Jonathan Clement's Blog: Righting Wrongs: 000-00-0000

Ted

FYI: SOCIAL SECURITY remains a great mystery to many Americans and is widely misunderstood. For instance, when Social Security’s trustees release their annual report, we get vastly different interpretations. One group will read the report, and conclude there’s a “surplus” and plenty of money to improve benefits. Meanwhile, another concludes that the program is in fiscal trouble and fixing it is vital.

Headlines frequently state the program is going bankrupt. It isn’t. Today’s level of benefits may not be sustainable, given current funding sources, but Social Security payroll taxes are sufficient to maintain the bulk of benefits currently paid. A recent survey indicates that 76% of younger American are concerned that Social Security will not be there for them. It will be.

On top of that, many older Americans don’t believe Social Security keeps up with inflation. They don’t understand the formula for each year’s COLA, or cost-of-living adjustment.
Regards,
Ted
https://humbledollar.com/2019/07/righting-wrongs/

msf

"Headlines frequently state the program is going bankrupt. It isn’t. Today’s level of benefits may not be sustainable, given current funding sources, but Social Security payroll taxes are sufficient to maintain the bulk of benefits currently paid. "

Emphasis added. To be clear, "bankruptcy" is a legal state - when someone seeks protection from creditors in court, or creditors sue to force a debtor into the state of bankruptcy. The financial term is "insolvent".

A debtor is insolvent if it is unable to fully pay its creditors as bills become due. That is precisely what is projected to happen to Social Security in 203x. It is projected to be able to meet about 3/4 of its obligations going forward.

I respectfully suggest that anyone using the term "bankruptcy" is by the choice of words appealing to people's vague understandings and fears. Social Security is not going "broke" (whatever that might mean), but neither will it be able to pay all of what it owes.

Neither stoking fears, nor poo-pooing them, is particularly productive. Social Security does need to be fixed, the sooner the better. In the worst case, "Social Security" will not be "there". But something paying 3/4 of its obligations, and still called Social Security, will be.

Old_Joe

@msf- You're comments and observations are consistent with what I've come to understand regarding SS. But it raises a question that I haven't seen addressed: If SS is indeed reduced at some future point to about 75% of it's presently stipulated obligations, will that percentage be maintained indefinitely, or will the payout continue to deteriorate from that point as the worker/retiree ratio changes? (Assuming no legislative intervention, of course.)

msf

I've read that trends after the mid 2030s are supposed to stabilize, once we get past the baby boomer bulge. Not doing a lot of research now to find supporting text, but quickly dug up this graphic. It shows relatively flat revenue and outflow curves. The SSA Trustees'projections (in turquoise) are a bit more encouraging in this respect than the CBO projections (black).



Graphic source (CBO): https://www.cbo.gov/publication/54679

catch22

One supposes adjustments from some areas of society may effect some future SS numbers; although my suggestion is somewhat, way out there. These folks may or may not have been payers into the SS system for very long, but could have been receiving some form of disability benefit, eh? The drug users, that is.

Narcan, to reverse O.D.; if given in a timely fashion is now preventing deaths and even the school system staff is now trained and has access to the product. I can carry the product, too. The death rate, I recall was lower in 2018. One suspects a lower death rate from Narcan use. I know of two saves last year in our large community by the police at a grocery store parking lot and at a mini mall. What a wonderful world.


CDC drug overdose annual death rate 1999-2017

Old_Joe

Thanks, @msf.