September 28, 2009

Lucid Links (092809, Morning)

Filed under: Lucid Links — Tom @ 9:53 am

Here’s an absolute howler (HT Noel Sheppard at NewsBusters) from the Associated Press’s Stephen Ohlemacher yesterday:

The (Social Security cash) deficits – $10 billion in 2010 and $9 billion in 2011 – won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

That gives less-informed readers the impression that there’s a stash of cash sitting there for retiree payments.

There is not.

As I have pointed out in previous columns (here and here), there is virtually no money in the Social Security “Trust Fund” because almost all of the $2.5 trillion in “surpluses” Ohlemacher refers to has been “lent” to the rest of the government — and spent.

The “Trust Fund” consists almost entirely of IOUs from the rest of the government, which in case you haven’t noticed is about $12 trillion in debt. The “surpluses” have NOTHING to with Social Security’s ability to pay benefits, because they have long since been raked off.

If Social Security taxes stop coming in, that “surplus” can’t be used to pay benefits without begging our broke government to either pay back its debt or print more money.

The false impression Ohlemacher creates is incredibly irresponsible, but sadly typical.

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Oh, and speaking of Social Security benefits and taxes, in case you missed it last week, Social Security is running monthly cash deficits already — and thank to the POR (Pelosi-Obama-Reid) Economy, now the POR Recession/”RepressionAs Normal People Define It, they’re getting worse very quickly. As long as unemployment stays high, payroll tax collections will lag, and more seniors will start taking benefits early.

Remember how we were repeatedly told this wouldn’t happen until 2017? That would have been the case if Nancy Pelosi, Barack Obama, and Harry Reid hadn’t caused, worsened, and, by choosing “stimulus” over tax cuts, extended the recession.

Speaking of recession, this CNNMoney.com article indicates that final GDP contraction for the second quarter will come in at -1.2% on Wednesday.

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RIP, William Safire.

The best sentence he ever wrote was about Hillary Clinton in January 1996:

Americans of all political persuasions are coming to the sad realization that our First Lady — a woman of undoubted talents who was a role model for many in her generation — is a congenital liar.

He never backed down (here, here) — because he was right.

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4 Comments

  1. Another thing I find annoying about the AP is their claim that mostly the lag in tax collections are causing the SS deficits, as if the recent fed spending spree and “borrowing” of the SS “Trust Fund” money had nothing to do with it. Whaddya think of that?

    Comment by zf — September 28, 2009 @ 10:22 am

  2. #1, there’s the “deficit” and there’s the “debt.” The rake-offs caused the debt. The “deficit” only refers to the current year, and is a combination of collections being lower and payouts being higher (due to early retirements).

    Comment by TBlumer — September 28, 2009 @ 11:39 am

  3. Oh, so a double-whammy, eh? I still say that all the money thrown down the drain this year in the name of “stimulus” could have done SS some good. Or at least not have added to the current harm.

    Comment by zf — September 28, 2009 @ 11:53 am

  4. Equally as important to consider is the moving of the fund exhaustion date from 2042 to 2037. Recently, the Trust Fund was revised to say, Social Security’s annual surpluses of tax income over expenditures are expected to fall sharply this year and to stay about constant in 2010 because of the economic recession, and to rise only briefly before declining and turning to cash flow deficits beginning in 2016 that grow as the baby boom generation retires. The deficits will be made up by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about three fourths of scheduled benefits through 2083.

    http://www.ssa.gov/OACT/TRSUM/index.html

    So in 2037, all seniors take a 25% pay cut because all the IOUs (so called reserves) will have been redeemed EVEN though SS tax receipts were paying around 75% of the needed retiree payouts. Now lets consider the math here which no one brought to the public’s attention. 2037 – 2009 = 28 years. $2.5 trillion divided by 28 years is $89.3 billion per year or $7.4 billion per month that the federal budget has to come up with and therefore NOT available to fund other programs. Now in the scheme of things an $89.3 billion line item in the federal budget is not that big, however when you consider up until recently the government was counting on a few hundred billion in excess SS receipts to cover their expenses, that’s the real double whammy. So all this spending has to now be extra borrowed.

    The following table shows the projected income and outgo, and the change in the balance of each trust fund (except for SMI) over the next 10 years.

    I direct your attention to the chart labeled: ESTIMATED OPERATIONS OF TRUST FUNDS

    Note that even with the negative cash flows we are currently experiencing they were projecting (OASI) a net increase of $147 billion. Notice the net positive cash flows for the following years. Does anyone think this is realistic?

    BTW -Don’t you think Orszag was counting on that surplus for Obama’s 10 year projection???? What does that say about the (un)reality of the budget as presented?

    Comment by dscott — September 28, 2009 @ 2:20 pm

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