CBO says Social Security is in trouble

[Wahbooz]

Since you consider it stupid, what way do you consider that the payment of benefits, and the accounting of revenues be handled? You do realize there are regulations as to how the accounting it handled.

And I disagree with the statement that "it is difficult in any given year......" If these are Paul Ryans words, all I can say is Ryan is not trained as an auditor.

 

[Joe Economist]

The Trust Fund is a pool of money, but it isn't large enough to pay for the shortfall of Social Security.

And how do you know that some form of fee wasn't deducted from the sale and purchase of bonds? How do you KNOW the receipts side is all the money collected from FICA taxes, as well as revenues from bonds?

I trust the Trustees. Maybe it is misplaced. Do you have a reason to not trust them?

It's interesting that you say that Social Security operated with a cash flow negative since 2010, and yet the 2012 annual statement shows:

What Were the Trust Fund Results in 2011? Trust fund operations, in
billions of dollars, are shown below. (Totals may not add due to rounding.)
The OASI and SMI Trust Funds each showed a net increase in assets
in 2011; DI and HI Trust Fund assets declined.
OASI
Assets (end of 2010) . . . . . . . . . . $2,429.0
Income during 2011 . . . . . . . . . . 698.8
Outgo during 2011 . . . . . . . . . . . 603.8
Net change in assets . . . . . . . . 95.0
Assets (end of 2011) . . . . . . . . . . 2,524.1


Looks to me like the assets still increased by $95 billion.

You are including interest. It has been cashflow negative on an operational basis that is payroll tax collected vs benefits paid. Interest is earnings paid on taxes that were collected in the past. Keep in mind that the original question was "And how do we know how much of the money collected over the life of Social Security wasn't diverted for other purposes." Interest can't be diverted. Past revenue could be, but once the cash is in the Trust Fund the issue of diversion goes away.

 

[Wahbooz]

Interest is part of the trust fund, part of the reason the money is invested rather than sitting around. When you discuss cash flow it is ridiculous to exclude it.

If you really think the treasury is managing the trust funds assets without collecting some form of administrative costs, you most likely are mistaken. But beyond that I have little faith in politicians not attempting to try something, one of them being 'adjusting' the calculator for interest rates.

 

[Joe Economist]

Interest is part of the trust fund, part of the reason the money is invested rather than sitting around. When you discuss cash flow it is ridiculous to exclude it.

If you really think the treasury is managing the trust funds assets without collecting some form of administrative costs, you most likely are mistaken. But beyond that I have little faith in politicians not attempting to try something, one of them being 'adjusting' the calculator for interest rates.

We disagree about the wisdom of including interest, and I doubt that you will find many businesses outside of banking that would include interest in operational cashflow. Operational cashflow deals with are you staying afloat or not on your core operations. Social Security is a reason that people would cite as why you shouldn't include interest in your operational cashflow. The interest hides the problem. You see the Trust Fund as part of the core operation, where as I see it as a buffer for a core operation that is failing. I would agree with you if I thought that the Trust Fund would be around in 80 or 90 years, ie the maximum length of time between when someone starts paying and ceases to collect.

 

[Joe Economist]

If you really think the treasury is managing the trust funds assets without collecting some form of administrative costs, you most likely are mistaken. But beyond that I have little faith in politicians not attempting to try something, one of them being 'adjusting' the calculator for interest rates.

I do believe it, and would expect to see a visible sign that SS was payihng for the services of the government. If you have one, that I would be very interested in. I would point you to the discussion of the debt ceilings impact on Social Security. The idea that the 'checks might not go out' had nothing do with the financial resources of Social Security. It was the appropriated expense, ie turning on the lights, was where the checks might not go out. If SS was paying for the cost, that would not have been a problem.

You have considerably more faith in politicians than I do. The interest rates by your links say that they are favorable to what other pensions get buying government securities in the open market.

 

[Joe Economist]

Since you consider it stupid, what way do you consider that the payment of benefits, and the accounting of revenues be handled? You do realize there are regulations as to how the accounting it handled.

I see Social Security as old-age insurance. I would run Social Security like insurance under the same guidelines. At the very least, I would make the system run according to FASB.

The way Social Security is run is on cashflow. If I go to a bank today to borrow $300,000 to buy a house, I don't report income of $300,000. Social Security collects contributions today which is revenue. The cost associated, ie future benefits, is held off balance sheet. We are matching revenue of today with the costs created as long as 80 years ago, to determine profit. This is like comparing baseball scores from different games. If I scored 6 runs today, I can say that I won because you scored 3 35 years ago. This is an insane way to run a business.

 

[Joe Economist]

And I disagree with the statement that "it is difficult in any given year......" If these are Paul Ryans words, all I can say is Ryan is not trained as an auditor.

Where did Ryan say that? Let's keep in mind that he is a politician not an auditor.

 

[Wahbooz]

We disagree about the wisdom of including interest, and I doubt that you will find many businesses outside of banking that would include interest in operational cashflow. Operational cashflow deals with are you staying afloat or not on your core operations. Social Security is a reason that people would cite as why you shouldn't include interest in your operational cashflow. The interest hides the problem. You see the Trust Fund as part of the core operation, where as I see it as a buffer for a core operation that is failing. I would agree with you if I thought that the Trust Fund would be around in 80 or 90 years, ie the maximum length of time between when someone starts paying and ceases to collect.

I guess we'll have to agree to disagree. You see the trust fund differently than I do, and most likely differently than a number of auditors would. And I certainly fail to see your point in the last sentence, since the trust fund has been around how many years, and is annually adding to it's fund balance?

 

[Wahbooz]

Where did Ryan say that? Let's keep in mind that he is a politician not an auditor.

I took it out of your link, it doesn't matter who said it. The point is anyone with the generated statements at their disposal, and accounting experience, CAN very easily ascertain how much is taxes and how much is interest.

 

[Wahbooz]

I see Social Security as old-age insurance. I would run Social Security like insurance under the same guidelines. At the very least, I would make the system run according to FASB.

The way Social Security is run is on cashflow. If I go to a bank today to borrow $300,000 to buy a house, I don't report income of $300,000. Social Security collects contributions today which is revenue. The cost associated, ie future benefits, is held off balance sheet. We are matching revenue of today with the costs created as long as 80 years ago, to determine profit. This is like comparing baseball scores from different games. If I scored 6 runs today, I can say that I won because you scored 3 35 years ago. This is an insane way to run a business.

Don't go off on a tangent. I'm questioning you on theory of how Social Security is being handled according to accounting standards. And Social Security is not a business, so I have no idea what world you're hiking on. Explain what accounting knowledge you have please.

 

[Joe Economist]

Don't go off on a tangent. I'm questioning you on theory of how Social Security is being handled according to accounting standards. And Social Security is not a business, so I have no idea what world you're hiking on. Explain what accounting knowledge you have please.

Social Security is a business - it just isn't run like one. Too many people depend upon the system to be run like a child's lemonade stand. Today the accounting practice allows the system to recognize the revenue collected without accounting for the cost of the promises connected to collecting the cash. No private business would be allowed to do this.

I guess we'll have to agree to disagree. You see the trust fund differently than I do, and most likely differently than a number of auditors would. And I certainly fail to see your point in the last sentence, since the trust fund has been around how many years, and is annually adding to it's fund balance?

At issue isn't how long something has been around in the past. It is how long something expects to be around in the future. Social Security is TODAY making commitments that likely will be filled 80 or 90 years from today. Given CBO's estimate, the Trust Fund has a life expectancy of 17 years. Given the difference, I do not view it part of the on-going business. You do. The difference is a matter of years. Even with a looser defintion, the system is going to be cash-flow negative on an on-going basis in 2021 or so.

 

[Woolleybugger]

Social Security is a business - it just isn't run like one. Too many people depend upon the system to be run like a child's lemonade stand. Today the accounting practice allows the system to recognize the revenue collected without accounting for the cost of the promises connected to collecting the cash. No private business would be allowed to do this.



At issue isn't how long something has been around in the past. It is how long something expects to be around in the future. Social Security is TODAY making commitments that likely will be filled 80 or 90 years from today. Given CBO's estimate, the Trust Fund has a life expectancy of 17 years. Given the difference, I do not view it part of the on-going business. You do. The difference is a matter of years. Even with a looser defintion, the system is going to be cash-flow negative on an on-going basis in 2021 or so.

So just increase the taxable rate or borrow to fund it. Who cares?

 

[Joe Economist]

So just increase the taxable rate or borrow to fund it. Who cares?

Social Security is a closed system. SS can't borrow money, and the general government does not owe anything to it beyond the debt held the Trust Fund. Yes SS can lend money, but once its resources are spent benefits are cut back to the level of revenue.

What you are suggesting is to change Social Security. Contact your legislator and let him introduce such legislation. The problem is of course that few people want to throw money at Social Security. So your legislation is unlikely to pass.

 

[Wahbooz]

Social Security is a business - it just isn't run like one. Too many people depend upon the system to be run like a child's lemonade stand. Today the accounting practice allows the system to recognize the revenue collected without accounting for the cost of the promises connected to collecting the cash. No private business would be allowed to do this.



At issue isn't how long something has been around in the past. It is how long something expects to be around in the future. Social Security is TODAY making commitments that likely will be filled 80 or 90 years from today. Given CBO's estimate, the Trust Fund has a life expectancy of 17 years. Given the difference, I do not view it part of the on-going business. You do. The difference is a matter of years. Even with a looser defintion, the system is going to be cash-flow negative on an on-going basis in 2021 or so.

Wrong, Joe, Social Security is not a business; and as such is not accounted the same way as a business. This is where you guys get confused, because Social Security is not some investment firm, it is a part of the Federal Government. I can see you're going to be stuck in this same rut, even if there was a certified audit done on the system and the report stated that the system was financially solid. We'll just leave it at that, and you can continue to believe what you choose.

And by the way, assuming you are totally unaware of that, but the organization that regulates how government entities account was set up by the AICPA. If you know what that is, you'll know they have vast knowledge of accounting, and would NOT create regulations that would allow government agencies to operate under non-GAAP hierarchy.

 

[Joe Economist]

This is where you guys get confused, because Social Security is not some investment firm, it is a part of the Federal Government.

If Social Security were part of the government, there would be no such thing as unfunded liabilities. The Federal Government is a fiduciary, and bears no legal responsibility for the promises of SS. So it isn't part of the government.

would NOT create regulations that would allow government agencies to operate under non-GAAP hierarchy.

Social Security has operated for nearly 80 years on accounting practices that are illegal in the private sector. The reason that you have a 'surplus' is because the system holds the cost of future benefits off balance sheet. Explain in GAAP terms, how Social Security has a 2.7 trillion dollar surplus and unfunded liabilities of 27 trillion dollars. Sorry, it operates under non-GAAP accounting practices.

 

[Wahbooz]

If Social Security were part of the government, there would be no such thing as unfunded liabilities. The Federal Government is a fiduciary, and bears no legal responsibility for the promises of SS. So it isn't part of the government.




Social Security has operated for nearly 80 years on accounting practices that are illegal in the private sector. The reason that you have a 'surplus' is because the system holds the cost of future benefits off balance sheet. Explain in GAAP terms, how Social Security has a 2.7 trillion dollar surplus and unfunded liabilities of 27 trillion dollars. Sorry, it operates under non-GAAP accounting practices.

You are so very sadly mistaken. The accounting practices of the federal government are regulated by FASAB, NOT GAAP. FASAB is the agency, assigned by AICPA, to establish accounting standards for federal agencies. Federal agencies are covered by SFFAS. Social Security is a federal program, and as such is also subject to FASAB. You are as sadly mistaken as those who think the Federal Reserve is a private bank owned by the Rothschilds. Oh wait, don't tell me you believe that as well.

I have no idea where you get your accounting ideas from.

 

[Supposn]

I have some ideas to fund it. It might not be in line with the Conservative mindset but folks spend their whole lives paying into it and they deserve it.
I am interested to hear y'alls thoughts on funding it.

http://www.cnsnews.com/news/article/susan-jones/cbo-director-important-give-advance-warning-about-coming-changes-social#sthash.mgi4jPs9.dpuf

I’m an advocate that FICA's entire portion of revenue earmarked for Medicare and half of Social security retirement’s portions of FICA revenue, (9.1% of USA’s taxes upon payrolls) be replaced with a general federal 4.55 % sales tax that will produce more revenue.

The consequences of this would be an insignificant reduction of direct and indirect FICA taxes paid by wage and salary earning families, lesser penalty upon employers that choose to increase their payrolls and somewhat increasing tax revenues that fund Social Security and Medicare.

This is not an entire solution but it is a start to remedying FICA’s revenue shortfall, reducing the regressive character of our FICA payroll tax, retaining the Social Security’s and Medicare’s full benefits and reducing the shortfall of their funding.

Respectfully, Supposn


For further explanation refer to the discussion thread:

https://www.politicaljack.com/threads/ficas-our-most-regressive-federal-tax.78696/


Respectfully, Supposn

 

[Supposn]

Or maybe they quit using money designated as SS payments for other things and pay back what the government has stolen from the SS fund. I'm betting that would sustain it.

Jen & Wahbooz, FICA payroll taxes have not been spent for other than Social Security or Medicare purposes; FICA revenues not been spent for current expenses are “parked” in federal notes, bonds or other federally backed U.S. securities.

Respectfully, Supposn

 

[Supposn]

Lupehernandezdepedjack, Klunker, FairSheet, and Joe Economist, FICA’s our most regressive federal tax.

FICA’stask is to fund the U.S. Social Security Administration’s retirement, long- term disability and Medicare programs. Reduction of these entitlements would be significantly net detrimental to both our economy and to our society.

The thread entitled “FICA’s our most regressive federal tax”, (i.e. https://www.politicaljack.com/threads/ficas-our-most-regressive-federal-tax.78696/ ) for a proposed policy that would start remedying FICA’s revenue shortfall, reducing the regressive character of our FICA payroll tax, retaining the Social Security’s and Medicare’s full benefits and reducing the shortfall of their funding.


Respectfully, Supposn

 

[Wahbooz]

Jen & Wahbooz, FICA payroll taxes have not been spent for other than Social Security or Medicare purposes; FICA revenues not been spent for current expenses are “parked” in federal notes, bonds or other federally backed U.S. securities.

Respectfully, Supposn

I don't believe I said FICA taxes were spent for anything other than Social Security. I said the surplus of FICA taxes are invested, and the treasury uses those funds. And Social Security is NOT in trouble, it has something in the neighborhood of $3 trillion in investment vehicles.

But a sales tax to replace the FICA and Medicare tax will not provide the proper funding for Social Security, because money has to be spent to pay a sales tax. Unless you plan on putting a sales tax on investments, the funding of Social Security and Medicare will be unfairly carried out by working people. And even then, with tax shelters, a certain sector of society will still escape unscathed.