Social Security Is Not Broke: Seven And A Half Things To Know

U.S. Treasury Secretary Timothy Geithner, Human Services Secretary Secretary Kathleen Sebelius and trustee Charles Blahous (R) hold a briefing to release Social Security and Medicare trustees reports at the Treasury Department April 23, 2012 in Washington, DC.

There's good reason to doubt that the Trojan Horse entered Troy on this very date in 1184 BC, but there's no doubt you need to know seven and one half things each day. Here they are:

Thing One: Apocalypse Later: You may read this daily tour through the world of business news looking for reasons to be terrified and/or outraged. And I usually try to deliver. But not today. Today it's all sunshine and light because I've got good news, brothers and sisters.

The good news is that the Social Security trust fund is going to have a surplus until the year 2033, give or take, at which point there will still be enough money to pay 75 percent of promised benefits, according to the latest trustees' report, an annual opportunity for the financial press and haters of our major social benefit programs to do the Panic Dance. Meanwhile, Medicare's trust fund is going to have a surplus until the year 2024, more or less, at which point there will still be enough money to pay out 87 percent of benefits.

You may have seen this news reported with a slightly darker take somewhere else -- oh noes, Social Security and Medicare are going broke again! You might also have heard that this horror is happening because people are getting old. But that's what people do: Get old. The point of having these programs is so we don't all get turned into Soylent Green and fed to the youngs immediately upon turning 65.

No, these programs might eventually run out of their gigantic surpluses largely because the economy has been terrible for the past decade or so, and wage growth has stagnated. There's no doubt we need to rein in medical costs, which would help address Medicare's problems, but there's an extraordinarily fair and simple solution to Social Security's future mild discomfort: Raise the payroll-tax cap, which has drifted from shielding 10 percent of the nation's income from taxation to 18 percent, according to the Center for Economic and Policy Research. One tweak to that, and this "crisis" could be averted.

Thing Two: Insurers Behaving Badly: A few years back the nation's health insurers settled complaints that they had underpaid patients for out-of-network medical bills and spent $95 million to build a database of medical fees that they could use to boost benefit payments dramatically. Fortunately for the insurance companies, there was much more than $95 million to be made by simply building that database, ignoring it, and using a Medicare database that kept patient costs high and insurance company profits higher, which is exactly what the insurance companies have done, The New York Times reports. In other insurer-behaving-badly news, MetLife agreed to pay $40 million to settle complaints that it overlooked the deaths of some of its life-insurance policyholders, keeping money that belonged to beneficiaries.

Thing Three: Belt-Tightening Backlash: We're going on three years of European debt crisis, and there is still no agreement in Europe about how to end it. The Dutch government collapsed on Monday after a revolt against its belt-tightening approach to cutting debt, a sign that austerity's chief propagandist, German Chancellor Angela Merkel, is increasingly isolated, with her pal Nicolas Sarkozy of France likely on his way out. Apparently the bond market is socialist, because borrowing costs in both the Netherlands and France remain placidly low. Greece, meanwhile, after enduring endless lectures from the Dutch government about its own budget problems, is inventing a Greek word for Schadenfreude.

Thing Four: Facebook Needs Lift: On the eve of selling shares to the public, Facebook released its latest quarterly results, showing a slowdown in revenue and profit. Uh-oh! Maybe there's a limit to growth after hitting 900 million users, or roughly half of all the estimated Internet users on the planet? Meanwhile, Facebook bought a bunch of patents from Microsoft for $550 million, some of the same patents Huffington Post parent company AOL sold to Microsoft just a couple of weeks ago.

Thing Five: James And The Giant Pickle: Another day, another inquiry for the Murdoch family. Today James Murdoch heads to the Royal Courts of Justice in London to talk about the News Corp. phone-hacking scandal, Reuters writes: "James Murdoch, 39, will face questions about meetings with ministers while they considered letting the Murdochs take full control of broadcaster BSkyB and also about a Christmas drinks party he attended with Prime Minister David Cameron, who may also soon face awkward questions from an inquiry he himself set up in response to public outrage at tabloid misbehaviour."

Thing Six: Deal Makers, Meet Door: With deals in scarce supply these days, Wall Street has little need for a bunch of deal makers hanging around, reports the Wall Street Journal: "Amid new regulation, lower profits and a dreary market for mergers and acquisitions, several banks are planning to trim investment-banking units that were built for an era of deals aplenty."

Thing Seven: Chinese Banks: China's banks are backed by the Chinese government, which is flush with cash, and yet the banks are starved for capital, writes The New York Times: "[T]he worry is that, over time, the huge infrastructure, real estate and other projects that were the products of China’s stimulus-driven lending binge will fail to turn a profit. Borrowers, including local governments, may then fall behind on their interest payments and could default on their loans."

Thing Seven And One Half: Gold In Them Thar Asteroids: Today a startup company ambitiously calling itself Planetary Resources will announce plans to send unmanned probes to near-earth asteroids, with the hope of eventually (meaning some decades from now) mining minerals and water there. The startup has the backing of Google's Larry Page and Eric Schmidt, among other tech-industry bigwigs.

Calendar Du Jour:

Economic Data:

9:00 a.m. ET: Case-Shiller home-price index for February
10:00 a.m.: Conference Board consumer confidence index for April
10:00 a.m.: New home sales for March
10:00 a.m.: FHFA Housing Price Index for February

Corporate Earnings:

After market close: Apple

Before market open: Coach

Before market open: 3M

Before market open: AT&T

Before market open: United States Steel

Heard On The Tweets:

@ObsoleteDogma: Hugo Chavez might have died & North Korea might have started a war. Or, as we like to call it, Monday.

@EddyElfenbein: "Facebook to Buy AOL Patents from Microsoft" Zuck will finally learn how they did that "you've got mail" voice thingy

@LaMonicaBuzz: When you wish upon a Starbucks. $SBUX to open stores at all $DIS U.S. theme parks. Thought of overly caffeinated Donald Duck is terrifying.

@TheStalwart: It's rough RT @ReformedBroker: LOL, @TheStalwart savaged in the comments section of his "Social Security is Fine" post http://t.co/7RXLd2IX

@ReformedBroker: New Facebook S-1 indicates the company has more "users" than there are human beings on earth, love Web Math

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

Comments

[Pedestrian101]

05:23 PM on 04/25/2012

Don't drink the kool-aid..... social security is solvent and we need a raise....

[StopMakingSense2]

02:00 PM on 04/25/2012

So it's not like rubepublican ideology? Whew that's a relief.

[twocansam]

11:29 AM on 04/25/2012

There is a No.#8 -and because of it's disconcerting nature no one has really addressed it, and that is that NO ONE lives forever. One must remember that this "75 million Baby Boomer" generation, the one that is supposed to break the bank is a "finite" number. People born before 1946 and after 1964 are not part of that Post-War Boomer number. My point is that ever since 1/1/46, hundreds if not thousands of people in the Boomer group have been dying yearly from accidents of all kinds, disease and war. Viet Nam claimed 60,000 souls alone. Now I'm not claiming that Life's Perils will be visited upon the Boomer set in a unusually larger ratio than Non-Boomers other than due to the sheer size of the group; but it will be a mitigating factor.Now as for people living longer in retirement and longer in general; with the afore mentioned "mitigating factors" that continue to this day this Boomer number will never "increase" but will only decrease daily. With that said; even this will leave an abnormally large group of retirees. However, after the peak number is hit, dropping from the peak number back to "historical normals" will happen twice as fast or faster than it took to reach the peak. So even if noting is done to make changes to S.S or to increase revenues; after the peak is hit we will begin to see surpluses in short order.

[JoeMomma]

10:08 AM on 04/25/2012

The problem with SS is that all the money that was collected to date has been spent by the government. It is all gone. So we either print money, borrow it, or raise taxes.

[No Dogma Freedom]

06:11 PM on 04/25/2012

You can stop by the way too, Big to fail USG insurance and Subsidies and more!

The subsidy to the US government from the payroll tax is larger than the $2 trillion in excess revenue collections over payouts.

The subsidy of the Social Security payroll tax to the government also includes the fact that $2.8 trillion of US government debt obligations are not in the market. If the national debt held by the public were $2.8 trillion larger, so would be the debt service costs and most likely also the interest rate.

The money left over for war would be even smaller. More would have to be borrowed or printed.
The difference between the $2 trillion in excess Social Security revenues and the $2.8 trillion figure is the $0.8 trillion that is the accumulated interest over the years on the mounting $2 trillion in debt, if the Treasury had had to issue bonds, instead of non-marketable IOUs, to the Social Security Trust Fund. When the budget is in deficit, the Treasury pays interest by issuing new bonds in the amount of the interest due. In other words, the interest on the debt adds to the debt outstanding.

[jdstelecom]

09:38 AM on 04/25/2012

To borrow from our 42nd President it depends on what the meaning of broke is. If by broke you mean SS won’t be able to pay benefits in say 2040, then no it’s probably not broke. If you mean, is there enough assets in the trust fund to pay current obligations then its not going broke, it is broke.

The reason for the confusion is how SS has been sold. It has been marketed as a forced retirement system where as legally its just another tax and spend policy. Congress has the legal right to stop or change benefit programs tomorrow (they won’t for political reasons) and current workers would have no recourse to lay claim to the money they’ve paid into the system i.e.you have no property rights in SS.

Because it is just another tax and spend program it is no more going broke than the defense budget is going broke. Congress can pay whatever benefits they want provided they politically can tax or borrow the money.

However, if you look at it as a forced retirement system then it certainly is broke. SS currently spends about $731 billion per year. The trust fund has a little over $2 trillion in it. Thus if you stopped collecting taxes from current workers it could meet its obligations for about 3 years. Since the average life expectancy of the current retirees is more than 3 years SS doesn’t have enough assets to cover its liabilities i.e. its currently insolvent.

[No-name-plz]

09:31 AM on 04/25/2012

" 2033.... at which point there will still be enough money to pay 75 percent of promised benefits" .

That's 20 years from now. If you are 30-50 years old, you can expect to pay into this "thriving" system only to be told at 65 that we need to reduce the amount we promised and you paid for.

[GOPisrightforareason]

08:40 AM on 04/25/2012

Obama is bankrupting the whole system...kudos to him

[No Dogma Freedom]

06:13 PM on 04/25/2012

BUSH cost us 4 trillion for the Illegal wars

Bush Sacked the land by allowing the Wall Street fandango

Bush Regime Preaches Democracy, Proposes Tyranny
Share

Americans had best rethink the "war on terror" while they still have the liberty to do so. For all of President Bush's blah-blah talk about bringing democracy to the world, the Bush administration has proved that it is no friend of liberty at home.

The Bush administration has violated constitutional principles, U.S. law and the Geneva Conventions as no previous administration has done. Here is a short list of the Bush administration's crimes:

— Spying without court warrants on Americans in violation of both the U.S. Constitution and the FISA statute.

— The denial of habeas corpus, attorney-client privilege, due process and Geneva Conventions protections to those, American or foreign, designated without evidence as terrorists or enemy combatants.

— The justification and use of torture to coerce confessions and the kidnapping of foreign nationals who are sent to be tortured in foreign prisons.

— The initiation of military aggression against states based on intentional deception by the Bush administration of the U.S. public and the United Nations, and the intentional fabrication of "evidence" to justify unprovoked aggression against sovereign states, which is a war crime under the Nuremberg standard established by the United States.

[GOPisrightforareason]

06:36 PM on 04/25/2012

obama has racked up more debt than ALL previous presidents COMBINED

[Tahut]

07:06 AM on 04/25/2012

Back in the early 80's when "you-know-who" was in charge, the social security trust fund was set up and employee contributions were increased but not employer.

The easiest way to shore up social security funding would be to require employers to pay the same rate as does their employees.

Fat chance we'll get Congress to "tax-the-hell" out of business to support retirees.

[SteveFromEuless]

05:14 PM on 04/25/2012

And the 80's also saw a solid dollar amount as a "cap on contributions" of $100,100, which has not been changed or adjusted for inflation. Removing the cap entirely, and placing a top limit on benefits for those with incomes over $1 million could go a long way towards solving the problem.

(PS - Putting a COLA on that $1 million in benefits would be a good idea while we're at it.)

[jistinnkees]

07:02 AM on 04/25/2012

our government should stop using social security, that we pay for as a fund. http://dissidentvoice.org/2009/11/abuse-of-the-social-security-trust-fund-began-in-the-1980s/

[thinker43]

05:03 AM on 04/25/2012

It's time to change the "trustees" for Social Security to people who aren't politicians! There's too great a chance those "trustees" will see only what they want to see, depending on their politics, not financial realities.

Why can't there be a randomly chosen group of CPAs from across the country be trustees?
Have anyone interested send in their name and years of experience and pull the names out of a barrel? We'd be a lot better off letting them monitor the fund than we are letting politicians do it!

That's why I never believe what is said about either Social Security or Medicare...it's being said by politicians.

[saldog]

02:49 AM on 04/25/2012

Simple way to fix healthcare. Tax stuff that is bad for you. They did it with cigarettes and they can do it for cheeseburgers, hot dogs, basically most of the things that we fat Americans eat. At least there is a causal link. It is regressive so libs will hate it and big corporations and anti-tax groups (GOP) will also hate it. Something for everybody not to like. That is the only way out of this healthcare debacle that is unfolding. If you eat a triple cheeseburger, you pay a tax. If you do not eat a triple cheesburger, yo are less likely to cost us money from heart disease, COPD, stroke, cardiac arrest, etc... This is not that difficult.

[thinker43]

05:10 AM on 04/25/2012

Won't work! And why is it that soem people think "taxing" is the best way to fix things?

The simplest way to fix healthcare to is allow everyone access to Medicare.

Medicare is a system that works, and contrary to what a lot of people think, it's not "free" to those who use it. Premiums are paid monthly, generally deducted from Social Security payments. It would be fairly simple to change the current Medicare deduction to a premium deduction. If everyone is paying into the system, just think how much money Medicare would have, and how much better healthcare in this country would be.

Preventative care alone would cut healthcare costs down by a huge amount of money. Get rid of Medicare Part D (the biggest financial rape of the elderly in the history of this country), make the cost of prescription medications part of the existing program,, and healthcare costs go way down.

Unlike private insurers, Medicare doesn't have to make a profit. Administrative costs are about 3% of the annual operating cost. That means virtually all money paid into the fund actually goes for healthcare.

[K August]

05:14 AM on 04/25/2012

How about we ask that food companies STOP putting saturated fat, high fructose corn syrup and all the chemicals we don't really need.

In Europe they've banned a lot of the stuff they've figured is not healthy.......here in the states they double down on it!

[bovine13]

06:21 AM on 04/25/2012

Because it's up to people to choose what they want to eat or not.  Where does the banning end?  Ever see the move Demolition Man?  Do you really want to go the banning route on everything which could be viewed as bad for you?

[saldog]

03:02 PM on 04/25/2012

I am not sure to be honest. My gut instinct tells me to do almost nothing that Europe has done. I know in Scandanavia, they have a good healthy citizenry and economy but I do not think we are that similar to them. Just educate and tax the fructose garbage. Maybe allow for premium rates to be contingent on body mass improvement meaning people get penalized for not taking care of their obesity.

[MrsHughes]

12:30 AM on 04/25/2012

Cinderella has half hour on PCF time to at least give an excuse why she is up too late, however, understand one contrast of time second nature to none where you live when you are living in present time and we say pracically this; stabilization of purpose is worth time immemorial.
(I'd rather give someone a normal pulse than belittle the power to start and become in control of the beauty of what this planet imo has to be remembered and continummed..if that is a word.SGJ

[oilfield]

11:28 PM on 04/24/2012

social security revenue will increase with our rapid inflation....bad thing is that inflation adjustments dont match reality.....so good luck living on social security in 20 years.

[ZhyKitty]

06:59 AM on 04/25/2012

Try living on it now...it's not really living, it's more like existing.

[oilfield]

11:50 AM on 04/25/2012

i believe you, but i also see your bio.....every dollar printed means your social security buys less......so good luck, i already see who you are going to vote for....good luck in the coming years on your existence and what it will buy.

[VikingQuest]

10:45 PM on 04/24/2012

"Medicare's trust fund is going to have a surplus until the year 2024, more or less, at which point there will still be enough money to pay out 87 percent of benefits."

I'm so glad the author left out the most important part of the reality of Medicare:

The outlook is based on assumptions that may be unlikely, including a scheduled 31 percent pay cut for doctors in 2013, which Congress is almost certain to override.

The forecast also assumes that a deficit-reduction agreement to slash Medicare spending by 2 percent a year can be sustained over the coming decade.

[VikingQuest]

10:56 PM on 04/24/2012

Anyone here think Congress is going to cut the payments by 31% to Doctors next year?

If not the numbers in this report are worthless.

[Lindeen]

01:40 AM on 04/25/2012

The rising costs of healthcare are due to several reasons, not simply payment to physicians:

1. high cost of medical devices: cardiac catheters, IV pumps and accessories
2. high cost of medications
3. ineffiencies of hospitals (not all)
4. fraud
5. Generic medication shortage - HUGE (!) problem AND extremely expensive for hospitals and could/has been deadly for patients
6. Patients
Some patients falsely believe the newest medications/devices are better, but that's not always the case.
7. Culture
Take extraordinary measures that have proven to only delay death without any quality of life.

ALL of these issues and many more I haven't mentioned need to be addressed.

[kamact]

10:31 PM on 04/24/2012

GOP misinformation on so many fronts....