You might know this is happening now, at about the time I get ready to start drawing what I’ve paid in for almost 50 yrs now it’s going in the red and one of the ways to prevent it in the future is reducing benefits. That’s just great.
Social Security Will Go Bust in 2010
For the third time in my life, the Social Security System will go belly-up.
Unless there is another Social Security tax increase in 2010, the system will go into red ink mode and stay there.
The public has not been informed of this, which comes as no surprise. There have been a few scattered stories on the Web, but nothing sustained. The media do not want to admit that the jointly operated Social Security program and Medicare program are going to bankrupt the Federal government if they are not cut back drastically.
They are never cut back. They always expand.
Medicare’s Hospital Insurance program has been in red ink mode for two years. The public does not know this, either. To cover the program’s insolvency, the government is quietly funding the Hospital Insurance Trust Fund with bailouts from the general fund.
Politically, this creates a problem. When the Treasury taps the general fund, the expenditure appears on the budget – the on-budget budget – as an expenditure. This immediately adds to the deficit, meaning the visible deficit, the one that gets recorded on those wonderful U.S. debt clocks.
When revenues flow into the four Social Security and Medicare trust funds, the money is instantly handed over to the Treasury, which issues non-marketable long-term IOU’s to the trust funds. These IOU’s are listed as assets by the funds. But, through the wonders of government accounting, they are not listed as liabilities on the government’s on-budget budget. They are liabilities only on the off-budget budget, which most Americans are unaware of. This chicanery has been going on ever since the Johnson Administration (Lyndon’s, not Andrew’s).
The problem facing the politicians is this: when a trust fund is no longer showing a surplus of revenues over expenditures, it has to sell its assets back to the Treasury. The Treasury’s non-listed liabilities must be converted into money to send to the legal recipients. This is a red alert of hidden red ink. The public finds out. The debt clocks speed up.
The Treasury has no money in reserve. Every dollar that it takes in immediately flows out. So, it must get Congress to provide the money for the deficit-running trust funds, either by taxing or by borrowing (increasing the legal debt ceiling).
What’s a Congress to do?
HIDING THE BUST
The Congressional Budget Office released a report in July on the condition of the Social Security trust finds. There are two funds: Old Age Insurance and Disability Insurance. Think of them as “geezers and gimps.” Combined, they are called OASDI. The report offered a table of numbers showing inflow and outflow. It is here.
The table is tricky to interpret. This is deliberate. The political strategy has always been concealment. But if we think through what is being reported in this table, we can spot the ringer.
The ringer is interest payments to the trust funds. The Treasury issued the IOU’s, so it must pay the trust funds interest.
Think: “Where does the Treasury get the money?”
Answer: “The general fund.” Up go the debt clocks.
Look at the figures projected for 2009. Income from revenues (FICA) is $653 billion. Total income is $808 billion. Where did the extra income come from? Three sources.
Taxes on benefits: $21 billion
Federal employer share: $14 billion
Interest: $120 billion
This means that the U.S. government has to pony up an extra $134 billion to pay to itself: $14 billion in taxes paid on behalf of Federal workers plus $120 billion in interest. This is counted as revenue for the OASDI Trust Fund, but it is red ink for the government.
Now let’s do a reality check. Subtract $134 billion from the $808 billion reported as total income to the OASDI Trust Fund. Why subtract it? Because this is not income coming from outside the government. We get $674 billion.
What is the expected outgo? $670 billion. The official budget surplus for the OASDI Trust Fund: $138 billion ($808b minus $670b). This is reported by the CBO under “Surplus.” This looks pretty good. For the Trust Fund, it is pretty good.
For the government, the real figure is barely in the black. The official on-budget, count-the-subsidy-as-a-subsidy OASDI surplus for the U.S. government: $4 billion ($674b minus $670b).
This is never mentioned by the CBO. We are expected to figure this out. No one does. It took me several minutes to spot the ringer.
For the entire article go to Lewrockwell.com