#Social Security is the largest program in the federal budget, and millions of Americans depend upon it. Any questions about its long-term stability deserve serious consideration by both politicians and voters.

There are many questions

Given current law, virtually every expert believes that future retirees will see some difference between what they were promised and what they will be paid. Yet, we do not know at this point the exact time of the cuts, the size, or even how the government will distribute the reductions to individuals. So there are a lot of questions.

Each year, the Trustees of the Social Security Trust Funds who are responsible for the overseeing the finances of the program provide a long-term outlook of the system for Congress.

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In last year’s report, we earned a number of things :

  • Without the Social Security Trust Fund today, benefit levels of the program would already be cut by more than 10 percent.
  • For every dollar that the program has ever collected it has created nearly $2 of promises that it does not expect to keep
  • The gap between revenue and expense grows over the next 75 years - this isn't just a temporary problem created by a change in demographics.
  • Valued at roughly $2.8 trillion, the reserve represents about a nickel of solution for every dollar of problem.

These people are not Chicken Little. They are basically well-mannered mathematicians who are looking at the results of formulas which show to a degree of certainty that the program is heading for crisis.

Why the Trust Fund is so important

The Social Security Trust Fund holds excess cash that is dedicated to the system.It acts as a cushion against times when the program does not draw in sufficient revenue to pay its bills.

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Once that reserve is gone, benefit levels are reduced by a lot. A consensus of experts agrees that this possibility will materialize in the 12 to 17 year time frame, delivering reductions to benefits between 20 and 30 percent. While that may sound like a long time, the average person turning 69 today expects to live roughly 17.25 years. Someone who turns 50 today on average expects to retire after benefits have been reduced.

Ironically enough, politicians tell us that we have time to deal with this issue, when in fact the passage of time is the primary driver of the approaching crisis. Why? Because we express all of the problems with the system in terms of present value. When you hear the word fixed, it means is how much would we have to pay today in order to kick the can some number of years out.

Here is the key quote from the SSA website:

"The open group unfunded obligation increased from $10.7 trillion shown in last year's report to $11.4 trillion in this report. If there had been no changes in starting values, assumptions, laws, or methods for this report, then the open group unfunded obligation would have increased to $11.2 trillion solely due to the change in the valuation period."

Translation :

As time passes, the cost to fix Social Security rises.

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In 2015, we could have kicked the can for 75 years for the bargain price of $10.7 trillion dollars but we didn’t put that sum into the program. As a consequence, as 2015 came to a close we needed to contribute $11.4 trillion. We didn’t take that action and as a result the cost to kick the can is now closer to $12 trillion. These figures mean that we spent more on not fixing Social Security in 2016 than we spent on (education, the EPA, NASA, Transportation, Commerce) combined.

Social Security is a vital program

Social Security is not a typical government program because it serves an audience that doesn’t have a lot of alternatives. This is very different from say agriculture subsidies where farmers can change from wheat to soy beans if the government’s assistance falters. They can, in the absence of all help, switch from growing crops to developing condos if necessary. The elderly and disabled do not have this type of flexibility.

This report is hundreds of pages jammed with charts and jargon. It is going to generate a healthy disagreement. Yet, virtually every expert on the planet agrees that Social Security is moving to crisis. The only difference in the opinion is the speed of the training and the size of the crash. That crisis will work like a tsunami that targets people who can’t swim. Any questions? #Social Security Trustees Report #Social Security Insolvency