Does Social Security Really Face an $11 Trillion Deficit?

[JohnnyMarzetti]

Does Social Security Really Face an $11 Trillion Deficit? (http://www.factcheck.org/article302.html)

Bush and Cheney say yes. But actuaries say the figure is "likely to mislead" the public on the system's true financial state.

Bush and Cheney say yes. But actuaries say the figure is "likely to mislead" the public on the system's true financial state.

Vice President Cheney echoed this claim in a January 13 speech at Catholic University when he said, “Again, the projected shortfall in Social Security exceeds $10 trillion.”

Both are correct -- but fail to mention that nearly two-thirds of that colossal bill doesn't come due until after the year 2078.

The Trustees Report

The projection comes from the 2004 Social Security Trustees report which estimates that the system’s unfunded obligations are $10.4 trillion over the course of what they call the "infinite horizon." Historically, the infinite-horizon projection has not been included in the annual report, and was only added in 2003.

Previously the Trustees had used only a 75-year projection to estimate the system’s long-term deficits, roughly the length of a human lifetime. (Average life expectancy at birth has now increased to just over 77 years, up from just under 75 years as recently as the 1980's, according to the National Center for Health Statistics .) The Social Security Trustees' 2004 projection shows a $3.7 trillion shortfall over this 75-year period.

The Trustees reasoned that the 75-year window should be extended to the infinite future to give policymakers a better idea of the changes necessary to keep the system sustainable indefinitely -- especially beyond 2078 when they said Social Security’s deficit will be increasing even faster than during the next 75 years.

[Yonivore]

Both are correct
And?

[JohnnyMarzetti]

And?

And this..but fail to mention that nearly two-thirds of that colossal bill doesn't come due until after the year 2078.

Does everything need to be spelled out for you?

[Spurminator]

So we should worry about Global Warming in the next 10,000 years but not this?


The Trustees reasoned that the 75-year window should be extended to the infinite future to give policymakers a better idea of the changes necessary to keep the system sustainable indefinitely -- especially beyond 2078 when they said Social Security’s deficit will be increasing even faster than during the next 75 years.

[office handle]

SS is sustainable with some payroll tax increases and/or changes in the annual inflation adjustments for the benefit payments.

but that still doesnt change the fact that its a raw deal considering that most workers dont have effective control over about 13% of their gross income and are stuck in a program which is approaching a negative real return. and its a regressive tax with a significant component going to fund the government itself instead of the current benefit payments

i think it needs to be changed into a welfare type pure redistribution program. the problem is that seems next to impossible to enact given that so many would never consider SS to be a welfare program

[spurster]

This is horrible financial thinking. If we run a deficit of only $1M/year, this is still infinite in the "infinite future".

Any future forecast extended to the "infinite future" needs to be discounted a certain percentage/year, otherwise how do you compare one infinite deficit vs. another. Even a 75-year forecast should have discounting. With moderate inflation, $11 trillion in the future could be a mere trillion today. :)

[office handle]

i understood that the 'shortfalls' discussed above were the sum of the present value of those projected deficits. that is, discounting has already been done and i am sure inflation was factored in with respect to the discount rate as well as in the benefit growth.

any dcf formula contains a component for the valuation of the present value of an 'infinite' stream beyond a certain known point, such as the end of the projected 75 year period.

[SpursWoman]

Well, here's something:


There were a substantially larger amount of babies born 60-something years ago that are about to start claiming Social Security benefits than the much smaller workforce contributors of today will be able to support, given that today's workers are paying for today's benefit recipients.

Wouldn't logic tell you that there isn't going to be enough, if you don't buy into the "infinite" time frame projections?

[baseline bum]

Social Security should die and go to hell.

[Yonivore]

And this..but fail to mention that nearly two-thirds of that colossal bill doesn't come due until after the year 2078.

Does everything need to be spelled out for you?
So? In 2042, we'll just be that much close to 2078. Why not fix the problem now?

You're not very forward-thinking or visionary...just like that Reid guy.

[office handle]

as i understood the article about roughly two thirds of the present value of the shortfall comes from the present value of the terminal value of the remainder of the 'infinite stream' 75 years from now.

personally, this debate is just political blather. the real issue is that SS as currently constituted will continue to be a raw deal for most workers.

[Clandestino]

money magazine says that by 2018 ss will be taking out more than is being put in... therefore it is a no brainer the system has to change...

[office handle]

what about the using SS surplus to pay for general govt expenses thing? whats going to make up for the loss of that?

[Clandestino]

what about the using SS surplus to pay for general govt expenses thing? whats going to make up for the loss of that?

maybe actually get some real revenue in.. besides not every person will elect to have their own personalized ss fund... their money can still be used elsewhere...

[office handle]

so wheres the revenue going to come from?

[Clandestino]

so wheres the revenue going to come from?

the gov will have to figure that out.. or cut some programs... we have so many bs programs we could use a few of them cut!

[office handle]

so which programs should be cut? should some consideration be given to a tax rate increase if that doesnt help?

[Clandestino]

so which programs should be cut? should some consideration be given to a tax rate increase if that doesnt help?

i wouldn't advocate raising taxes, but we have many programs we can cut completely or just reduce...

[Yonivore]

i wouldn't advocate raising taxes, but we have many programs we can cut completely or just reduce...
I agree...even some proposed by the current administration.

Limited government, limited government, limited government...

[office handle]

what about the one rather egregious one pushed through by the current administration (ie medicare drug benefit)? is that an accomplishment of the supposedly conservative republican or something to ignore?

think about it, on the one hand we are told that SS has to be fixed now or all hell is going to break loose, yet a couple years ago it was fine and dandy to increase a major entitlement program, an increase which doubled the projected deficit for medicare...only in america


http://www.lvrj.com/lvrj_home/1999/Nov-21-Sun-1999/photos/king.jpg

[Opinionater]

IMHO, programs that benefit the citizens of the US should be last on the list.
Cut the pork barrell spending first. Like the money spent on stupid research projects and the arts. No more fancy decorations for the White House for the holidays.
Does the White House really need 50 Christmas trees?

[office handle]

itll take a little bit more than that to close the gap

[Yonivore]

IMHO, programs that benefit the citizens of the US should be last on the list.
Cut the pork barrell spending first. Like the money spent on stupid research projects and the arts. No more fancy decorations for the White House for the holidays.
Does the White House really need 50 Christmas trees?
You have a good point Opinionator. However, pork barrell spending doesn't hold a candle to entitlement spending and is just a drop in the bucket -- even if you eliminated all of it...and I'm in favor of eliminating all of it.

It just wouldn't make a big difference.

[office handle]

but der leader george w bush rammed through the most massive expansion of government entitlement programs since the 1960s. if we cant count on der leader to make things right who can we count on?

[Yonivore]

but der leader george w bush rammed through the most massive expansion of government entitlement programs since the 1960s. if we cant count on der leader to make things right who can we count on?
Yep, and I was opposed to it. So, what's your point?

[office handle]

but bush said it needed to be done and you have said that you dont question anything he says, unlike the "demoncrats"

[Nbadan]

You have a good point Opinionator. However, pork barrell spending doesn't hold a candle to entitlement spending

:rolleyes

Entitlement spending doesn't hold a candle to defense spending. I know, lets get the hell out of Iraq and save SS at the same time.

[Clandestino]

:rolleyes

Entitlement spending doesn't hold a candle to defense spending. I know, lets get the hell out of Iraq and save SS at the same time.

if we were to leave now and let terrorists take over it would cost more in lives and money!

[Nbadan]

if we were to leave now and let terrorists take over it would cost more in lives and money!

That's BS. If we leave, we take away the insurgents only legitimacy for existing. The Baathists will be drawn to the negotiation table by the Shiite and Kurds.