Is Social Security Bankrupt?

Is Social Security bankrupt? According to Prof. Antony Davies, it isn't bankrupt yet, but it will be soon. Davies warns that as a simple matter of mathematics, the current system is unsustainable.

[marklen]

Sixty years ago Speaker of the House Tip O'Neal told Washington politicians that Social Security and Medicare need to be funded properly for future generations. For sixty years our politicians have swept the problem under the rug. Today the American people need to hold current and retired politicians criminally responsible for misfeasance in office.

[definingimage]

Why are men like this not running our country?

[FurryMurry]

They're ALREADY stopping pensions! 30-40 years ago, almost every business offered pensions to their (usually full time) workers. Take a look now. There are not nearly as many businesses now that are offering pensions to their workers. I work at a major hardware chain (400+ locations nationwide) and that company doesn't offer pensions.

It won't be long before pensions are a thing of the past.

[Einstormer]

The laws of mathematics are going to throw grandma out in the street? Then we have to stop those evil mathematics!

[benf]

You guys are awesome! Lets keep exposing these broken programs that are run by bureaucrats talking others what to do with their money!

[wingedarrw]

If you put in $100 in a piggy bank every year, After 10 years you have $1000, if you start withdrawing an additional $120 each year, you don't instantly become bankrupt, you just begin to withdraw your savings.

[VertousWLF]

Private investment in stocks or Treasury notes generate a higher return and Treasury Notes are safer than SS.

[jaspony]

Why dont we allow people to choose... If you want to stay in SS and MC than you can, and if you want to do something else than allow that as well. Even if they only allowed me to put that money in tbills, the return would be way more.

[YuppiePrepper]

At about 35-seconds the professor states that "they still have money in the banks so they are not bankrupt"

I am confused, what money is he talking about? Is promissory note from the treasury department 'money'? We are borrowing funds from other countries to pay for the SS & medicare/medicaid failures today. Not in a few years - Today.

They are bankrupt and it is disingenuous to pretend that their are "funds" or "accounts" propping these schemes up.

[GregoryTheGrster]

Congress has been borrowing from the SS trust fund for a long time. It's not just Bush. Anyways, I love your solution! That would give the U.S. the highest marginal tax rates in the world. It also would demonstrate that SS is just a transfer of wealth, not the insurance scheme that FDR told the public about.

[dlstb]

@FartyFace I am not specifically speaking about Warren. There are alot of people who live entirely off stock market gains and dividends. Also, those CEO's do draw a salary, but nearly all of them receive large bonuses that you and I do not get. Those bonuses are not taxable the same as income earned on an hourly wage because they are immune to the 15% FICA taxes that are normally paid.

I'm not advocating raising taxes, I'm advocating getting rid of this broken system and replacing it. Fair Tax

[ilovetech]

The social security system already operated under bankruptcy law since the federal reserve was created. The correct definition is insolvent.

[nicklikethesoup]

@YuppiePrepper Actually, it's the funds that have been set aside for SS & Medicare. They have an accounts like your savings. Each year we put more in from tax revenues, but we lose more to pay outs. Hence, the deficits. They aren't bankrupt yet, but if not addressed they will be. It helps to understand how things work before trying to conclude things falsely.

[TZach]

2011 it is now 2023. Congress - you ignored Bowles Simpson, what is the new solution to this problem?

[KittenKoder]

This is the one government scam I fell for ... and wish I never did.

[Pyrrhic.]

Social security is not broke. The surpluses SS had in the past are in the SS Trust Funds, which the Trust Fund has used their funds to buy US Treasury Bonds. The SS Trust Fund does not want to cash out their bonds because they would flood the market with extra treasuries, making it difficult for the US government to issue new treasury.

Bottom line, SS has enough money, its just all tied in US treasury bonds.

If push comes to shove, they can always sell their treasury bonds before it matures.

[hauskalainen]

The advantage of doing this would be to cut out all the argument that goes on about "the government cannot do anything right" and "these are just ponzi schemes" and finally you would have a sensible debate about how much of our earnings are we going to put asidethis year to care for our parents, grandparents and great grandparents.... One that would focus on real needs and not money. This is what other countries do.

[NOLAMarathon]

Professor Davies knows this but neglects to mention it: the assets that remain in the social security fund -- assets that are declining every day -- are not "hard currency" assets. Rather, they are merely IOUs written by the general fund of the United States Treasury. There is no money in there, only a collection of written promises from the Treasury to repay money that was long ago borrowed. The surplus in Social Security is actually an asset used to improve the appearance of the US debt.

[browiththeglasses]

In other words, say you have $5, 000 in the bank. Each year you will earn (i.e. collect, in this case) $1, 000 more. However, you are paying out $1, 500 a year. So, you had $5, 000 in the bank and you collected $1, 000. This brings your total to $6, 000 before your pay any money out. But, after paying out you only have $4, 500 in the bank. This is a deficit - paying out more than you take in.

Eventually, the money will run out. It hasn't yet, but it will eventually. That is what he is saying.

[Pyrrhic.]

SS Trust Fund owns $ 2xx trillion in US treasury bonds. By the time your retiring, many of the treasury bonds will be matured and SS will have their investment + interest earned. After their payout, if there is still a surplus, they will re-vinest in US Treasury Bonds.Never ending cycle.