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Entitlements: Tick-Tock

“SOONER” IS COMING SOONER THAN YOU THINK … || By FITSNEWS || A week ago we published an item entitled “Other People’s Money Is Running Out,” which highlighted the looming insolvency of the Social Security Disability Insurance (DI) trust fund. In that report we cited the latest estimates from Social…

“SOONER” IS COMING SOONER THAN YOU THINK …

|| By FITSNEWS || A week ago we published an item entitled “Other People’s Money Is Running Out,” which highlighted the looming insolvency of the Social Security Disability Insurance (DI) trust fund.

In that report we cited the latest estimates from Social Security trustees – who predict the DI fund will go into the red late next year.  Meanwhile Social Security’s bigger retirement fund is currently projected to run out of money in 2035 (or 2034 if it bailed out the DI fund).

It turns out those numbers are wildly optimistic.

From a post by Contra Corner’s David Stockman

On a cash basis, the OASDI (retirement and disability) funds spent $859 billion during 2014 but took in only $786 billion in taxes, thereby generating $73 billion in red ink. And by the trustees’ own reckoning, the OASDI funds will spew a cumulative cash deficit of $1.6 trillion during the 12-years covering 2015-2026.

Naturally, Washington, D.C. won’t be budgeting money to cover that gap – meaning Social Security will be adding $1.6 trillion in new debt over that period.

According to Stockman, Social Security trustees achieved their optimistic timetables by “redeeming phony assets; booking phony interest income on those non-existent assets; and projecting implausible GDP growth and phantom payroll tax revenues.”

That’s true.

The “trustees” achieved their 2034/35 date by projecting annual economic growth of 5.1 percent over the next twelve years.

What?

As we’ve repeatedly noted, the best the economy has been able to muster since 2000 is 3.8 percent growth – in 2004.  It last hit the three percent threshold in 2005 – at 3.5 percent.

The last time the economy grew at a five percent clip? 1984.

Oh, and this year’s growth has been abysmal, too.

With all the global economic headwinds out there – what makes these accountants think five percent annual growth is even remotely possible?

Stockman also refers to the $2.79 trillion in current Social Security assets as “government accounting confetti.”

This figure allegedly represents the accumulated excess of trust fund income over outgo historically, but every dime of that was spent long ago on aircraft carriers, cotton subsidies, green energy boondoggles, prison facilities for pot smokers, education grants, NSA’s cellphone monitors, space launches and the rest of Washington’s general government spending machine

Add (well subtract) it all up and Stockman estimates Social Security’s D-Day will come not in 2034 or 2035, but more likely in 2026.

So yeah … let that sink in.  And while it’s sinking in, don’t ever forget who is on the hook for it.

***

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52 comments

shifty henry July 30, 2015 at 8:16 am

Can anyone tell me how to get rid of shitty ad(?) that keeps popping up — it is a black square with the heading “close video” — but the only way to ‘close’ it is to close Fitsnews. I can deal with the normal ads but this shit really annoys me..!!

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erneba July 30, 2015 at 8:20 am

I use the adblockplus software. It works well with Chrome and Firefox, I don’t use IE.

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meh July 30, 2015 at 8:51 am

uBlocker might be better

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erneba July 30, 2015 at 9:01 am

Never tried ublocker. All of them seem to work well.

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erneba July 30, 2015 at 8:33 am

Shifty, I just turned off my adblocker software, reloader FitsNews and got the same thing. Then I turned my adblocker software back on, reloaded Fits News, and it was gone.
It rids you of all the “pop up” ads.

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jimlewisowb July 30, 2015 at 9:39 am

The burden of getting rid of annoying shit on any website is the responsibility of the site owner

I don’t visit this site as often as I used to because of the amount of shit that pops up

Looks to me that willie is letting his website go the same route as Nascar – once you start pissing on the people who pay the freight bill they will go elsewhere

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Ryan P. Curtis July 31, 2015 at 8:58 am Reply
euwe max July 30, 2015 at 5:42 pm

I used my kindle get on here once… damn! The pop ups are annoying!
I’m using chrome and an ad blocker on my desktop.. must be working.

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erneba July 30, 2015 at 8:23 am

As The Reverend Wright used to say, “The chickens are coming home to roost.” That’s barnyard talk for “the bills are due.”

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RogueElephant July 30, 2015 at 8:37 am

Social Security could be extended well into this century, I don’t know how far but it would relieve the problem till the boomers all croaked, by simply taking off the cap. he politicians could do this with one vote. But they lack the backbone –SSDD.

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75 Years July 30, 2015 at 8:51 am

Maybe if Republicans didn’t fetishize not raising taxes they could find the backbone to pass such a thing? Eliminating the payroll tax cap is basically raising taxes and goes against their little Grover Norquist pledges.

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CNSYD July 30, 2015 at 9:28 am

Eliminating the cap needs to be done BUT it will not increase the fund’s solvency very much at all. Increasing the eligibility age to reflect the increased life expectancy since the beginning of the system is the key to solvency.

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Rocky July 30, 2015 at 9:57 am

Is it just me, but I remember seeing a long term (like 50 year) SS projection that shows it running in the red from like 2020 to 2035, and then back into the black. Wouldn’t you just bridge finance the 15 year gap with future surplus? Of course to do that you have to keep your grubby little Congressional hands off it. Wait, I think I just figured out why Congress always talks about curtailing SS? It’s not that they’d replace it with something, or reduce our contribution. They’d just take the future surplus now to fund something else. Those crazy bastards!!!

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CNSYD July 30, 2015 at 10:23 am

The SS “trust fund” is a file cabinet of IOUs from the general fund.

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Bill July 30, 2015 at 10:25 am

Yes, IOUs to people who are too old or too sick to work. So they need to be paid. Period.

CNSYD July 30, 2015 at 10:30 am

No doubt. They are absolutely “entitled” to their money because they and their employers were forced into contributing to the system. Now the Sic Willie’s of the world want to treat it like “welfare”. Congress views SS, highway trust fund, etc as “free money”. Income is sent to the general fund and thus escapes the “deficit”.

Bill July 30, 2015 at 10:53 am

The problem is we have one of our major parties bent on killing Social Security and Medicare. That is a mistake, and the major reason I have been unable to vote Republican for the past 15 years. Social Security and Medicare are an essential part of the health care of this nation. They are programs that work. They need to be strengthened, not attacked. The proposals of Ryan and now Bush for Medicare are a disaster.

idcydm July 30, 2015 at 11:57 am

“one of our major parties”…Both parties, *Congress* spend Social Security and Medicare (FICA) taxes on things other than Social Security and Medicare. They have been a cash cow for *Congress* from their inception.

Bill July 30, 2015 at 2:30 pm

I am not talking about that. Everyone with common sense knows that should not be happening. I am talking about literally killing these programs. Intentionally bankrupting them and then legislating them out of existence. Bush has already said openly we need to end Medicare. But of course he offers no alternative other than that dumb Ryan plan.

idcydm July 30, 2015 at 3:46 pm

Doing nothing will not save them. If Franklin and Lyndon were still alive we could ask them but since they are both dead maybe another Democrat could offer up something.

BTW killing these programs would be suicide, I don’t think that is their intention, something has to change and we’ve know it for a long time.

Bill July 30, 2015 at 4:05 pm

“Killing these programs would be suicide” I hope. As well it should be. But that is obviously not what Bush thinks and not what Ryan thinks. Both have proposed gutting the Medicare program, and replacing it with some kind of voucher that may or may not be enough for a person to pay for his health insurance.
These programs need to be funded. If that requires more taxes so be it. Major changes are not necessary or called for We can raise the retirement age a little and raise the cap, but other than than, that, we can afford this. In fact we cannot afford not to afford this..

idcydm July 30, 2015 at 4:14 pm

” If that requires more taxes so be it.”…more money for Congress to spend on other things. If you don’t think so just look at what they have been doing.

“we can afford this”, I’m sure that’s what Greece said also… what don’t you understand about an $18 Trillion National Debt?

Bill July 30, 2015 at 4:22 pm

Taxes are at near 50 year lows. That is part of the debt problem. We spend more on defense than the next 12 countries combined; and all we can point to to justify that is a rag tag band of about 50k volunteer terrorist in the desert.

We need to make adjustments to some prograsms. We need to cut spending in some areas,a nd we need to raise some taxes. But that is not what anyone in the GOP is proposing. All they can come up with apparently is cut SS, cut Medicare, cut Medicaid, cut education, cut healthcare, don’t fix the roads, don’t repair infrastructure.etc. etc, etc.

idcydm July 30, 2015 at 4:29 pm

FICA is not at a 50 year low.

Apparently all you can come up with is more taxes but then that’s not surprising.

Bill July 30, 2015 at 4:34 pm

Apparently you can come up with nothing. Just criticize what others come up with. But that is not surprising. It seems to be the modus operandi of the GOP these days.

idcydm July 30, 2015 at 4:40 pm

It’s not your or my job to come up with something, it’s the responsibility of the people we elect to come up with something and that includes Republicans and Democrats. In your eyes it’s only the GOP that is the problem and there in lies the real problem blaming just one side.

Jack July 30, 2015 at 6:46 pm

What does FICA have to do with anything. SS does not add to the federal deficit and FICA does not reduce the federal deficit. You are the one who brought up the federal deficit. Did you know that if we had just returned tax rates to where they were under Bill Clinton, we would have been running annual surpluses for several years now.

idcydm July 30, 2015 at 7:03 pm

“federal deficit” I didn’t bring up federal deficit.

If you don’t know the difference between deficit and debt you shouldn’t be talking about annual surpluses either.

idcydm July 30, 2015 at 11:57 am

It appears everyone in Congress has a key to those lock boxes.

idcydm July 30, 2015 at 12:01 pm

As long as FICA goes into the general fund it will be spent by Congress.

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Jack July 30, 2015 at 10:43 am

There are sensible middle of the road fixes that could easlly extend the life of Medicare and Social Security by 75 years. Moderate increases in the age of normal retirement to 70 for those who are under 40 and moderate increases in the cap. We do not need to extend the life of the program more than that for now, because we have no clue what the life expectancy and health of the general public will be 50 years from now. The average person may live to be 100 and work until 80. If we can increase the life of the programs by 75 years, we can worry about this in 50 years. We can’t try to predict too far into the future.

But the truth is your buddies Bush and Ryan do not want to save these programs. They want to kill these programs. They love headlines like this. They love scaring people by saying you will never collect Social Security. They love saying Social Security and Medicare are bankrupt and we are not going to do anything about it.

Social Security and Medicare have been phenomenally successful programs. They are both major players in creating a vibrant, successful middle class.

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RogueElephant July 30, 2015 at 1:47 pm

I worked about half of my career for a company that had a 401K program. I am retired now because I was allowed to put my own money back as I wanted to toward my retirement. I made more in 21 years on my own than in 55 years with SS. The same program in the place of SS would make far more retirement income for younger people. SS is nothing more than a cash cow for politicians. If they were serious about retirement for people they would let US have individual retirement accounts that we owned in place of SS. But that would be too much freedom. Besides that I can pass on my retirement savings to my children whereas when I croak SS is over.

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Jack July 30, 2015 at 2:22 pm

When social security was enacted 1/2 of the people over the age of 65 lived in poverty. Today that number is less than 10%.

If you eliminate Social Security, within a generation 1/2 of the elderly population will live in poverty. If you eliminated social security today 1/2 of the people over the age of 65 would live in poverty. These numbers have not changed in a century.

Not everyone has a 401k and not everyone is capable of saving enough money for retirement. Further not everyone makes good choices, and they become everyone’s problem when they are too old or too sick to work.

Further, timing is everything. In 2007 and 2008 many people saw half the value of their retirement plans disappear overnight. Out of fear many sold and never recovered. If those people had been left without social security they would have been destitute. Further, we were just lucky the 2008 did not turn out like 1929.

In addition many older people with failing capacity are the subject of fraud and financial abuse. We have seen story after story of people being cheated out of their life savings by scam artist and “investment advisors” What do we do with those people?

Not everyone is capable of managing a portfolio. Social Security is a sensible safety net, that has served this nation extremely well. It does not prevent you from saving independently for your retirement, and given that your employer matches your social security contributions, there is no way to know that investing half in the stock market will produce income greater than social security. .

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Guest July 30, 2015 at 8:51 pm

I agree with you on letting younger people invest these monies in a 401k like program. If they would have let me do the same, my balance for contributions made by me and my employer based on market return rates would now total nearly $1.4M and I am 10 years from the social security retirement age. Between piss poor indexes and then not giving those that have paid in more to have the same return just pisses me off every day that I think about it. Perhaps people need to get more pissed off when they look at their numbers and the total monies paid into the system.

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dwb619 July 30, 2015 at 11:27 am

Plus, eliminating the cap would only effect 3% of the people. Makes you wonder why >>>>>>>>>>>>>>>>>>>>>>>>.

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Torch July 30, 2015 at 12:55 pm

And by putting the money back that both parties have taken

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flip July 30, 2015 at 9:23 am

Growth at 5.1%? It has grown only 2.3% since ‘closet’ Muslim Obama’s 2nd term as dictator.

We have a great example of what is bankrupting America in our very own beloved poster ‘Rocky’. Apparently his NON citizen mother in-law is receiving a taxpayer funded subsidy for health insurance. NON American citizens and illegals are bankrupting this country-NOT the veterans seeking disability payments….

DISCLAIMER: State controlled LIBERAL universities are now banning the term ‘AMERICANS’-we are now a “residence of America’.

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flip July 30, 2015 at 9:24 am

‘resident’ of America…

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Rocky July 30, 2015 at 9:59 am

Man, you have a real problem with law abiding citizens don’t you. Tell you what putz, you sign over your SS checks back to Uncle Sam and obtain private insurance after 65, and I’ll consider alternatives to ensure my family complies with the Affordable Care Act. OK? Otherwise, go fook yourself.

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Rocky July 30, 2015 at 11:56 am

Flip – you ever do an average of GDP growth under the last administration. I think it’s 1.8%. Let me know if you need the link and instructions on how to save down to excel and take the average. Otherwise, I think I’ll take my mother-in-law to the dentist today. Maybe the eye doctor too. Via con dios, mi amigo!!!!

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TroubleBaby July 30, 2015 at 9:33 am

Nice write up. It’s always good to get some concrete numbers…which is very hard to do even from the CBO now as everything is polticized.

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Rakkasan July 30, 2015 at 2:09 pm

OK, it sunk in, with a big grain of salt. Too easy to find very credible analyses and estimates that are different than this. But more importantly, I think the real point is everyone knows changes are going to have to happen. Let’s get on with discussion about what they could or should be. You know, the constructive part of the issue. Too much “jump out of the bushes, take a shot, then go hide again” –as the singular point being made. BTW, OASDI–don’t forget the “S”. People are living longer–collecting benefits, in some cases collecting their spouse’s higher benefit longer

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Guest July 30, 2015 at 4:11 pm

Perhaps whoever wrote this article needs to figure out how they calculate social security retirement income. The SSA indexes the annual amounts that you pay into FICA (and your employer matches) to “inflation” and let’s just say that since the government controls the #s feeding the inflation figure, they are really really low. For example, the index factors that they use to compute payments to you at retirement have slowly melted away. If you look at the index factors for the 10 years ending 1980, 1990, 2000 and 2010 they averaged over the 10 year period 1.42, 1.24, 1.25 and 1.11 respectively. The index factor average over 10 years from 2014 backwards has averaged 1.08. They then take your highest 35 years of indexed earnings and average them over 420 months (i.e. 35 years). They then go through an index and give you a credit of 90% for the 1st $826, 32% for the next $4154 and 15% thereafter. Therefore the more you make, the less valuable it is in computing your monthly payment. Then they want to tax you even more if you make over a certain sum per year. AND please note that no where do they take into account what are essentially matching monies from your employer or additional funds you have contributed from being self employed.

So they are getting their 5% growth, but essentially zeroing out the growth of monies being paid into social security and taking the rest of the monies paid by employers and self employed individuals all the way to the bank (or your favorite politician’s lobbyist self interest). They just do not tell you those dirty little secrets. A person noted below how absolutely P poor the returns have been. If I would have invested the monies that I have paid into FICA over my life to this point in the market, it would have taken my total contributions of $140K and turned it into $691K. If I would have been self employed or you get to include employer contributions in these investments, I would have an additional $697K for a total investment to date of $1.388M. And like the author noted below, my 401k account has done a lot better than what the government has done for social security.

Why do us baby boomers deserve social security – we paid the damn monies into the broken system and expect to at least get a little bit out of it (even though we may die off shortly after retirement). I have been hampered from early retirement due to the ex-bitch taking a chunk and paying for college for two sons. But life moves onward and upward!!

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Bob July 30, 2015 at 4:39 pm

Yep, and if you had had that money in a 401k you would have had the pleasure of giving half of it to your ex-wife.

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Guest July 30, 2015 at 4:46 pm

So true and yet so sad!! But it would still be more than what I will end up getting out of social security!! Fortunately, I get part of her SCRS pension and pensions are few and far between these days!!

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Terry July 30, 2015 at 6:58 pm

The problem I have with you analysis is, it presumes Social Security is only a retirement pension. Its not. Its a disability policy for you, a disability policy for a non-working spouse, a retirement pension for a non-working spouse, and a disability policy for a child who becomes disabled prior to age 21; as well as support payments for the children of deceased taxpayer until their 18th birthday.

What if you had a heart attack at 45 and could no longer work. What would have happened to your 401k then? What if you had opted out of SS and Medicare.

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Guest July 30, 2015 at 8:41 pm

It is true that it can be a disability policy, but I personally believe that the SSA or whatever organization oversees disability payments do not verify the true disability of many individuals. My dad tried to turn in folks that were cheating the system – yet the SSA told him it was none of his business – and by the way, these folks are still collecting disability and making cash on the side. It would be interesting to look at the numbers of social security payments for disability and how they vary state to state, with unemployment rates, etc.

I would hope that someone would be smart enough to purchase at least some form of term life insurance to cover the issue associated with premature death. But nevertheless, the figures that I provided are based on the figures as of today and I am at least 10+ years from retirement.

I think this is one of the primary economic obstacles of granting citizenship to the illegal alien population in this country. Another 5 to 10M folks that have not paid into the system could realistically claim disability or starting collecting social security with very little pay into the system and start collecting benefits from the monies paid in to date from taxpayers like me. I am bet that if you ask any hard working immigrant that paid their dues and have busted their chops and paid into the system will not be very happy to have what little benefit we get from social security be diminished even more by those that have not paid into the system.

I would still have both 401k funds (personal and social security) – this is like any business risk – you have to analyze all risks and prepare for them. Social Security is a rip off – especially those of us that have paid heavily into the system. Why should the monies that I have paid into the system have a much less return rate than someone making a fraction of the monies that I have paid into the system, but the scales noted above is very true and right on the SSA website on how they calculate payments. if someone only had an average indexed earnings of $10K per year, they would have a social security monthly payment that is 29% of what a person with an average annual indexed salary of $100K has placed into the system – i.e. 10 times the taxes and only a fraction of the return. Even if I had died at 40 years of age, my family and my children would have been OK financially at least due to planning. And please note that I was not raised with any type of golden spoon – I hate brown beans because that is what we ate as a family when I was a child to make ends meet.

I could go on and on. Send me an email and I would be more than happy to send you a spreadsheet to check your own results. The SSA allows you to create a login account to check your wages. The rest of what I have done will take more time and labor and a little knowledge with Excel.

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Terry July 31, 2015 at 10:46 am

I am aware that Social Security and Medicare could be improved. I would love to see that happen. And actually you cannot get SSDI and Medicare unless you have paid approximately 40 quarters into the social security system. However, I did not ask what would happen if you died early. Life insurance can in fact cover that, and if you are young and healthy, it is relatively cheap. I asked what if you had become disabled at age 45, and there was no social security and no medicare. Would you have had the resources to live the next 45+- years, including paying for your health insurance, the cost of long term care, etc.

The problem as I see it, is Republicans do not want to make the system better, they want to kill the system altogether. As a result, they will not work on making it better.

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roger July 30, 2015 at 10:24 pm

Let’s remove tax exempt status from fat cat colleges like Harvard which has billions of dollars in assets and continues to receive massive amount of federal grant monies…

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ImpaledNazarene August 11, 2015 at 1:33 am

Welp, we’ll be in further debt $20.82 trillion when old people get their ‘entitlement’ money they foolishly accepted when they were young and stoned while listening to the Greatful Dead. They’d be wishing they were ‘greatfully dead’ when they get their precious money. Well, at least half of it since the other half will be used for administrative costs and taxes. LOL!!!!!!!
Oh well. Hopefully that socialist bastard Sanders won’t be in the white house. $60000 quadrillion in hyperinflated entitlement debt does not sound like my fair America

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