Monday, June 4, 2012

2012 report: SS financial state deteriorates.

This little "cartoon" is making the rounds on liberal websites and Facebook pages:

Just one problem. Its not true. Here is what the recently-released 2012 actuarial report has to say about the future of Social Security. Oh, and that is the report produced by the Social Security Administration, not some conservative think-tank.

"The long-run actuarial deficits of the Social Security and Medicare programs worsened in 2012,....

Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare....

Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Get that? Social Security is now operating at a deficit and it will only get worse.  The so- called surplus is the actual assets of the trust fund. Thus the report states Social Security will be forced more and more to dip into the assets instead of the income more and more every year for quite some time. The so-called $2.5 trillion surplus is actually the assets of Social Security (p.7). Of course to liberals or in this case socialists such as Sanders, that means everything above one dollar in the checking account is a surplus, showing how financially ignorant he really is.  They don't seem to get the difference between assets and income, but I digress.

"In 2012, the projected difference between Social Security’s dedicated tax income and expenditures is $165 billion" (p.13)...

the OASI Trust Fund is financially adequate throughout the 2012-21 period, but the DI Trust Fund fails the short-range test because its projected trust fund ratio falls to 83 percent by the begin- ning of 2013, followed by exhaustion of assets in 2016.
... (KF Note: OASI is the main Social Security fund)

Here is the money paragraph:

"Beginning in 2021, net redemptions of trust fund assets with General Fund payments will be required until exhaustion of these assets in 2033. After OASDI trust fund exhaustion, continuing tax income would be sufficient to pay 75 percent of scheduled benefits in 2033 and 73 percent in 2086. When the programs are considered separately, the projected exhaustion dates are 2035 for the OASI Trust Fund and 2016 for the DI Trust Fund. Payment of full DI benefits beyond 2016, when tax income would cover only 79 percent of scheduled benefits, will require legislation to address the financial imbalance, possibly including a reallocation of the OASDI payroll tax rate between OASI and DI." (p.16)

The trustees warn the financial state of Social Security has worsened since the 2011 report was issued a year ago:

"The Social Security outlook has worsened significantly relative to last year's report. The actuarial deficit in its combined trust funds is now 2.67 percent of taxable payroll, the highest recorded since the last major Social Security financing reforms roughly three decades ago. The single year deterioration in the 2012 report is the largest recorded since the 1994 report. While the projected depletion date (2033) for the combined trust funds is not the earliest recorded since the 1983 reforms, we are nevertheless now closer to the point of projected depletion than we have been since enactment of those reforms. The combined Social Security trust funds' balance continues to grow in nominal terms, but has been declining generally relative to the total cost of paying benefits since 2008, and will be shrinking after 2012 in real (inflation adjusted) terms. Thus by almost any objective measure, the financial health of the Social Security system has entered a concerning decline.

While there is no way for us to know what mixture of additional tax revenues and restraints on benefit growth will prove to be the most palatable means of strengthening Social Security's financial position, lawmakers should be aware that it will become increasingly difficult to avoid adverse effects on current beneficiaries, those close to retirement, and low-income beneficiaries in all birth cohorts if legislative changes are delayed much further

The 2011 report stated the Social Security trust fund would be financially exhausted in 2036. This report moves it up to 2033. Link to more SS 2012 reports. But hey, we have a $2.5 trillion "surplus" and there is nothing to worry about.


Anonymous said...

Is it operating at a deficit or reducing the principle?

At any rate, it's paying for Medicare and Medicaid out of those funds that is the problem.

Kingfish said...

Operating at a deficit right now but from what I read, not yet eating into the principal. However, they forecast the principal will be spent by 2033.

Anonymous said...

Another question is...where is that principle? Isn't it a bunch of IOU's from the the general that has already been spent?

Anonymous said...

8:52 I believe you are correct. I have heard all the "surplus" money went in general funds and was spent, leaving IOUs from past Congresses to future Congresses. Good luck collecting.

Anonymous said...

the demise of S/S and M/C would be an atrocity to Seniors, and the economy as a whole. The politicos continue their "games" in order to pacify and enhance their political status. Think Obama a few months ago threatening to stop S/S payments during the budget battle. Reducing SS taxes from 6.2% to 4.2% then auctioning govt. air waves to supplement the reduction in contributions. The SS, MC, tax is a political football for both parties. Deja Moo/(more of the same ole bull)

Anonymous said...

Do you REALLY know why the date is getting closer,and do you want the truth?Look at thr payroll tax "holiday" that tha Democrats love to tout as such a wonderful idea.If you take a closer look,part of this "holiday" are the contributions to Social Security and Medicare!!!!It WILL NOT get better until OBAMA and the Democrats stop demonizing the republicans on this "tax cut" and saying they just want to hurt the poor.

Kingfish said...

If you read the report, it does mention the holiday and its negative effects on SS.

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