2014-08-06 / Opinion

Social Security is broke-

by MCL staff writer

In a recent article in CNSNews, Barbara Hollingsworth, reported that Boston University economics professor, Laurence Kotlikoff, told the House Subcommittee on Social Security at a hearing on Capitol Hill Tuesday, July 29, concerning Social Security said, “And it’s (Social Security) not bankrupt in 30 years, or 20 years, or 10 years. It’s bankrupt today.”

“This is not my opinion. This is the only conclusion one can draw from Table IVB6 of the 2013 Social Security Trustee’s Report."

"This table reports that Social Security has a $23 trillion fiscal gap measured over the infinite horizon,” noted Kotlikoff, who also served as a senior economist on President Ronald Reagan's Council of Economic Advisers.

“Twenty-three trillion dollars is 32 percent of the present value, also measured over the infinite horizon, of Social Security’s future revenues. Hence, Social Security is 32 percent under-financed, which means it is in significantly worse financial shape than Detroit’s two pension funds taken together.”

Social Security’s debt also “swamps the $13 trillion of official debt in the hands of the public,” Kotlikoff testified.

And “the system’s off-thebooks debt is growing at leaps and bounds – by $1.6 trillion between 2012 and 2013 – thanks to the approaching retirement of vast numbers of baby boomers.”

While “the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Fund fails the longrange test of close actuarial balance, it does satisfy the test for short-range (10-year) financial adequacy,” the 2014 Trustee's Report states.

The “combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027,” it continues. However, “depletion of combined trust funds reserves” will occur in 2033.

The economics professor, Kotlikoff, also told House members that Social Security is now in “worse financial shape today than when the Greenspan Commission ‘fixed’ it” 31 years ago.

“Today, we are looking, in the current 75-year projection widow, at 31 years of negative cash flows, which the Greenspan Commission knew were coming and willfully ignored,” he said.

The economist also accused the system’s trustees of a “disinformation” campaign to keepAmericans from finding out that “Social Security is in terrible financial shape.

The Social Security’s actuaries have been reporting the system’s infinite horizon fiscal gap every year since 2002. Social Security’s Trustees have been ignoring this comprehensive measure of the system’s insolvency every year since 2002.

It was recently noted that the next payment of the U.S. Social Security check will not be forthcoming if our government fails to borrow the payment. The economists said that nothing short of a fundamental reform of the system will save it.

“To pay its scheduled benefits in full through time, the Social Security system needs a 32 percent immediate and permanent increase in the future path of payroll tax revenues,” Kotlikoff noted. “Alternately, to prevent having to raise its FICA payroll tax rate, the system needs to immediately and permanently cut all benefits payments by 22 percent.”

He also pointed out that Social Security, which is 32 percent under-financed compared to its obligations, “cannot be bailed out by the rest of our fiscal system,” which is 58 percent under financed.

Kotlikoff urged House members to support The Inform Act (H.R. 2967 and S. 1351), which has been endorsed by17NobelLaureates in economics. The bill would require federal accounting agencies such as the Congressional Budget Office, the Government Accountability Office, and the Office of Management and Budget to do “infinite horizon fiscal gap” accounting for every major fiscal bill introduced in Congress.

1968: raided the Trust Fund to help pay for the Vietnam War

Raiding the Social Security Trust Fund was a precedent set in 1968 by another progressive Democratic president, Lyndon B. Johnson, to help pay for the Vietnam War. To date, the federal government has borrowed over $2 trillion from the Social Security Trust Fund to spend on other programs.

Contrary to what many Americans believe and what progressives love to say, there is no money in the Trust Fund to pay future benefits. Furthermore, the fundamentally flawed program faces a severe demographic crisis as members of the baby boom generation begin to retire. The mess we face with Social Security, a program so many are now dependent on, is yet another example of a failed progressive policy, where the potential for unintended consequences was ignored at the program's inception when Democratic President Franklin D. Rosevelt, in 1935, made a bunch of promises that never came true.

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