Forum Post: Fixing the economy, fixes Social Security past 2085.
Posted 12 years ago on Nov. 16, 2011, 2:07 p.m. EST by RogerDee
(411)
from Montclair, NJ
This content is user submitted and not an official statement
Since 2005 each Social Security Trustees report that I have read describes 3 scenarios, low cost, medium cost and high cost, that tries to predict when SS will go broke. These scenarios utilize varying values for things llike GDP growth, job creation, population growth, immigration, wage growth, growth of workforce, population health and age to generate a prediction of when SS will be broke.
In the 2011 SS trustees report, we are given the 3 scenarios in Table IV.B3. The High cost scenario says SS will be broke in 2029. The Intermediate cost scenario says 2036, and the Low cost scenario shows that SS never goes broke, in fact after 2067 SS gains assets very quickly, because it is assumed that by 2067 the Boomers are dead and will not be collecting SS benefits.
http://www.ssa.gov/oact/TR/2011/IV_B_LRest.html#396638
The High cost (2029) scenario is reliant on a number of unrealistic assumptions, It assumes GDP growth will average about 2.2% growth. This scenario assumes an economic downturn twice the length of the Depression in the 1930's, a 20 year recession. Most mainstream economic thought is that GDP growth is likely to average between 3% and 3.5%.
The Low cost scenario assumes much greater GDP growth ( about 2.8%) all focused in the bottom 80% of income earners. in order to get this prediction to work, we must make 2 key assumptions 1) widespread job creation and 2) real wage growth (above inflation) among other minor factors.
Stochastic Modeling see figure VL.E1
http://www.ssa.gov/oact/TR/2011/VI_E_stoch.html#103970
Stohastic modeling has an advantage over a hand picked list of demographics picked by a committee in an office, plugging numbers into software. This chart shows a 97% confidence rate that SS will go broke in 2055. Simply put, if we have significant job creation, some wage growth, and the Boomers dont all live past expectancy..... then the 2055 date is very realistic.
If we have widespread job creation (right now we need 15 million jobs according to Paul Krugman) and raise median Individual income from the current 26k, 30%, back to where it was during Clinton- 38k, we will see considerable increases in FICA contributions... then that 2055 date can be pushed back even further to 2065 or 2067.
It is more than likely if we fix the economy, we also fix Social Security.
Summary of the 2011 SS Trustees report
If we leave Social Security alone it will go broke by 2055. The 2029 date requires an additional 18 years of recession, this is extremely unlikely. The 2085 date is far more realistic than the 2029 date but 2085 requires that most or all the variables go our way.
Heres a great worksheet that allows you to pick your SS policy to see the effect. The total SS shortfall over 75 years is considered to be .6% of GDP. To use this worksheet your choose a line, look at the second line that says "Increase the payroll tax rate by 2% over 20 years", and then look to the right at the blue bar with the number .6%. This change to SS taxes would equal the projected shortfall. Or line 7, raises the cap to 250k, this gains .5%.... 5/6ths of the shortfall.
Worksheet from CBO: http://2.bp.blogspot.com/_fjW71B3WLTQ/TC3Bs2undtI/AAAAAAAAAYI/PQiTSfBitWo/s1600/CBO-SS+options+Fig+1.jpg
ending the war on drugs fixes s.s. forever.
http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?v=cEXtNM7Lf0o
Edit,: The Stohastic model shows a 97.5% confidence rate for SS going broke in 2049. Not 2055. Unless I read wrong still....
A couple of important points to keep in mind about social security:
1) The social security trust fund is an illusion. Since Lyndon Johnson raided it in the 60's for the Vietnam war, it is now just part of the "general fund". The payroll tax receipts are collected together with all other federal government revenue and just put in one pile. No lockbox, no trust fund.
2) You have absolutely no inherent right to the money in the "trust fund". Nowhere in any law is it written that you have rights to benefits. The collecting of taxes to fund social security and the payout of benefits to recipients is completely at the whim of congress. They can change the rules anytime.
Social security is a Ponzi scheme. The numbers don't lie. If you are over 60 right now, you'll probably get what you believe is yours. If you are between 40 and 60, you'll get something. Under 40? Forget it.
Again: Congress can change the rules anytime. And they will.
In the low cost scenario of the 2011 SS Trustees report SS is good thru 2085, After 2065 assets grow quickly. For people 40 and under to believe that that SS wont be there for them, requires a depression longer than the depression in the 30's for that to occur. That scenario is hardly believable.
And BTW, the word entitled is in the 1935 law 9 times, 26 more times in the later SS disability law.
"Entitled" is a word describing a grant given to someone at the time of the writing of a law. What I was trying to emphasize is that nobody has an inherent right to SS benefits, like the rights granted in the Constitutions to citizens - constitutional rights that cannot be taken away. SS benefits can be taken away at any time. I often see where people talk about their rights to SS benefits. That is just not correct.
"SS benefits can be taken away at any time". Sure. "nobody has an inherent right to SS benefits"
Sure, no doubt, but next time say that first, get ti right the first time, so you're not moving the goal posts. I wont be holding my breath waiting for that day to come, And until that day comes, retirees are entitled to their benefits as per the 1935 law......