The Social Security Trustees have released their annual report, only five months later than they are required by statute to provide it (a record), reports Kate Davidson at the Wall Street Journal. The report contains good news and bad news. The bad news first:
- The fund disbursed more than it took in last year.
- The trust fund will be depleted by 2034, one year earlier than forecast just one year ago.
Now the good news:
Senior administration officials also said they expect higher inflation this year will significantly boost benefits next year, estimating Social Security beneficiaries could see close to a 6% cost-of-living increase. That would be the highest annual benefit increase since 2008, when rising gas prices pushed up the cost-of-living adjustment to 5.8%, officials said.
By comparison, beneficiaries saw a 1.3% cost-of-living adjustment in 2021, and a 1.6% adjustment in 2020.
There’s a worm hidden in that apple. The higher the disbursements, the faster the fund will be depleted.
Now the big question: will Congress take action to prevent the fund from cutting benefits in 2034 as they will be required to do? I honestly don’t think it’s a done deal. Social Security recipients are not just older than other Americans—they tend to be richer and whiter, too. Social Security has been called “the third rail of American politics” but that was then and this is now.
Yes, richer and whiter. But the reason SS has been the third rail is that to curtail or eliminate benefits would be the biggest bait and switch in history. People understand bait and switch.
The 2030 Congress might do something about it. But chances are they will pass something short-term to keep things running and kick the can to the next Congress.
For years Congress has used the Social Security Trust Fund as a supplement to general revenues and spent it on whatever they want. They’ve done the same with the Highway Trust Fund. Both are full of non-negotiable T-bills.
We have now seen truly spectacular borrowing and deficit spending. CBO projections for FY 2021: total spending was $6.8 T; total revenues $3.8 T; total deficit $3.0 T; accumulated deficit $23.0 T. Deficit spending was 44% of total.
This suggests that Congress will simply borrow the money to pay retirees, regardless of the deficit. There are no longer any limits on spending nor any limits on borrowing. Whether we get Weimar or Zimbabwe remains to be seen.
So where we are is budgetary collapse plus cultural collapse plus educational system collapse plus continuing manufacturing collapse plus military collapse. And most importantly, the collapse of any national allegiance as the tribes take back their own.
The Russian and Chinese elites must be giddy.
Weimar or Zimbabwe
We may instead get Japan, they took care of their debt by monetizing it.
Shift it to a different, interest free pocket, dilute the money.
The only other way is strong, sustained economic growth.
Government betting on a bigger pie tomorrow.
I was thinking; social security checks are just pieces of paper. In the end, they let the elderly who don’t have the means to consume to do so.
As long as the country produces enough so even the elderly can be “consumers”, then the “real” level of benefits can be maintained. If the country isn’t producing enough, then a benefit cut will occur (in real terms, maybe not in nominal terms).
My recommendation is to focus on increasing production (in the real economy, not the financial economy).
I’m sure you know that’s what I think.
Curious,
That’s a really good formulation.