Social Security Article

Investment Analysis Clubs Macro Economic Trends and Risks
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We should all know this stuff.
A reminder article.

https://www.morningstar.com/retirement/social-security-is-already-deficit-marketwatchs-brett-arends-dissects-what-retirees-get-wrong-about-program

‘Social Security Is Already in Deficit’

Americans should focus on Social Security’s annual cash flow—not the trust fund—and explains why he believes the program’s finances are widely misunderstood.

The simple truth is there is no such thing as the Social Security Trust Fund, not in any meaningful way.

In real terms, it’s all government money. In real terms, the government is already bailing out Social Security. Social Security is already spending more than it is taking in Social Security payroll taxes. And the difference is being made up by general government spending, in other words, the taxpayer. The talk about the trust fund is very misleading. It is very misleading because people think there’s this pot of money, and I’ve stopped writing about this because, now, finally, everyone else has woken up to it, so it’s no longer interesting. But for years, I was writing that it is insane that this is the only pension fund I know of that is not invested in the stock market.

If the Social Security money, if the Greenspan Commission in the early ’80s had invested Social Security or some of Social Security’s assets in the stock market, we wouldn’t have any kind of funding crisis today. There would be a real trust fund. It would have real assets, and it would be fully funded. They didn’t do that. The money essentially was lent to the federal government. And when you get through all the accounting malarkey, if you like, when it comes down to it, there isn’t a trust fund.

And it’s the same for Medicare. The majority of Medicare is actually funded by general taxation anyway, but the Part A hospital insurance part technically has a trust fund like Social Security’s. But again, it’s just an accounting mechanism.

However, fundamentally, these trust funds, they sort of exist in law. They exist in accounting, but they don’t exist in reality. We as Americans should stop thinking about the trust funds. We should be thinking solely about the actual cash flow of Social Security year to year.

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Isn’t that saying the trust fund bought bonds? Seems like if I own bonds, it’s a pot of money.

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Ok. So you own bonds in a failing government. You would buy bonds in a corporation that was run just like the US gov’t.
The cash flow is negative.

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The government is not failing. At least overall; maybe at the moment?

Governments should not be run like a corporation; the missions are wholly and distinctly different. And “deficits” are nothing new. Even in the first 200 years the country ran a deficit almost half the time.

For what it’s worth, the debt has been paid off only once, during the term of Andrew Jackson. It might be worth noting that a severe depression followed, starting in the last year of his Presidency, and it lasted for more than 7 years, so one of the worst to that point. Now I’m not saying that caused it, but it obviously didn’t prevent it either.

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Take a peek here:

The national debt has really taken off since 2008.
Eventually high interest rates will be required to entice the sale of US government bond.
Well we can just turn on the printing of dollars. Such action eventually erodes the value of the dollar worldwide.

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Yup. That proposal got shut down a number of times. For example…

Clinton’s claim that Bush wanted to ‘give the Social Security trust fund to Wall Street’
https://www.washingtonpost.com/news/fact-checker/wp/2016/02/22/clintons-claim-that-bush-wanted-to-give-the-social-security-trust-fund-to-wall-street/
“After Bush got reelected in 2004, the first thing he said was, let’s go privatize Social Security. … And you know what, their whole plan was, their plan was to give the Social Security trust fund to Wall Street. Imagine that.”

— Hillary Clinton, remarks during an MSNBC/Telemundo Democratic town hall in Las Vegas, Feb. 18, 2016

George W. Bush’s plan for private Social Security accounts — which died a quick death after even congressional Republicans balked at the idea — remains a favorite bogeyman of Democrats. Even more than a decade after the plan’s demise, the claim that the GOP will “privatize” Social Security still pops up in attack ads.

We have explained before, “privatization” is one of those pejorative political labels used by opponents of the Bush plan, akin to the bogus Republican claim that the Affordable Care Act is a “government takeover” of health care. Just as the health-care law preserves the private health-care system, private accounts in Social Security would have been established as part of the current system.

But there’s something else about Clinton’s claim that was wildly off. Let’s take a look…

DB2

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Raise taxes, anyone? To spur economic growth? And stop the bold-faced lying?

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It’s pretty hard to think of a worse idea once you include the obvious and undeniable secondary effects. Think of what happened in the market in 2008. Or 2000. Or 2019.

With so much of the SS “invested” in the stock market, is there any doubt politicians would be rushing to bail out every company with a listing? (Yes, they did some of that, but it was - by comparison - fairly restrained.)

Then there’s also those periods where the market goes flat for years and years. That happened from 1999 to 2009 in the US; in Japan it happened for three decades. And, of course, from 1929 until, well, whenever depending on which data set you point to.

Dumping trillions into the market would only inflate (spectacularly) asset prices, but provide nothing meaningful in terms of capital funding (as that only happens at IPO) or provide other benefits, and the idea of the government having “leverage power” over some companies (or not) gives me the willies.

Oh, so they’re going to buy some sort of ETF-like vehicle? Who is going to profit from that?

No, the government should support business, not be part of it.

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China, by a wide margin, is now the number one manufacturer. China, in large part, can not afford to do that by being profit-driven like the US. The economic rules on debt are flying out the window.

We face a new and little-studied economics.

When the chickens come home to roost we face reality. Because the new economics is failure heaped on failure.

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Shall I state the obvious? 20 years of low/no interest rates combined with a policy of only investing in US government debt crushed the SS trust fund.

Now, we will see the opposite effect. Interest rates rise (continuing to be higher than inflation, hopefully) and the trust gaining incrementally over inflation.

There will have to be either a modification of benefits (eligibility, funding rates and schedules or additional curtailment based on income factors, etc.) or separate additional funding through tax rates (FICA, etc.)

Simple, simple math, over time. Going forward, nothing has changed in the equation. Our reaction to is must be more than incremental.

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The obvious question is still when does Congress get around to addressing the Social Security (and Medicare) issues. We are hopeful for after the Nov election but not much reason to believe that will happen.

Clearly dysfunctional Congress is the greatest threat to our system of govt.

Letting Social Security and Medicare sink into bankruptcy is not acceptable.

Everyone knows what is required but Congress fails to act.

Continuing to raise national debt until people refuse to buy the bonds is also a path to disaster. Why are we following this path. Voters prefer rising inflation and deficit spending rather than raising taxes or reducing benefits.

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However, as noted upthread, the situation was accurately predicted over a decade before the zero interest period started. “Higher” interest rates (the long-term real return on bonds is just 1%) can’t make up for demographic changes with a pay-as-you-go system.

DB2

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Is this, Invest America Accounts doing it?

:thinking:
ralph

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And in 2010 there would have been no bailout. TPTB never bail the little guys out.

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If all Social Security assets were invested in stocks, many companies would be owned by the govt. How do they vote those shares? Would the stock market as we know it survive?

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Excuse me, the press have not given them one reason to act on taxes. It is a void out there with zero ideas. The give me generation at the bottom of the pile is half right and half wrong, but the saner minds are bought and paid for.

Why hasn’t the press pushed for tax hikes? It is what the public wants. Where is the press? Would go to college to become a reporter? The behavior sucks.

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Because reporters work for corporations that like the existing system. And our representatives are largely bought by corporations. You don’t bite the hand that fills your rice bowl.

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The press doesn’t “push”. They report if someone else pushes. Is there someone else “pushing” for tax increases? Other than you, I mean.

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https://www.npr.org/2025/10/27/nx-s1-5576355/population-babies-capitalism

Worldwide, the number of children born to the average family has dropped by more than half since the 1970s, according to the latest United Nations data. Economists say having fewer children is the norm for many families, especially in relatively prosperous countries like the U.S.

The global population of people age 80 or older will triple between 2020 and 2050, according to the World Health Organization.

Eberstadt, at the American Enterprise Institute, thinks the population shift could destabilize key U.S. programs that underpin the economy, including Social Security and Medicare.

“The way public finances are organized makes no sense if you’re heading into an aging, shrinking world,” he said.

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As it should be. If the government was running on a surplus, it would be deflationary.

We should aim to reduce the deficit but never eliminate the debt (though some modest reduction would be nice).

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