[Vision2020] Social Security Time Lime

Donovan Arnold donovanarnold at hotmail.com
Wed Feb 9 00:11:17 PST 2005 

Earth to Pat Kraut . . . Come in Pat Kraut, . . . Can you hear us Pat Kraut? 
. .  Come in! COME IN! I think we are losing you!--- Pat can you hear us? 
Pat!?! Patttttttttttttttt!!!!

Oh no!-- I think we just lost Pat to another universe. We can only hope, we 
can---(tears running down cheeks) . . . only pray,  she is better off on her 
own little planet (sigh).

Good Day,

Someone looking forward to investing her SS check in my private investment 
account.



>From: "Pat Kraut" <pkraut at moscow.com>
>To: "vision2020" <vision2020 at moscow.com>
>Subject: Re: [Vision2020] Social Security Time Lime
>Date: Tue, 8 Feb 2005 23:13:53 -0800
>
>So, all those dems who were crying crisis in Clintons day were wrong?? I
>believe they are only afraid that the Repubs will win the save the day. 
>Even
>if it were for the good of the country the dems won't care...just so Bush
>doesn't look good in any form. Social Security is in trouble and it doesn't
>take a genius to figure it out. Economists have complained about it for 
>many
>years but to politicians it has been the 'third rail'. Bush has a lot of
>guts and is in a good position to try to fix it. A little honesty on the
>part of dems would be nice for a change.
>
>----- Original Message -----
>From: "Donovan Arnold" <donovanarnold at hotmail.com>
>To: <dave at davebudge.com>; <vision2020 at moscow.com>
>Sent: Tuesday, February 08, 2005 10:06 PM
>Subject: RE: [Vision2020] Social Security Time Lime
>
>
>"The leftist opponents of Social Security reform want you to believe 
>there's
>no "crisis," and that whatever problems the system may have won't
>materialize for more than 35 years."--First Sentence of Donald Luskin in 
>his
>article in National Review on 01/11/05.
>
>This is incorrect. Thus, all his arguments after it are strawman. I think
>most people on the left think that SS is in crisis already and has been
>since the Reagan and Bush(s) administrations racked up a $ 8 trillion
>deficit requiring 20% of your Federal Tax dollars go to just pay the
>interest on the debt instead of something useful, like education or a 
>bigger
>tax cut.
>
>Leftist opponents don't want the Bush plan because it reduces SS payments
>and steals from the elderly and disabled now and gives it to Wall Street 
>fat
>cats that make more in a day then most Americans make in a lifetime. Well,
>geniuses, what do we do when 20 million people are ready to retire in 2025
>and we have a down turn in the stock market? Tell them to wait another ten
>years to retire when it is on the up swing?
>
>Plus, there is no way of even getting the money into the stock market in 
>the
>first place. The money goes directly (99% of it) from the paychecks of
>working Americans into the current recipients of SS. So if money is 
>invested
>it in the stock market, how is it going to get to the SS checks? The same
>dollar cannot be given twice to both the stock market and the SS recipient
>at the same time? The only way to do this would be to double the SS Tax (oh
>God not more taxes!), or cut the checks of SS recipients.
>
>Why do people on the "right" refuse to address this problem?  It is not 
>just
>a matter of politics, it is also a matter of feasibility and practicality.
>You might as well pass a law making the day 25 hours, cuz you know we all
>could use an extra hour in the day to sleep, and that would be a popular
>idea too, just like giving people free money to put in the stock market,
>which is what this idea is really all about.
>
>Good Day,
>
>Donovan J Arnold
>
> >From: "David M. Budge" <dave at davebudge.com>
> >To: vision2020 at moscow.com
> >Subject: [Vision2020] Social Security Time Lime
> >Date: Tue, 08 Feb 2005 11:07:51 +0000
> >
> >Donald Luskin
> >
> >Natinal Review Online
> >January 11, 2005, 8:42 a.m.
> >The C-Word: Say It
> >The Social Security crisis begins in just 5 years.
> >
> >The leftist opponents of Social Security reform want you to believe 
>there's
> >no "crisis," and that whatever problems the system may have won't
> >materialize for more than 35 years. Funny how such equanimity and 
>patience
> >seem to elude them when the subject is global warming.
> >
> >It's even funnier when you realize the objective fact is this: The Social
> >Security crisis actually starts a lot sooner than advocates of reform are
> >saying. The Social Security crisis begins to materialize in just 5 years.
> >
> >Here are the facts. You decide whether they amount to a "crisis."
> >
> >Right now the Social Security program collects more in taxes -- both FICA
> >taxes from current workers and income taxes on benefits from current
> >retirees -- than it pays out in benefits to retirees. That surplus goes
> >into Social Security trust funds, where it is used to buy Treasury bonds
> >that are held as an investment toward the payment of future benefits. The
> >purchase by the trust funds of those Treasury bonds is no different than 
>if
> >you or I bought them. The Treasury issues the bonds in exchange for cash,
> >which is used to finance the current expenditures of the federal
> >government.
> >
> >According to the latest annual report
> ><http://www.ssa.gov/OACT/TR/TR04/IV_SRest.html#wp207413> of the Trustees 
>of
> >the Social Security Trust Funds, the surplus in 2004 was $64.4 billion
> >dollars. It will be higher this year -- at $87.7 billion. The surplus 
>will
> >keep getting bigger and bigger through 2008, when it will reach $108
> >billion. Each year, that's more and more money that the federal 
>government
> >won't have to raise from the world capital markets. It's a captive 
>audience
> >of bond buyers -- and a growing one.
> >
> >But in 2009, just 5 years from now, the surplus will start to shrink. In
> >2009 it will fall to $103.7 billion, and in that year the federal
> >government will have to go to the capital markets to raise $4.3 billion
> >that it didn't have to raise the year before. That's not a lot of money 
>in
> >the grand governmental scheme of things. But it's an important turning
> >point for Social Security -- it's the year the crisis begins.
> >
> >Every year after that the crisis will deepen. Each year the government 
>will
> >get several billion dollars less from the Social Security surplus than it
> >did the year before, and it will have to make up that difference by 
>tapping
> >the capital markets, or by raising taxes or trimming spending.
> >
> >Most observers point to 2018 as the earliest year for the Social Security
> >crisis to begin. But that's only the year the crisis will pass an
> >especially attention-grabbing milestone. That's the year, according to 
>the
> >trustees <http://www.ssa.gov/OACT/TR/TR04/II_project.html#wp105724>, that
> >the Social Security surplus will disappear entirely and become a deficit.
> >In other words, for the first time tax revenues will be less than the
> >benefits paid out that year. From the standpoint of public finance, 
>though,
> >it will just be another painful year in which the federal government had 
>to
> >raise more money from capital markets -- or raise taxes more or trim more
> >spending -- than it did the year before. By 2018, the Treasury will have
> >already received $359 billion less cash each year, cumulatively, than it
> >received in the peak year of 2008.
> >
> >Starting in 2018, as soon as Social Security tax revenues are 
>insufficient
> >to cover benefit payments, the gap will be made up as the trust funds
> >redeem the Treasury bills they have been hoarding. Not only will the 
>Social
> >Security system no longer give cash to the federal government in exchange
> >for Treasury bonds. Starting in 2018 the situation will be just the
> >opposite: The Social Security system will give back the Treasury bonds 
>held
> >in the trust funds -- and the interest on those bonds, which is held in 
>the
> >form of more bonds -- and demand cash for them.
> >
> >According to the Social Security actuary
> ><http://www.ssa.gov/OACT/TR/TR04/lr6F9-2.html>, in 2018 the trust funds
> >will demand $23.4 billion in cash from the federal government. The trust
> >funds will redeem the last of their bonds in 2041 -- demanding from the
> >government $1.003 trillion that year. From 2018 through 2041, the trust
> >funds will redeem bonds worth, cumulatively, $11.9 trillion. Once again,
> >just to be perfectly clear, let me emphasize that the federal government
> >will have to come up with this $11.9 trillion somehow -- either by 
>tapping
> >the capital markets, raising taxes, or trimming spending.
> >
> >This should illuminate the debate on whether the trust funds are "real" 
>or
> >not. They are perfectly "real" in the sense that the Treasury bonds they
> >hold are valid legal claims on the government. But they are not "real" in
> >the sense that they, as a June, 2004, Congressional Budget Office report
> ><http://www.cbo.gov/showdoc.cfm?index=5530&sequence=1> put it, "contain 
>no
> >financial resources" in and of themselves. For their value to be 
>realized,
> >the Treasury bills they hold must be redeemed for cash by the government 
>--
> >and that cash has to come from somewhere.
> >
> >From the standpoint of public finance, the crisis ends in 2042 when the
> >trust funds' hoard of bonds is completely exhausted. Under current law,
> >Social Security benefits will then be trimmed such that they will be
> >payable out of current tax revenues. According to the trustees
> ><http://www.ssa.gov/OACT/TR/TR04/II_project.html#wp105057>, benefits will
> >have to be cut 27 percent from their present scheduled levels, with the
> >situation only getting worse as time goes by. So, yes, the drain on the
> >Treasury will end in 2042 -- but at that point the crisis will simply be
> >inherited by retirees in the form of lower benefits.
> >
> >Those are all simple facts. Yes, they are estimates. They might be off a
> >little bit one way or the other. But the general pattern is clear. Social
> >Security will start to become a drag on the budget of the federal
> >government in 2009. The state of affairs will get progressively worse
> >through 2042, by which time Social Security will have consumed $11.9
> >trillion from the federal budget. And after that, Social Security 
>benefits
> >will be automatically cut. If that isn't a "crisis," I don't know what 
>is.
> >
> >The opponents of reform claim that the Social Security crisis is, in 
>fact,
> >a crisis of general public finance -- not one of the Social Security 
>system
> >itself. They see Social Security as an entity separate from the federal
> >government, and maintain that its own dedicated stream of tax revenues 
>and
> >trust-fund assets will keep it going for more than a third of a century.
> >
> >That's a fair point of view, as far as it goes. At the same time, it is
> >dangerously myopic to treat Social Security in isolation from the overall
> >finances of government. That would be like finding nothing troubling 
>about
> >a factory that dumps pollutants into a river. That may be no problem for
> >the factory itself, but it can be a major problem for everyone downriver.
> >And when it comes to Social Security, we're all downriver.
> >
> >But the case of Social Security is even worse than that. By 2042 the
> >pollution will back up into the factory itself. Unless the opponents of
> >reform don't think it's a problem to automatically cut benefits by 27
> >percent all at once in 2042, then Social Security itself has a "crisis" 
>--
> >maybe not right now, but surely by then.
> >
> >Don't be too hard on the advocates of reform when they throw the C-word
> >around. It's fully justified. In fact, I'd even dare to use that most
> >dangerous of all political words to describe the crisis. Yes, the I-word:
> >imminent.
> >
> >-- Donald Luskin is chief investment officer of Trend Macrolytics LLC
> ><http://www.trendmacro.com/default2.asp>, an independent economics and
> >investment-research firm. He welcomes your comments at don at trendmacro.com
> ><mailto:%20don at trendmacro.com>.
> >
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>  serving the communities of the Palouse since 1994.
>                http://www.fsr.net
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