My sole source of income is social security so I pay attention to it diligently. Today the SS trustees came out with a new report and the mainstream media -again- put forth the moans and groans about it’s so called solvency. And ,of course, the congress critters jumped on the report to further their efforts to undo the linchpin off the ‘New Deal’.
So here is some news which I hope elucidates for others what the report really is saying. AND an associated article by Sheila Bair that WILL have an effect upon the whole so called ‘safety net’ which includes social security.
First of all the actual press release from the SS Admin.
“The combined assets of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2033, three years sooner than projected last year. The DI Trust Fund will be exhausted in 2016, two years earlier than last year’s estimate. ” ; NOTE, the adjective “combined”
and that it’s the Disability Insurance that “will be exhausted in 2016, two years earlier than last year’s estimate.”
“In the 2012 Annual Report to Congress, the Trustees announced:
The projected point at which the combined Trust Funds will be exhausted comes in 2033 – three years sooner than projected last year. At that time, there will be sufficient non-interest income coming in to pay about 75 percent of scheduled benefits.” ; again, note the adjective “combined” and the phrase “non-interest income” because that “non-interest income” is a factor that the article by Sheila Bair will touch on.
Other highlights of the Trustees Report include:
“Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.” ;and THAT is the result of the FED’s zero interest gambit that Bair will talk about in her article.
“The cost of $6.4 billion to administer the program in 2011 was a very low 0.9 percent of total expenditures.”
Now if only healthcare administration costs were that low.
Nancy Altman and Erik Kingson have an article that rebuts the common talking points those that want to do away with SS have here. They also ignore the DI “elephant in the room” but this point in their article does need to be called out and presented to those wishing to alter SS for the worse: “The report will likely project that Social Security’s benefits and administrative costs in 2012 will exceed the amount of payroll tax contributions collected — but that is not surprising in light of the stagnation of average wages and continued high unemployment. Indeed, it has happened 18 times since 1958, according to the Social Security Administration.”
So what about Disability Insurance? Per the SS website: “Michael J. Astrue, Commissioner of Social Security, today announced 52 new Compassionate Allowances conditions, primarily involving neurological disorders, cancers and rare diseases. The Compassionate Allowances program fast-tracks disability decisions to ensure that Americans with the most serious disabilities receive their benefit decisions within days instead of months or years. Commissioner Astrue made the announcement during his remarks at the World Orphan Drug Congress near Washington, D.C..”
Now that’s good news, especially this: “The conditions include certain cancers, adult brain disorders, a number of rare genetic disorders of children, early-onset Alzheimer’s disease, immune system conditions, and other disorders.” BUT is this part of the calculations regarding the DI fund being out of money in 2016? AND shouldn’t the DI fund be a completely separate entity from the Old Age and Survivors fund? Well, IT IS !! BUT the funding for it is rolled into the FICA taxes; you know ,those taxes reduced 2 per cnt in an attempt to get consumers to,well, consume. And the DI fund WAS NOT part of what FDR got passed: “The Disability Insurance (DI) Trust Fund was created with passage of the Social Security Act Amendments of 1956. DI became effective on January 1, 1957.”
Let’s see; Eisenhower was president, a Republican. And the Congress? Well, it was pretty evenly balanced BUT the issue of disability payments and setting up a fund for such was pretty much a Democrat Party legislation. Note the contrast between then in the Senate and now.
So obviously if the DI fund isn’t to run out of money,then the FICA must be restored -end the 2 per cent reduction- OR a separate deduction become law.
WHAT CAN’T KEEP GOING ON IS USING THAT ISSUE AS A RATIONALE FOR SS ALTERATIONS. As Orrin Hatch is trying to do.
The SS trustees also indicated Medicare is in ‘trouble’.
“Medicare, which is expected to provide health insurance to more than 50 million elderly and disabled Americans this year, is expected to start operating in the red in its largest fund in 2024, according to the annual assessment by the trustees charged with overseeing the programs.”
“Certain people younger than age 65 can qualify for Medicare, too, including those who have disabilities and those who have permanent kidney failure. The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care.”
So here we are again with the issue of those with disabilities and the costs associated with such people. Do any of you who might read this hear ANY politician calling for raising the income tax rates of those most monetarily wealthy with such taxes being dedicated to those with disabilities or Medicare in general?
And how many of those calling for “Medicare for all” realize this: folks should be aware of how the part A works hospitalization wise ; what the provided link doesn’t tell you is this In other words, if one is hospitalized for say 50 days, Medicare will pay everything beyond the deductible (which is over $1,000) BUT say 2 months go by and one again has to be hospitalized for say 25 days. Well, in that case YOU MUST AGAIN PAY THE DEDUCTIBLE BEFORE MEDICARE WILL PAY THE REST !!! THAT’S CALLED THE ‘BENEFIT PERIOD’.
Now Sen. Bernie Sanders has introduced legislation -co-sponsored by Sens. Daniel Akaka, Patrick Leahy, Barbara Boxer, Claire McCaskill, Sheldon Whitehouse, Al Franken and Richard Blumenthal. And Rep. Peter DeFazio introduced the companion bill in the House (but Defazio is ,well, an ‘outlier’).- that addresses both OAS and DI if I’m reading this correctly (from the link at the bottom of the Sanders page titled “Social Security Administration Bill Evaluation”): “Would this bill make Social Security solvent for the next 75 years? Yes.
According to a September 7, 2011 letter from Steve Goss, the Chief Actuary of the Social
Security Administration, “Assuming enactment, the [Social Security] program would be
expected to be solvent for the next 75 years … The assets in the combined [Social
Security Trust Fund] would be positive throughout the 75-year period, meaning that
solvency would be expected throughout the period … For the 75-year long-range period
as a whole, the present-law unfunded obligation of $6.5 trillion in present value is
replaced with a positive trust fund balance of [$40 billion] in present value through the
end of the period.”
So THAT is what the “peoples” response to the Trustees press release and the Congress critters should be !!
BUT “Watch out! Is the Fed pushing us into another bubble?” Now I do understand the arguments for MMT -modern monetary theory- and haven’t a problem with them except that until the whole rotten financial edifice currently in place finally falls apart, we’re stuck with what is. And what is is a looming disaster that is impacting the prognostications associated with the ‘safety net’. And I don’t see the demand for such assistance from the so called ‘safety net’ being reduced anytime in the next few years.
“The Fed has maintained interest rates at or near zero for four years running, even though the financial system has been relatively stable since 2009. The Fed’s actions have kept Treasury bond prices high (while keeping the government’s interest costs low), but the fundamentals do not support the high valuations, given the fiscal mess we are in. Sooner or later, the bond bubble will burst. History has shown that a structurally weak economy combined with a fiscally irresponsible government propped up by accommodative central-bank lending always ends badly. Absent a change in policies, a toxic brew of volatile interest rates and uncontrollable inflation could define our future.
As we saw in the years leading up to the subprime crisis, yield-hungry investors are taking on more and more risk. Pension managers are investing in hedge funds, and gullible investors are buying up junk bonds. Meanwhile, low-yielding assets pile up on the balance sheets of more risk-averse banks. If interest rates suddenly spike, bankers may find that the paltry returns on their loans are insufficient to cover interest on their deposits. (Does anybody remember the S&L crisis?) Most important, retirees and others who want to keep their savings in supersafe liquid investments are earning returns of 1% to 2% (if they are lucky), while inflation creeps higher, now hovering around 3%.
The biggest beneficiaries of loose money, are our profligate elected officials who refuse to come to grips with budget deficits and an exemption-laden tax code. As long as Treasury can borrow cheaply to paper over the real problems, politicians can demagogue about overspending (GOP) or undertaxing (Democrats) while dodging their responsibility to work together to fix our problems.”
And that inability -due to imho, democrats lack of courage and republican’s acting like the donkey that is their symbol- to address the problems we face in a realistic manner instead of trying to put humpty dumpty back together again spells needless suffering.