Social Security is broke and next year expenses will exceed revenues. Medicare is broke, too. From Simon Black at sovereignman.com:
Hot off the presses: The Board of Trustees for the Social Security and Medicare programs in the United States just released their annual report a few minutes ago.
And if you want to read all of its gory detail, check it out for yourself here.
Both of these programs are massively and terminally underfunded. And not by a little bit.
The Board of Trustees itself calculates Social Security’s long-term shortfall at a mind boggling $43+ TRILLION.
Simply put, the trust funds don’t have enough money to keep the programs going, at least under the current promises.
They admit right at the beginning of their report that, starting 2020, Social Security’s cost will exceed the money it earns in from interest and taxes.
That’s not some far out date decades into the future. That’s next year. And every year after that.
By 2034, just 15 years from now, Social Security’s primary trust fund will be fully depleted. And one of Medicare’s trust funds will run out of money in 2026.
In case you’re wondering, by the way, the Board of Trustees consists of the United States Secretary of the Treasury, Secretary of Labor, Secretary of Health and Human Services, etc.
This isn’t a bunch of conspiracy theorists. They’re some of the top executives in government.
So I’m not exaggerating in the slightest when I say this is a complete disaster. Millions of people depend on Social Security for their livelihood… people who have been promised for their entire working lives that the program would be solvent.
When the funds run out of money, countless people’s lives will be turned upside down.
You’d think this would be considered some kind of national emergency… that politicians would be doing everything they can to fix this.
But hardly a word is uttered about it. 15 years is far enough out that most of these people don’t expect to be in office anymore… so it will be someone else’s problem to deal with.
Not to mention, their options are extremely limited.
On one hand, they could try to actually generate more investment income for the program. To me this is an obvious choice.
Right now the Social Security trust funds have $2.9 trillion in assets. Yet they only earned a pitiful $83 billion in investment income last year, a return of roughly 2.8%.
That’s barely enough to keep up with inflation.
Seriously– is this the best these people can do? 2.8%? The United States is home to some of the most brilliant investment minds in history who could easily double that investment return.
This is what other countries do– Japan, Singapore, Norway, etc. Fund mangers for public pensions have the discretion to invest in assets all over the world in an effort to derive higher returns.
But that’s not going to happen in the Land of the Free.
It’s actually ILLEGAL for Social Security to invest in anything EXCEPT for US government debt. I’m serious. Social Security’s ONLY assets are Treasury Bonds, and under current federal law, that’s all it will ever be.
Thing is- the US government really needs that money. They’re already $22 trillion in debt and going deeper into debt each year.
They can’t afford to allow Social Security to invest in anything else other than US debt. They’re already over-reliant on Social Security as a lender, and allowing the trust funds to invest in anything else would be financial suicide.
So that option is off the table… leading to option #2: Cutting benefits.
And you can absolutely count on that happening. The Trustees themselves even say this– that after the fund is fully depleted in 2034, they will have to make deep cuts to the monthly benefit.
Again– tens of millions of people are depending on that money. Tens of millions more will be depending on it when they retire in the future.
Slashing benefits is going to have a massive impact on their lives.
The last option is to raise taxes. And just like cutting benefits, you can count on this happening.
Just wait for the Bolsheviks to rise to power. They have a limitless agenda and no qualms about jacking tax rates up to 70% or more.
I really don’t want to sound alarmist. But there are obvious realities here that any rational person should take very seriously.
At some point, most of us probably expect to retire. And retirement will take very careful consideration in full view of all the facts.
These are facts… and it’s important to start planning with these basic truths in mind: the longer you have until retirement, the less likely that you’ll ever see a penny in benefits.