To our readers:

Since 1996, your generosity and commitment have made it possible to offer The Patriot Post without a subscription fee to military personnel, students, and those with limited means. Please support the 2020 Year-End Campaign today.

Jim Harrington / May 13, 2015

Social Insecurity: The Looming Crisis

A new report shows the extent of the trouble for the nation's most popular entitlement.

For years, actuaries, financial analysts and policy wonks have warned that Social Security is doomed to crash. Contrary to rosy predictions a decade ago that this popular government program has a funded lifetime of 33 more years and won’t sink into the red until 2017, Social Security actually went red in 2010 and will go broke in 2024.

In 1983, the Social Security trustees predicted that reforms would maintain the program’s solvency through 2048. Even they’ve changed their tune, though they won’t admit it’s as moribund as it actually is.

Since its inception, Social Security has promised each succeeding generation that there will be at least a minimum of money for them at retirement. All working people are taxed at the rate of 12.4% of each paycheck, with the promise of a return. (Yes, employers pay half, but they also pay employees less as a result. It still costs “X” to employ a person; whether 6.2% is earmarked for direct Social Security payments matters not.) But that money’s gone in an insolvent system.

When Franklin Roosevelt created Social Security, the ratio of taxpayers to beneficiaries was 42:1. Today that ratio has plummeted to numbers FDRs’ “Brain Trust” never contemplated — it’s now a puny 3:1, and with 80 million Baby Boomers beginning to enter the system that ratio will only get worse. Social Security’s already running a $200 billion annual deficit with 60 million recipients, so it’s difficult to understand the trustees’ optimism.

Researchers Gary King of Harvard and Samir Soneji and Konstantin Kashin of Dartmouth analyzed the Social Security Administration (SSA) trustees actuarial reports and conclude the program’s insolvency is near. Their research found little or no bias in the annual reporting between 1978 and 1999, but from 2000 onward the bias presenting the program positively has been increasing steadily.

King reports that the trustees use outdated modes in the analyses, comparing them to “steering by sextant and dead reckoning” rather than using “global-positioning-systems.” They “employ research methods that are antiquated and opaque compared with the statistics and open-source data analytics powering today’s successful scientific and business enterprises.”

Steve Goss, the chief actuary of the SSA, nevertheless enjoys widespread credibility. Supporters in the public, academic and private sectors use his analyses in their own work.

Barron’s Bill Alpert explains why: Goss says SSA actuaries “leave politics at the door when they prepare” reports, and argues that “forecast errors in the past decade might have resulted from the 2008 recession.” Besides political independence, Goss values consistency in the projections and looks askance at changing assumptions or methods.

Goss cites as a cautionary tale the trustees’ continuing to project long-term gains while productivity dropped during the 1980s. Then in 1995, the economy began a sharp climb. “[We] learned a lesson,” Goss said. “[M]aybe we should look at the long-term averages, not flip back and forth a lot based on very, very brief periods of recent experience.” One problem with that approach is that the U.S. is not your granddaddy’s country.

And Alpert notes another big problem for Goss: “[A] surprising number of past panelists complain that Goss has ignored their advice. A case in point is the way the actuaries predict death rates. Along with birth rates and immigration, death rates are a crucial consideration in projecting the future populations that will be paying into Social Security and drawing benefits. Since 1999, outside demographers on Social Security’s technical panels have unsuccessfully urged the actuaries to change their approach for predicting death rates. Goss’ crew makes judgments about future death rates within each age group and sex from five separate causes, like heart disease, cancer, and violence — a process that obliges the actuaries to come up with 150 different parameters in a way that outside experts have never been able to plumb.”

Faulty methods distort projections for solvency.

Problems are many, solutions, few. The system has already raised the full eligibility age to 66, and soon, 67. That’s not enough. One suggestion: raise taxes (naturally). To maintain the promised benefits, former Bill Clinton adviser Bill Galston argues the payroll tax would have to rise from 12.4% to 15.9%. A middle-income family (about $50,000) would pay another $900 annually. Adding this to all other taxes they pay is unconscionable.

Republicans have promoted privatizing part of Social Security for more than 20 years. Were taxpayers allowed to invest their Social Security money in 401k’s, even a modest return would allow middle-income earners to retire on six-figure incomes. Social Security’s “return,” by comparison, is an obscene joke. It actually results in a loss due to the constant inflation of the 20th and 21st centuries.

Social Security is a Pony Express program in a smart phone world. It makes changes grudgingly and only long after they are obviously needed. And because it is the greatest Ponzi scheme of all time, some Americans will be hurt very badly. Yet this oft-repeated warning has never been heeded because government employees have their own pension system, and citizens only want what was promised to them — a retirement income. Anybody aiming to fix that, in the view of too many Americans, is merely trying to steal from them. In short, it’s an entrenched problem that will almost surely receive nothing but token Band-Aids as long as politicians can hold out.

Who We Are

The Patriot Post is a highly acclaimed weekday digest of news analysis, policy and opinion written from the heartland — as opposed to the MSM’s ubiquitous Beltway echo chambers — for grassroots leaders nationwide. More

What We Offer

On the Web

We provide solid conservative perspective on the most important issues, including analysis, opinion columns, headline summaries, memes, cartoons and much more.

Via Email

Choose our full-length Digest or our quick-reading Snapshot for a summary of important news. We also offer Cartoons & Memes on Monday and Alexander’s column on Wednesday.

Our Mission

The Patriot Post is steadfast in our mission to extend the endowment of Liberty to the next generation by advocating for individual rights and responsibilities, supporting the restoration of constitutional limits on government and the judiciary, and promoting free enterprise, national defense and traditional American values. We are a rock-solid conservative touchstone for the expanding ranks of grassroots Americans Patriots from all walks of life. Our mission and operation budgets are not financed by any political or special interest groups, and to protect our editorial integrity, we accept no advertising. We are sustained solely by you. Please support The Patriot Fund today!

★ PUBLIUS ★

“Our cause is noble; it is the cause of mankind!” —George Washington

The Patriot Post is protected speech, as enumerated in the First Amendment and enforced by the Second Amendment of the Constitution of the United States of America, in accordance with the endowed and unalienable Rights of All Mankind.

Copyright © 2020 The Patriot Post. All Rights Reserved.

The Patriot Post does not support Internet Explorer. We recommend installing the latest version of Microsoft Edge, Mozilla Firefox, or Google Chrome.