By official measures Social Security is going broke, and those measures incorporate overly optimistic assumptions. From Simon Black at sovereignman.com:
A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.
Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…
… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.
But that didn’t happen.
The story was hardly picked up.
It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.
That’s not hyperbole either– the numbers are very clear.
The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.
In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.
That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.
Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008.
So this is a pretty big deal.
More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.
In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future.
What will interest rates be in the future?
What will the population growth rate be?
How high (or low) will inflation be?
These variables can dramatically impact the outcome for Social Security.