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Social [In]Security made Worse?

Thursday, January 04, 2007

The National Center for Policy Analysis has a policy report explaining what dire straits the Social Security program is in. You can read the report, titled "How Large Is the Federal Government's Debt?", dated October 30, 2003, by clicking here. They have a summary which states:

Executive Summary

Social Security and Medicare have made future promises far in excess of tax revenues that will be collected at current tax rates. The difference between what has been promised to current and future generations and what will be collected from taxes dedicated to fund these programs is an "unfunded liability."

How large are the federal government's unfunded obligations? That depends on how we measure them.

  • If we confine our horizon to the next 75 years, as government actuaries have traditionally done, the unfunded liability is about $18 trillion in today's dollars -- more than six times as much as the federal government's outstanding bonds.
  • If we focus only on people who are already participating in the system (either as beneficiaries or as taxpayers), the government's net debt is more than $24 trillion -- more than twice our current gross domestic product (GDP).
  • If we consider only benefits that have been accrued so far (i.e., if we ended the program tomorrow and only paid benefits people have already earned), the debt is about $30 trillion -- about three times the size of our GDP.
  • If we look indefinitely into the future -- and include not only people who are participating today, but all future generations who will pay taxes and draw benefits -- the U.S. government's Social Security and Medicare unfunded obligations are equal to almost $50 trillion in today's dollars.

What does it mean to say that we have $50 trillion in unfunded obligations? It means that in order to ensure the government will keep all its promises, we need to have $50 trillion on hand right now, invested at a rate of return of about 6 percent. The failure to have these funds on hand and invested today means that the overall obligation will become larger and grow through time. It also means that the programs are severely underfunded at today's tax rates. To close the funding gap, we will have to endure either substantial tax increases or significant benefit cuts in future years.

In other words, its bad and only getting worse. Now, imagine my surprise when I read that:

Social Security Agreement with Mexico Released After 3-1/2 Year Freedom of Information Act Battle

January 4, 2007 (Washington, DC) – After numerous refusals over three and a half years, the Social Security Administration (SSA) has released the first known public copy of the U.S.-Mexico Social Security Totalization Agreement. The government made the disclosure in response to lawsuits filed under the Freedom of Information Act by TREA Senior Citizens League, a 1.2 million member nonpartisan seniors advocacy group.

The Totalization Agreement could allow millions of illegal Mexican workers to draw billions of dollars from the U.S. Social Security Trust Fund.

A loophole in current Social Security law could allow millions of today's Mexican workers to eventually collect billions of dollars worth of Social Security benefits for earnings under fraudulent or "non-work authorized" Social Security numbers, putting huge new pressures on the Social Security Trust Fund.

The release continues (click here), but you get the point. There is no way this can continue and provides yet another reason why Social Security should be dismantled.


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