Uh, speaking of shortfalls - how about the State and Federal budget deficits....

What about the Federal prescription drug deficit....

What about the collapsing dollar ......

What about the pension deficit and the personal savings/ debt crisis.....

What about the trade deficit.....

Somebody wake Dana Milbank up.. he is disrupting the class.

Dean

this time i agree about the immigration issue. only i think you have been wrong about the lawyers. we don't need more of 'em, we need less. could we export lawyers to a country which has a shortage?

funeral directors too.

The Republican Noise Machine at it again.

This issue was dealt with in 2005 , but here it comes again . This ia part and parcel of Republican tactics : Attack on so many fronts that all you can do is defend against the MSM barrage.

If Pelosi had any balls she would put impeachment back On the table and take Social Security Off the table.

Maybe Mr. Milbank should look at the subprime crisis and what looks to be the beginnings of a multi billion dollar bailout of CitiGroup , Bof A and Wells Fargo. They all look to be insolvent !

It is not just that the SS-must-be-fixed fanatics have their priorities wrong, but they are either blatantly lying or talking ignorant nonsense. Milbank says "Social Security will go into the red in 2017...". Actually, that is the (projected) point at which the Trust Fund will be largest, at several trillion $. The SS system will not go "into the red" until the Trust Fund is exhausted, currently projected about 20 years later. Even then, it does not have to go negative, and if it does, so what? The total national debt would then be over $20 trillion at current deficit rates.

It is bad enough that gullible fools like Milbank get taken in by this ongoing hysteria (yes, the fix in 1983 worked; the baby boomers are paid for). It is that the SSA continues to be controlled by people who seem to want to do it in, to "destroy it in order to save it," who go around staging these kinds of ridiculous extravaganzas. Really, one cannot be surprised that non-economist average reporters get taken in by such "official" shows.

Actually under Intermediate Cost the Trust Fund is scheduled to keep increasing after Shortfall in 2017. Initially only a portion of the accrued interest is tapped and it is not until 2023 that Cost finally exceeds total Income including Interest and the Special Treasuries themselves need to start being redeemed.
Table VI.F8.-Operations of the Combined OASI and DI Trust Funds,
in Current Dollars, Calendar Years 2007-85
The whole thing is crazy. If you reduce the whole thing to actual dollars, whether expressed in current or constant dollars the problem is simply not there. There is a small period of strain in the few years immediately preceding depletion, but nothing like Reagan era deficits, and after that the General Fund burden resets to zero anyway. As per Barkley '75% of 160% is 120%'. The notion that the solution to a 'crisis' that still results in a better real check for retirees than my Mom gets today, is to start phasing the cut in early in order to avoid sticker shock in 2041, 2046, or 2335 is nutty.

In 2017 using pessimistic assumptions the Treasury will have to find $30 billion current or $15 billion constant dollars to start paying down a $6 trillion dollar Trust Fund. The notion that this somehow equates to a problem is ludicrous.

There is a long discussion on this over at Economist's View. I put up one post with a lot of numbers, then another pointing out that in the end none of this is about numbers to start with. Some people simply went barking mad with the passage of the Social Security Act of 1935 and their ideological descendents never got over it. I don't know if Milbank is a tool or a tool user here, but in the band none of this is being driven by any sense of concern about worker retirement, the plans I am seeing pushed promising worse results at higher costs than simply leaving the program alone.

Personally I don't think the system is broken at all. But even if you grant them every number and every solution there is no way around Rosser's Law. I'll be 84 in 2041 and anywhere from 18-23 years into collecting benefits. The idea that I should accept a lower level of benefits for a couple of decades in exchange for avoiding some sort of sticker shock is crazy.

Private accounts make sense if you are young, dumb and rich, otherwise not.

Let me put the following in the form of a question because I may not be totally on top of this aspect.

Are current Social Security surpluses financed? What would the implications be if the ratio of Interest to Cost is such that the program has to be increasingly shifted over to the General Fund?

I poked around in the Budget and it would appear that they are and that a certain portion of what shows on the books as General Fund deficit represents servicing the debt in the Trust Funds. And without this the Unified Deficit would be sort of a fiction, with Interest credited coming out of nowhere.

The way it seems to work conceptually is that the Treasury borrows money from the public in the amount needed to pay the Interest and then 'invests' it in Special Treasuries, which of course means the cash reverts to the Treasury either to pay off other Public Debt (the ideal) or to be spent on federal programs (the usual). This would simply be a matter of bookkeeping under scenarios which have the Trust Fund eventually being redeemed in full, i.e IC. But for outcomes between IC and Low Cost things start getting wacky and for outcomes better than Low Cost things get really nutty.

Under IC the ratio of Interest to Cost rises from 18% to 25% by 2017 and then declines to zero, with FICA and Tax on benefitsalways picking up 75%
of the tab. Okay that is a worker financed retirement system. Under LC that ratio goes to 26% by 2020 and stays more or less at that level through the projection perod. Okay that is a worker financed plan too. But under Low Cost Plus that ratio never levels out, ultimately you end up with three choices; increasing benefits, cutting FICA rates or effectively defaulting on the bonds whose interest you are no longer financing through public borrowing.

You wouldn't think an overfunded system would be a threat to Social Security but it is, if you compare LC Trust Fund ratios in the 2006 and 2007 Report in Fig II.D7 you will see a subtle difference. In 2006 the line between 2060 and 2080 is almost flat with only a small increase of about 30 points. In 2007 there is a noticeable curve resulting in a larger increase of maybe 60 points. Well that's still no problem. But if you start pulling that Low Point back and change the slope of that curve up even more, things get out of hand. How much Trust Fund Ratio is too much? If I am getting my math right at 5.4% nominal interest (LC) anything above 920 becomes an absolute threat, the program then draws majority of its income from the General Fund, which is unhealthy in the long run. SS's strength is rooted in the fact that it is financed by workers for workers.

skeptonomist wrote, Milbank says "Social Security will go into the red in 2017...". Actually, that is the (projected) point at which the Trust Fund will be largest, at several trillion $.

Yeah, I'm surprised Dean didn't highlight this part of Millbank's despicable column.

For the second consecutive time, Mr. Dean has honed in on a key economic issue (The other being the housing bubble before all others recognized it as such.): privatization of Social Security. This Holy Grail of the Chicago Boys remains a 'must do' before Bush signs off. In 2007, look for a convergence of the two: the pain of a recession paired with high inflation. The Boys will then scream about their projected numbers for Social Security that would be much more bleak. What Naomi Klein calls the 'shock doctrine' is in progress, right under our feet.

Remind me: what's the cover story for the cap on FICA-taxed wages? I mean besides being totally regressive, what's the rationalization?

Actually, the dollar is immediately borrowed by the Government and put to use in all the things they do. In a way the Trust Fund is a type of forced savings. The payee eventually gets back the principal with interest when he retires or is disabled. Any kind of retirement savings does the same thing, though private retirement funds obviously invest much more in the private sector.

That is the point at which the Trust Fund will be largest, at several trillion $. The SS system will not go "into the red" until the Trust Fund is exhausted, currently projected about 20 years later. Even then, it does not have to go negative, and if it does, so what? The total national debt would then be over $20 trillion at current deficit rates.