re owed. Right? Wrong! If you tried to observe the vault with the $2.7 trillion on deposit, you’d be looking for a long long time. You see, the noble politicians in Washington DC took the $2.7 trillion and spent it on undeclared wars overseas, ethanol subsidies, investments in Solyndra, turtle crossings, tax breaks for hedge funds, TARP, bailing out AIG, subsidizing GM, $800 billion stimulus packages, cash for clunkers, homebuyer tax credits, predator drones, DHS, Sandy relief and thousands of other buckets of shit. There are nothing but IOU’s in the vault. The $2.7 trillion is long gone. The U.S. government had to borrow $47.8 billion to fund SS last year. They will have to borrow over $50 billion this year. There will be 10,000 per day turning 65 for the next decade. The borrowing will rise exponentially. If the $2.7 trillion actually existed, why would we need to borrow?

The trust funds are required by law to hand over all surplus revenues to the Treasury and the Treasury then provides “special issue” non-marketable bonds—essentially electronic IOUs—to the trust funds in return for the cash. These “IOUs” become part of the national debt. When the Treasury pays “interest” that increases the value of the Social Security Trust Funds it does so by increasing the number of IOUs it owes the trust funds. When the Social Security program runs a net cash flow deficit, as it has in the last three fiscal years, the Treasury needs to borrow cash from the “public” to keep the program funded.

Does this look like a trend that is going to reverse itself or level out with 10,000 Boomers turning 65 years old every freaking day?

These costs will be exceeding $1 trillion per year in the near future. Meanwhile, the number of workers per retiree will continue to fall as it has for decades. In 1945 there were 42 workers per retiree. In 1965 there were 5 workers per retiree. Today there are less than 2.5 workers per retiree. There are only 1.6 full time private workers for every one retiree. With Obamacare working its magic of destroying jobs across the land, there is much less revenue going into the Social Security System. The system is unsustainable and ignoring the problem will not make it go away.


  1. "The U.S. government had to borrow $47.8 billion to fund SS last year. They will have to borrow over $50 billion this year."

    Not so fast. They raised SS taxes by 50% for 2013 so the SS budget should be roughly balanced for the next two or three years.

    There actually IS a quick and easy fix for SS - raise SS taxes from 12.4% to about 20%. It's just that any politician who votes for that is going to be voted out of office, so they won't.

    Medicare, on the other hand, is unresolvable.

    1. The temporary payroll tax cut did not lead to a shortfall of revenue. The difference was paid for from the treasury (so we borrowed/printed)

    2. which, like Gary North says, puts the Feds in the same boat as cities and states all across America and his question is will the voters allow themselves to be taxed more and services to decline to pay for the retirees. Unsurprisingly, he thinks no.

  2. Doesn't the concept of Social Security bankruptcy indicate we're still being fooled by FDR's insurance propaganda? Social Security is just another spending program with a tax named after it. If there were a defense tax that brought in less than total military spending, would we hear about DOD going bankrupt? If so, it would be part of the agitation for more taxation.

  3. For the record, the queen of MMTers was on MSNBC saturday morning:

    There's no debt crisis or unfunded liability crisis because the government can never run out of "dollars". Thanks to the MMTers (fact not theory!) we need never run out of anything, including people to change the diapers of 40 million senile baby boomers.

    I must admit that in 2008, I did not foresee the coming of the MMTers in response to the collapse of the Keynesian paradigm.

    1. The fact that even a small subset of the "liberty" movement takes the MMT propaganda as workable shows how scared the Elite really is. They know Ron Paul let the Austrian Genie out, and are throwing all they can to provide an alternative to REAL LIBERTY.