Friday, March 11, 2011

B.O.'s S.S.'s...B.S.

Charles Krauthammer predict's Obama's Social Security hoax to be employed for 2012:
From National Review Online-  "Everyone knows that the U.S. budget is being devoured by entitlements. Everyone also knows that of the Big Three — Medicare, Medicaid, and Social Security — Social Security is the most solvable.

"Back-of-an-envelope solvable: Raise the retirement age, tweak the indexing formula (from wage inflation to price inflation), and means-test so that Warren Buffett’s check gets redirected to a senior in need.

"The relative ease of the fix is what makes the Obama administration’s Social Security strategy so shocking. The new line from the White House is: no need to fix it because there is no problem. As Office of Management and Budget (OMB) director Jack Lew wrote in USA Today just a few weeks ago, the trust fund is solvent until 2037. Therefore, Social Security is now off the table in debt-reduction talks.

"This claim is a breathtaking fraud.

"The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction.

"If you don’t believe me, listen to the OMB’s own explanation (in the Clinton administration budget for fiscal year 2000 under then-director Jack Lew, the very same). The OMB explained that these trust-fund “balances” are nothing more than a “bookkeeping” device. “They do not consist of real economic assets that can be drawn down in the future to fund benefits.”

In other words, the Social Security trust fund contains — nothing.

""Here’s why. When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it’s kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury — and is spent. On roads, bridges, national defense, public television, whatever — spent, gone.

"In return for that $100, the Treasury sends the Social Security Administration a piece of paper that says: IOU $100. There are countless such pieces of paper in the lockbox. They are called “special issue” bonds.

"Special they are: They are worthless. As the OMB explained, they are nothing more than “claims on the Treasury [i.e., promises] that, when redeemed [when you retire and are awaiting your check], will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.” That’s what it means to have a so-called trust fund with no “real economic assets.” When you retire, the “trust fund” will have to go to the Treasury for the money for your Social Security check.

"Bottom line? The OMB again: “The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.” No impact: The lockbox, the balances, the little pieces of paper, amount to nothing.

"So when Jack Lew tells you that there are trillions in this lockbox that keep the system solvent until 2037, he is perpetrating a fiction certified as such by his own OMB. What happens when you retire? Your Social Security will come out of the taxes and borrowing of that fiscal year.

"Why is this a problem? Because as of 2010, the pay-as-you-go Social Security system is in the red. For decades it had been in the black, taking in more in FICA taxes than it sent out in Social Security benefits. The surplus, scooped up by the Treasury, reduced the federal debt by tens of billions. But demography is destiny. The ratio of workers to retirees is shrinking year by year. Instead of Social Security producing annual surpluses that reduce the federal deficit, it is now producing shortfalls that increase the federal deficit — $37 billion in 2010. It will only get worse as the baby boomers retire." (read the rest here)

From VDH- "[...] There are two constant refrains about the Social Security crisis. One, we are lectured that payouts have already exceeded revenue. Two, we are promised that only future generations, currently far from retirement age, will have to work longer and get less to ensure that the system is solvent.

"But if all that math is true, why wait to act? If Americans assume that our children and grandchildren may well have it worse than the baby boomers, then why not rework existing retirement plans right now, by either freezing cost-of-living raises or increasing the retirement age? Otherwise, we send the message that a more affluent generation can demand that a less affluent generation make all the sacrifices.[...]" (entire article) emphasis mine