Another Look at Social Security

I like this Post of Cactus at Angry Bear, which highlights the varied use of Sleight of Hand in Government Accounting practice. Readers need use a degree of Kentucky Windage whenever they read the Liberal and Conservative versions of Government Spending. An intense review of the U.S. Today article notes my immediate impressions.

1) It states that the loss of $11,434 Dollars per Household is likely true, but that Payment of the Expense will occur over a 40-year Period–establishing an Average Household Payment of some $285 per year. Now, this Payment is front-end loaded, and I will use a Factor of 3 though any Economist will tell you would stand far closer to 2, so the yearly Household Payment would be somewhere around $858.

2) Aggregation of liabilities of $59.1 trillion seems an immense Debt, but amortized over a 40 year Period, $59.1/40, equal $1.4775 trillion per year–a horrid Debt load unadjusted. This, though, becomes a back-loaded Payment schedule, only reaching highest Payment levels some halfway in the 40-year Payments Interval. The health of the Retirees at Age of Retirement the Best which can be found in the Interval, and deteriorates slowly to the mid-way Point. I will utilize an adjustment of 0.6 until the Halfway point, though Economists would probably say I should use 0.8 for the First Decade, 0.9 for the Second Decade, 2.5 for the Third Decade, and 0.7 for the Last Decade. Here We have my Estimate of $886.5 billion for the first Twenty years in yearly Payments. Economists would say $1.182 trillion for the First Decade, $1.32975 trillion for the Second Decade, $3.39825 trillion for the Third Decade, and $1.03425 trillion for the Last Decade. Terrible Bill is it not!

3) Here is the fundament Error in the analysis. First, the above Math is nonsense. There is no liability as long as Social Security receipts exceed Payments, which I now estimate will contain the Expenses until 2014. Second, the greatest majority of liabilities have already been assumed and paid for by the Baby Boomers; the real area of contention here resides in whether Our Successors will repay the Money devoted for this purpose to Us. Baby Boomers paid for the real Cost of Our Parents and Grandparents, and for Ourselves; and allowed repetitive Administrations to spend Our accrued Savings for our Old Age. Current Politicians and Taxpayers would rather not repay this Sum. Third, Social Security Payments will stabilize without yearly increases sometime in the late 20Teens. This being do to the reduction of Elderly population, and stay there due to a overall declining population.

Many Elements could help Us to reach that Point of stabilized Liability levels. We could actually do something about the Health Care industry to cut Costs; a factor which possibly would reduce Medicare Costs by 50%. We could raise the Social Security contribution by 1.5%, split evenly between Employees and Employers, and raise total Contributions by about 8%. We might ask current Administrations to raise overall Taxes sufficiently to redeem the Notes held by the Social Security over the next 30 years–something called within the Lifetime of the Baby Boomers. Finally, We should not worry, as cancelling some of Our wars could leave sufficient revenues to do all of the above things. lgl