May 15, 2011

AP Reporters Act As If Social Security’s Reckoning Is 25 years Away; It’s Not

The opening paragraph of Saturday morning’s Associated Press report by Stephen Ohlemacher and Ricardo Alonso-Zaldivar on the state of Social Security and Medicare and an additional sentence from the third paragraph give away the fact that theirs will not be a missive that should be taken seriously (bold is mine):

The bad economy is worsening the already-shaky finances of Medicare and Social Security, draining the trust funds supporting them faster than expected and intensifying the need for Congress to shore up the massive benefit programs, the government said Friday.

… The Social Security trust funds are projected to be drained in 2036, one year earlier than the last estimate.

This post will concentrate on Social Security. By referring to the idea that its trust fund is being “drained,” the pair are perpetuating the myth that the Social Security system has a stash of cash and investments just sitting there ready to be redeemed and distributed as benefits when needed. This of course is false. What follows are four fundamental truths about Social Security.

First, for years, Social Security collected more in taxes than it paid out in benefits. A normal “trust fund” or investment account would invest these excesses and allow them to grow, so that funds would be there to keep paying benefits in years when taxes are lower than benefits paid (like now, thanks to the retirements of baby boomers).

Second, that is unfortunately not what happened. Since the 1960s, when President Lyndon Baines Johnson decided to present a “unified” budget which included Social Security instead of treating it as a separate, dedicated program, trust fund surpluses were lent to the rest of the government for the rest of its operations. The amounts involved didn’t become significant until the late-1980s. From 1986-2007, the rest of the government wrote over $2.3 trillion in IOUs (i.e., it issued “special bonds” to Social Security, routinely emptying its coffers annually.

Third, the annual surpluses, which peaked in fiscal 2007 and 2008 at about $186 billion each, started to rapidly shrink in 2008 as the recession hit. Now, quoting from this year’s Trustees Report summary, “Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983.” That means tax collections aren’t covering benefits, meaning that the rest of the government is having to add to its already harrowing deficits to fund the annual shortfalls, which are forecast to continue and grow as far as the eye can see. Somehow, this isn’t considered news by the nation’s gatekeepers at the Associated Press.

Fourth, perhaps the AP pair’s excuse is that the rest of the government should have no problem paying back its IOUs when it has to over the next 25 years until 2036. Anyone even remotely aware of the $1 trillion-plus deficits run up during the past three years would have be asking: “Really?”

As I noted in a column I wrote several weeks ago:

… the nation’s “debt held by the public” — really amounts owed to individuals, corporations, and other countries — … is over $9.6 trillion, an amount that is roughly 65% of the nation’s annual output, or Gross Domestic Product (GDP).

… there is a consensus that a country reaches “a critical insolvency threshold” once its public debt hits 90% of GDP. At that point, lender cutoffs and interest-rate premiums become real possibilities.

How far are we from the 90% … threshold? Not far at all.

The Congressional Budget Office’s latest projections believe that unless there is serious reform, we’ll hit the 90% threshold in just 10 years, in 2021. Economist Larry Kotlikoff, however, noted in an April column that the budget deal made in late 2010, which extended the current tax system for another two years (the leftist press insists on referring to this as “extending the Bush tax cuts,” even though the current system is now in its ninth year mostly unchanged) and which lowered the employee portion of Social Security by two percentage points for calendar 2011, moved the 90% threshold date to 2017, just six years from now. If the economy doesn’t start picking up pretty soon, the government will cross the 90% threshold even sooner. Regardless for the exact crossover date, it’s obvious that the country has serious issues with Social Security right now because of its cash deficits and the rest of the government’s awful condition. Social Security’s deficits are hastening the day when either no one will want to lend to it or will start charging higher interest rates for doing so.

Only someone who is breathtakingly ignorant of Social Security’s and the federal government’s true fiscal situations or is engaged in deliberate deception would try to pretend that it will have no problem paying back its IOUs to the Social Security system for the next 25 years. Someone should ask Stephen Ohlemacher and Ricardo Alonso-Zaldivar a simple question: Which is it, guys?

Cross-posted at NewsBusters.org.

Quotes of the Day (051511, Morning)

Filed under: Quotes, Etc. of the Day — Tom @ 10:54 am

How is it that this White House can make a big hullabaloo over what it called a coup in Honduras in 2009, yet ignore last week’s news of death squads in Venezuela? Dictatorships and double standards, anyone?

– Opening of an Investors Business Daily editorial, May 13

Gosh, I thought only “right-wing repressive regimes” had death squads. It turns out that Hugo Chavez’s regime has been doing the death squad thing for almost a decade.

Unlike with Nicaragua and El Salvador, the press has almost never employed the term in connection with Hugo Chavez’s regime. It might as well be absolutely never, as seen in this Google News archive search, which informs searchers on ["death squads" Venezuela] (typed as indicated between brackets) that “Your search … did not match any news results.”

The IBD editorial elaborates:

London’s International Institute for Strategic Studies (IISS) released a 300-page analysis of documents from the computer of FARC terrorist Raul Reyes, blown away in a Colombian army raid in 2008.

The report laid out patterns of activity showing indisputably that Venezuela’s dictator, Hugo Chavez, is running a death-squad regime.

The IISS’s report summary indicates that FARC (the Revolutionary Armed Forces of Colombia) is Chavez’s designated death squad.

______________________________________________

One thing we’ll say about federal bailouts—if you pay attention, you can usually see them coming a mile away. It was true of Fannie Mae and General Motors, and it’s increasingly clear that the next candidate will be the U.S. Postal Service.

– Opening of a Wall Street Journal editorial, May 13

The Postal Service faces projected losses of $42 billion in the next four years.

The Journal eventually gets to a useful private sector vs. public sector comparison:

If this were a private business, the obvious response to these losses would be urgent cost-cutting to avoid insolvency. Instead, Postal Service management recently concluded negotiations offering the 205,000-member American Postal Workers Union a new four-and-a-half-year contract that will provide a 3.5% pay raise over three years, dole out automatic cost of living wage hikes after 2012, and expand no-layoff protections.

Postal officials say this is the best deal they could get and that, had they not agreed to it, an arbitrator would have been even more generous to the union. But given that 80% of postal costs are for wages and benefits, this contract is unhinged from all fiscal reality.

That is, unless the real play here is a bet on a taxpayer bailout.

The Postal Service should long ago have been privatized. Instead, its latest contract is clearly working to cement its status as a permanent government millstone, no matter what the cost.

______________________________________________

Good.

– Instapundit’s Glenn Reynolds, reacting to Mike Huckabee’s decision not to run for President.

Agree.

Huckabee, and in case you missed it Chris Christie (I did, as apparently did Christie cheerleader Ann Coulter), can’t see through the statism in Michelle Obama’s so-called “anti-obesity” campaign:

“I’m just simply saying that what Michelle Obama is proposing is not that the government tells you that you can’t eat dessert,” added Huckabee, who lost more than 100 pounds before his 2008 presidential campaign–though he recently confessed to gaining some of the weight back.

… Without singling out Obama’s detractors by name, Christie called their brickbats “unnecessary” on “Face the Nation.”

“I think it’s a really good goal to encourage kids to eat better,” he said. “I’ve struggled with my weight for 30 years and it’s a struggle. If a kid can avoid that in his adult years or her adult years, more power to them.”

Christie added that “I don’t want the government deciding what you can eat and what you can’t eat,” but said ” I think Mrs. Obama being out there encouraging people in a positive way to eat well and to exercise and to be healthy – I don’t have a problem with that.”

Sorry guys, but Michelle Obama does want to interject the government into “deciding what you can eat and what you can’t eat.” There is never a co-equal relationship between the parties when the government makes “suggestions.”

Update: Not that the food thing is the most important reason to reject Huckabee. There are many others, not the least of which is the arrogance inherent in this post-gubernatorial exercise in Arkansas in 2006. It betrayed a breathtaking sense of entitlement. To say that we’ve had enough of that in the past two years and four months is a huge understatement.

Positivity: Italian priest honored for sheltering Jews during WWII

Filed under: Positivity — Tom @ 7:00 am

From Rome:

May 11, 2011 / 01:24 pm

An Italian priest was posthumously awarded with a top honor for protecting a Jewish family from Nazi persecution in World War II.

Father Martino Michelone, who died in 1979, was declared “Righteous Among Nations” by Jewish leaders on May 8 for hiding four members of a family for nearly two years.

Fr. Machelone sheltered a young boy named Luciano Segre – as well as Segre’s father, mother and aunt – between 1943 and 1945 in the town of Moransengo in northwest Italy.

The “Righteous Among the Nations” recognition honors those who helped save Jews during the Holocaust.

According to Canadian paper The Edmonton Journal, the priest once went into hiding himself during the war to escape a patrol on the move.

Israel’s ambassador to Italy Ghideon Meir gave the medal for the award to Fr. Michelone’s surviving relatives at a ceremony Sunday in Moransengo. …

Go here for the rest of the story.