Again, it comes down to the underlying assumptions. If we're looking as SS in a vaccuum, you are completely 100% correct. If we're looking at SS with a surrounding context of Federal spending and the overall US economy, you are changing nothing, or perhaps even making things worse.

The 'real life' problem is that to cover boomers' SS payments, the US will either incur significantly greater and greater debt, increasing the chance that our financial house of cards will come falling down, or will have to raise taxes to unacceptable levels (or More unacceptable levels, if you prefer), slowing the economy and/or sowing seeds of unrest. Or drastically cut other Federal programs, which again has a potential for social unrest, but that seems unlikely.

Raising taxes now helps the 'slush fund', but does little to avoid the above negative impacts as the slush fund operating surplus dries up and then the slush fund is supposed to be repaid from general revenues and public debt. I suppose it Might help if all excess funds were dedicated to reducing the national debt so we had more room to run it back up again later, but this seems unlikely. A more likely scenario is that Congress will funnel any new surpluses into vote-buying programs, which will potentially worsen the later pain when either those programs have to be added to the list of things to be cut or their expense is added to what needs to be covered by tax increases and/or new debt.


I agree, debt reduction is the only good use for these funds. But how likely is it that the CongressCritters who have refused to responsibly address this mess for decades will behave responsibly now?

I don't think there's been a problem with the actuarial analysis, just with the intestinal fortitude of the politicians to make appropriate adjustments.

__________________
Today's forecast: Government corruption.

Tomorrow's forecast: 100% chance of more 'politics as usual'

Maybe it's finally time to vote Libertarian

Social Security incurred debt is no different than military spending debt incurred. There is no difference.

So, you are saying that even if Social Security's obligations are fully funded with a (roughly) 16% increase in taxes introduced over the next five-ten years, this money won't actually exist and the Social Security will still project insolvency?

Please provide a precise argument. Just asserting "vaccuum" and "context" isn't substantive.

Speaking of vacuums...

You do realize that every single western nation has a) higher debt than the USA, and b) larger boomer obligations. The only exception I know of is Canada and Canada's numbers are projected to be similar to the USA.

Ergo, the USA could raise the Social Security funding through a tax increase and even could double the total US debt position and the USA would still remain the lowest tax jurisdiction in the western world and one of the lowest debt ratios in the western world.

So the question here becomes, how would present German level taxes and boomer obligations, that are generally quite manageable in every other western country, become entirely sufficient to cause the US economy to crash?

That makes no sense. And I'm using the German example only for effect. US tax rates and boomer retirement obligations are only a fraction of German rates - even with the proposed 16% increase in US taxes.

T-bills held by the Social Security Trustees are not a slush fund. The Government borrowing these funds doesn't actually impact the fund. Taxpayer obligations are taxpayer obligations. US Government debt is US Government debt. Shuffling from one hand to the other may look rather messy and be inefficient, but it doesn't really change anything.

Using Social Security funding to pay down the debt while similtaneously running a current budget deficit will not solve the problem. The place to run surpluses for the paying down of debt is the operating budget.

Indeed, Canada and Denmark are very much engaged in this process. Using budget surpluses to pay down the national debt so that, in the long run, these two countries are better able to debt-finance any 'boomer crunch' that may come 20 years down the road. This is good public policy.

Huh? A Social Security tax increase accrues to the Social Security Trust Fund no matter what the politicians may do with the actual money.

Financing US debt spending from the Social Security Trust Fund or from floating T-Bills on the money markets is no difference at all.

The problem is US passion for tax cutting. US taxes are too low to support US government services and obligations.

Without splitting hairs, yes, you are correct.

"Vaccuum" in this case is looking at SS only and/or the 'Trust Fund' only. It has a balance of $X on paper, and will draw down that balance from year Y to year Z, at which point it will officially be broke and need outside assistance. This seems to be your preferred context and everything you've said regarding this context is 100% correct, IMO.

The "in context" in this case basically accounts for the outside circumstances of the rise and fall of the 'trust fund', including redemption of the 'trust fund bonds', and their impacts and indirect effects.

The US is not Germany, just as the US is certainly not France or the UK. To get to the circumstances you describe, we would need significant tax increases and a corresponding decrease in lifestyle. Americans already think our taxes are much too high, and seem to think the sky is falling if unemployment passes 7-8%; the reaction, and thus impacts, of a change like you describe could be severe.

(Tho thank you for the comparative info - It hasn't changed my position, but certainly softened it, and also reduced my personal level of concern.)

Good to know Somebody's handling things the right way! Better make sure the kids learn Danish! (Or Canadian!)

Actually, there is a difference. If the US funds $10B worth of $100B deficit spending from a SS slush fund tax increase rather than T-Bills, I agree it's a wash because somewhere down the line, we'll theoretically have to collect $100B in taxes to pay back the debt regardless of whatever internal accounting may or may not be involved. But if politicians see that they can potentially use $10B of slush fund money to buy votes without increasing the official $100B deficit, and then do so, then our future obligation is $110B. Unfortunately, experience has shown the latter to be the more likely scenario.

I'd say the problem is more one of greed and entitlement attitude - US government services and obligations have been allowed to grow to far beyond what US taxes can support. Tomayto, tomahto.


So I guess my implications of doom, gloom, and financial collapse are probably blown out of proportion, but we're still on the brink of a period of declining lifestyles (or hopefully just declining improvement of lifestyles). The sooner and deeper we can cut spending and/or reduce debt, the better off we'll be.

__________________
Today's forecast: Government corruption.

Tomorrow's forecast: 100% chance of more 'politics as usual'

Maybe it's finally time to vote Libertarian

US taxes are too low, and spending is too high.
Raise taxes, reduce the amount wasted on the military, and the problem is gone.
Does that prevent future presidents from embarking on foolish military adventures to prop up their poll numbers? Maybe, would that be bad?
There is a lot of room between what the US collects in taxes and what other nations collect, especially in the higher brackets, it's quite possible to raise taxes on the higher brackets, save social security and fund National health, and give most people a tax cut.

And it's a plan that would would get a politician more votes than it would lose him.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

As I noted above, an obligation of the US-taxpayer is an obligation of the US-taxpayer. These obligations (SS obligations and national debt) are both on the books right now. Using SS Trust fund assets to finance fiscal revenue deficits through the issuing of t-bills doesn't change any of the essential math here.

That is a 'political' problem that is separate from the core issue of boomer retirements. In this thread, I've only been concerned with pointing out how and why the boom retirement crisis is not as catastrophic as some would like to make it out to be. It is a realistically manageable problem. Challenging and difficult certainly, but manageable.

According to my understanding of the fiscal impact of the 'boomer retirement' wave is that Japan, Germany and Italy are the ones facing the biggest crisis with far bigger boomer retirement impact than anything US is projected to have. According to demographic studies I've seen, Canada and the USA are the two countries that are best equipped to handle the impact and the two countries who will have the least severe boomer retirement impact (mostly due to relatively high immigration levels of working age people to offset the natural boomer skewed age-ratios).

Glad to hear it.

As time goes on and the crunch numbers and dates loom ever closer, I think you will see the political will there to deal with the issue. Ten years ago it was politically easy to do what you say. Ten years from now, it will likely be politically impossible to do so.

That's politics.

You are correct that we are probably on the brink of a period of declining lifestyles, though I think there are other reasons for this (peak oil being the key one). And the boomer retirement wave will be one of the facts that may perhaps have that effect by forcing a higher level of general taxation - everywhere. Every western nation has the same demographic 'boomer bulge' beginning to move into their retirement years.

And as I've mentioned in previous posts in this thread, nothing I've said here applies to the issue of Medicare and/or healthcare. This thread has been entirely about Social Security. Medicare and healthcare is a whole different topic and, with respect to the USA specifically, that where the real long term funding problems lie.

This is 'pie-in-the-sky' dreaming.

As it stands now, the bottom 50% of income earners in the USA pay little or no federal income tax at all. The entire US federal tax burden is presently being carried by the top 50% of income earners.

Thus, "most" people don't actually deserve a tax cut because they don't pay the tax.

And the kind of cuts to the US military that you are suggesting would have to be massive - essentially cutting it in half.

Merely restoring GWBush's tax cuts would still leave the USA running a fiscal deficit at this time. This doesn't cover the SS projected shortfall nor would it pay for a National healthcare program. Let alone additional tax cuts for the middle class.

Well we have been here before...a) stop taking the ss surplus and spending it..leaving behind i.o.u.’s that are meaningless and worse, give a false sense of security....b) take the surplus and invest it so as to gain returns above the abysmal 2.5% its gets now....c) get folks off ss that have not contributed to the system.

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No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

Phew! I thought I was going to have to look for a job.

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From toxic waste to the unpronounceables on your food labels, chemicals are all around and within us......

Grover Norquist, believes that the military budget can be cut by 70%, without affecting national security, it's one of the ways the Bush tax cuts were justified. It costs a lot less to defend the US, than it costs to attack the rest of the world.

The US health system costs more than any other health system on the planet, how would implementing a different system (based on the many successful systems that cost half as much to operate) bankrupt the system?

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

One problem with that is that the surplus is so large that saving or investing it would be worse than spending it. You cant simply have trillions sitting around. Instead, lower taxes to where there is a small surplus, and let the people keep the rest.

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http://www.fairtax.org

Elminate all taxes on income and replace with a national sales tax.

When the US is spending more on its military than the next 14 nations together, and eight times what China spends, without including Afghanistan/Iraq/black operations/nuclear arsenal maintenance/veterans/homeland security, common sense says bring it home and position it as a defensive force. Common sense being in short supply when leadership invokes the fear mode and of no use to special interests, the pathetic percentage of highly inflated GDP is still being used to rationalize the bloated beyond belief US military.

I don't think the general public or media is going to listen to anyone on this issue until universal health care is in place in a couple of states as examples of how US citizens are being screwed on health care costs. A significant economic recession could have the same affect.

So what is your point? Wait until 2040 and let our kids try to stick fingers in the dike? Why?????

'Fuck it...it will only effect our kids, and I will likely be dead, so why should I worry?"

Brilliant.

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That's the conservative view on just about everything.

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When they come a wull staun ma groon
Staun ma groon al nae be afraid
Thoughts awe hame tak awa ma fear
Sweat an bluid hide ma veil awe tears

From your posts you'd obviously rather spend it now supporting irresponsible fiascos such as tax cuts and out of control military spending to let our children pay the price at a later date.

White rabbit.

You might find it is Australia that has the lowest debt of all the western nations.

Could have changed recently, but with the war and what not I can't see how if would have.