[ExI] The Myth of the Social Security System's Financial Shortfall

[BillK]

On Tue, Aug 10, 2010 at 6:41 PM, Damien Broderick  wrote:
> The Myth of the Social Security System's Financial Shortfall
> MICHAEL HILTZIK - Los Angeles Times
>
>
> The annual report of the Social Security Trustees is the sort of rich
> compendium of facts and analysis that has something for everybody...
>
> In recent years, during which conservatives have intensified their efforts
> to destroy one of the few U.S. government programs that actually works as
> intended, the report's publication has become an occasion for hand-wringing
> and crocodile tears over the (supposedly) parlous state of the system's
> finances.
>
>


He wrote a book about the Social Security system a few years ago, so
he obviously knows more about it than the trustees of the fund.
(sarky comment).

The US system has the same problem as the UK and (I believe) most
European pension systems.  Since they were set up many years ago, the
income has greatly exceeded the pensions being paid out. For the first
time ever, due to the recession, the US finds itself having to pay out
more in pensions that it raises in income.
And this situation is likely to get worse.

So what, you say, all the previous income is in a Trust Fund surely?

Well, no. Not for the US or any other country. What there is in the
Trust Fund is government IOUs. (Note - NOT real government securities
which could be traded on the market by the trustees. Just bits of
paper which have to be repaid by the government).

So in previous years the government spent the trust income and
promised to repay it, in the unlikely event that it would ever be
needed. Well, now the repayments are needed.
The teensy problem is that the US is currently running a 1.5 trillion
deficit and is borrowing like crazy from the Chinese to keep going.

If you see a picture of the bus driving over a cliff, you've
understood the situation correctly.

<http://www.washingtonpost.com/wp-dyn/content/article/2010/08/09/AR2010080905559.html>

At least the Euro crowd seem to be trying to get their deficits under
control. But they still have many painful years ahead. There are no
easy choices left. It's too late.


BillK