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Social Security Status Update 2017

The 2017 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds set forth the following findings through the end of 2016:

    • The Fund was providing benefits to 11million disabled workers and dependents
    • Total expenditures were $922B while income was $957B
    • “Asset Reserves” in the form of U.S. Treasury Bonds increased from $2,813B to $2,848B. These projected reserves are expected to increase to $3,000B by 2022 and be depleted by 2034
    • Social Security’s total income is projected to exceed its total cost by 2021
    • The Disability Trust Fund has projected income to cover expenditures for the next 10 years
    • The Disability Trust Fund is projected for depletion in 2028 as a result of increasing disability payments with the entire social Security Trust Fund depleted by 2035

These estimates take into account many estimated future variables including life expectancy, disability incidence/termination, employment, gross domestic product, immigration, interest rates, among others. For this reason, the dates and estimates will be revised time and again over the years.

Here is the rub that you of which you must be aware. The government routinely withdraws funds from the Social Security Trust Fund to pay for daily operations. In return, it issues “IOUs” in the form of U.S. Treasury Notes. If these notes were to be redeemed to fund the Social Security Trust Fund, it would require the government to borrow money to supply the needed money. This action would, in turn, necessitate issuance of bonds for purchase which will increase the national debt substantially. The national debt at the time of this writing was $13.6T. The redemption of the Treasury Notes issued to the Social Security Trust Fund would increase this by $2.8T or 22%. Such an enormous debt increase would have repercussions throughout the U.S. economic system in terms of dollar valuation, credit rating, etc.

The most important take away from this discussion is the pressing need for action by the United States Congress. The “kick the can down the road” approach and avoiding the proverbially “third rail” of politics in addressing the impending shortfall in the Social Security Trust Fund is irresponsible.

Unfortunately, there are clear political lines drawn by the parties. Republicans wish to restrict benefits and make eligibility harder whereas Democrats prefer to create funding (through taxes of some type) to insure the Fund’s solvency. Until there is some actual cooperation between the parties, there will be means to address the situation as neither party wants to be solely responsible for changes to the current system due to the political liability inherent in doing so.

Posted in Social Security |


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