Category Archives: Pensions

The Social Security Fiscal Black Hole Has Arrived, by Andrew Moran

The fiscal doomsday so many of us have warned about for so long is at our doorstep. From Andrew Moran at libertynation.com:

The fiscal black hole surrounding Social Security and Medicare had been talked about long before mankind got its first glimpse of the interstellar phenomenon. Like the particles and electromagnetic radiation absorbed in the galactic monster’s path, the American people face an event horizon, a point of no return. Unless drastic actions are taken by good folks in the swamp, the only hope for the next generation of retirees is that scientists discover a wormhole connecting this reality with an alternative universe that practices prudence and responsibility.

Social Insecurity And Medican’t

According to the Social Security Administration’s trustee report, the cost of maintaining this entitlement program will exceed the revenue it generates next year. The last time this happened was in 1982.

Last year, SS received $1.003 trillion in income, including $885 billion from the payroll tax, $83 billion in interest, and $35 billion from taxing benefits. At the same time, it spent about $1 trillion: $988.6 billion on benefits, $6.7 billion on administration, and $4.9 billion on retirement expenses.

With the 1.8% cost-of-living adjustment (COLA) later this year, SS expenses will exceed the money it receives. Based on current trends, SS will exhaust its reserves by 2035 and officially be insolvent. The other disappointing takeaway is that the projected bankruptcy date is one year sooner than previous estimates.

Medicare also faces a gaping budget hole. The overseers of this government benefit say it is slated for bankruptcy by 2026. This would result in hospitals, nursing homes, and other medical care providers receiving only a portion of their payments.

It isn’t all bad news. Social Security’s disability program is expected to remain in the black for an extra 20 years to 2052.

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Unlike Real Insurance, Social Security “Insurance” Creates Greater Risk for the Future, by Gary Galles

Social Security is not insurance. From Gary Galles at mises.org:

Every time the Social Security trustees issue their annual report, some people notice that the system’s huge unfunded liabilities (currently, a $42.1 trillion cumulative shortfall) are inherently unfair to future Americans. That threatens its status as the “third rail” of politics, which electrocutes anyone who tries to touch it.

So Social Security’s army of defenders go on the attack. And one of their greatest weapons is that the program has been promoted as insurance program ever since it started and taking away insurance sounds like a bad idea.

In a sense, Social Security does act as a form of mandatory old age insurance for participants. However, rather than paying off with earnings from investments, as with private insurance, its taxes provide only promised future government benefits (though the Supreme Court long ago ruled in favor of the government’s claim that it did not need to provide the benefits promised).

However, for Social Security to really be insurance, a group’s “premiums” would have to finance the benefits they receive. But that has not even remotely been true of Social Security. Older generations got far more in benefits than they paid. They may believe they deserve a massively subsidized deal (especially when it is falsely presented as if early recipients actually paid all the costs of their benefits), but that deal is dramatically unfair to younger generations forced to pick up the multi-trillion dollar bill to make good on program promises.

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Chicago’s pension funds looking more like a collapsing Ponzi scheme, by Ted Dabrowski and John Klingner

Soon Chicago’s pensions funds will have more beneficiaries than working contributors, which will be their absolute death knell. From Ted Dabrowski and John Klingner at wirepoints.org:

You can’t help but call it a Ponzi scheme. Not if you look at Chicago’s collapsing demographics and consider how they’re threatening the solvency of the city’s government-run pensions. Chicago households are on the hook for more than $145 billion in state and local retirement debts and there are fewer and fewer people left to pay them.

Consider first Chicago’s falling population. The city’s metropolitan population has fallen four years in a row. It’s the only top-ten city to shrink like that. In all, the Chicago MSA lost 66,000 people between 2014 and 2018.

A falling population means the city’s massive pension debts are falling on a smaller base of taxpayers. That’s bad news enough.

But another key demographic – the ratio of active government workers to pensioners – is even more concerning.

That ratio, which equaled 1.4 actives for every pensioner in 2005, has collapsed to nearly 1.05. And if the trend continues, in just a year or two there will be more pensioners draining money from the pension funds than active workers putting money in.

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Just released: Social Security earned a pitiful 2.8% on your money last year, by Simon Black

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.

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Ominous Tendings in the Nervous Here and Now, by James Howard Kunstler

The answer to the issues confronting the US government may be secession by its sub-units. From James Howard Kunstler at kunstler.com:

Unfortunately for the nation, the RussiaGate fiasco is only half over. There is just too much documented official turpitude on the public record for the authorities to answer for and the institutional damage runs too deep. Act One, the Mueller investigation, was a 22-month circle-jerk of prosecutorial misconduct and media malfeasance. Act Two will be the circular firing squad of former officials assassinating each other’s character to desperately avoid prosecution.

In the meantime, there is the nation’s business which has been hopelessly burdened by an hallucinatory overlay of Wokester idiocy emanating from the campuses, so that even in the absence of the Mueller distraction every organized endeavor in this land from-sea-to-shining-sea is paralyzed by race-and-gender hustles. Next up: a national debate over reparations for slavery in the never-ending quest to monetize moral posturing. Won’t that be a mighty string of knots to untangle? Who qualifies, exactly? What about the indigenous people whose lands were overrun? And what about the Japanese interned in 1941? And what about women prevented from earning salaries all those lost decades of housewifery? And what about the brown people from many lands whose families did not come here until slavery was a long time gone? Do Silicon Valley engineers from India, and thoracic surgeons from the Philippines have to pay up for the sins of Whitey?

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Illinois’ demographic collapse: fewer immigrants, fewer babies and fleeing residents, by Ted Dabrowski and John Klingner

The people of Illinois are heading towards the exits. Understandable, given the state’s fiscal problems, insolvent pensions funds, and what’s sure to be continuously rising taxes. From Ted Dabrowski and John Klingner at wirepoints.org:

Since the turn of the century, Illinois has been in the midst of a perfect demographic storm. Residents are leaving the state in record numbers. The number of Americans moving into Illinois has hit new lows. Net foreign immigration has fallen by half. And the number of births has dropped by more than 20 percent.

These demographic forces have all combined into a single troubling fact: Illinois is shrinking. The state has lost population five years in a row. In 2018 alone, the state lost 45,000 people, the second-biggest population drop in the country.

The state’s growing domestic out-migration has been especially problematic. More Illinoisans are leaving the state at the same time that fewer Americans from other states are moving in.

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The “Fertility Crisis” Is a Government-Caused Crisis, by Ryan McMaken

The “fertility crisis” is only a crisis if it is the involuntary duty of the young to fund the benefits the old have granted themselves. From Ryan McMaken at mises.org:

anuary’s report on fertility from the CDC set off a new wave of speculation in the media about the alleged “fertility crisis.”

We continue to see headlines like Fortune magazine’s article “Americans Aren’t Making Enough Babies, Says CDC ” and we hear from experts in this Marketplace interview that replacement-level fertility, “is needed to sustain high living standards and a high quality of life.”

This latter sentiment takes us to the heart of the matter: when we hear about the fertility crisis, it is usually packaged as an economic crisis. That is, we’re told that standards of living will collapse if people don’t start to have more babies.

This argument, of course, should be noted as being distinct from other arguments— namely sociological, cultural, political, and religious arguments — in favor of higher fertility. Some of those are compelling.

I remain unconvinced, however, that a stagnant or declining population necessarily presents an economicproblem or a threat to the standard of living. The problems we were likely to encounter result from government programs and government spending — not from demography or markets themselves.

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