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Social Security, Medicare Trust Funds Sink
AP ^ | 5-1-06 | MARTIN CRUTSINGER

Posted on 05/01/2006 12:30:33 PM PDT by Conservative Coulter Fan

WASHINGTON - The trust fund for Social Security will be depleted in 2040, and Medicare will exhaust its trust fund reserves just 12 years from now, trustees for the programs said Monday.

Their annual report showed deterioration in the financial condition of both of the government's two largest benefit programs.

A year ago, the depletion of the Social Security trust fund had been projected to occur in 2041 and the Medicare hospital insurance fund in 2020.

The trustees, who include the head of the Social Security Administration and three members of President Bush's Cabinet, painted a sober assessment of the health of the two programs in advance of the looming retirements of 78 million baby boomers.

"We do not believe the currently projected long-run growth rates of Social Security or Medicare are sustainable under current financing arrangements," the trustees said in this year's report.

Bush's efforts last year to overhaul Social Security went nowhere in Congress. Even members of his own party refused to support the benefit cuts that would have accompanied the establishment of private accounts for younger workers.


TOPICS: Business/Economy; Constitution/Conservatism; Crime/Corruption; Culture/Society; Government; News/Current Events; Politics/Elections
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1 posted on 05/01/2006 12:30:37 PM PDT by Conservative Coulter Fan
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To: CyberAnt; Baynative; TheOracleAtLilac; stopem; TonyRo76; sarasmom; 9999lakes; dalereed; ...

Ping!!

Apologies to anyone who was received a ping and didn't want it.. :)


2 posted on 05/01/2006 12:32:30 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: Conservative Coulter Fan
No problem. Let's just dish out some more IOUs, so the trust fund lasts until the year 3583.

And to pay for it, we can just "raise taxes on the rich." After all, their money will never run out, so we can tax them at 100% and pay off everyone's Social Security and Medicare benefits!

Let's create a new entitlement program while we're at it. We can put Paul Krugman in charge.

3 posted on 05/01/2006 12:33:45 PM PDT by SunnyD1182
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To: Conservative Coulter Fan

Chickens are coming home to roost.


4 posted on 05/01/2006 12:33:50 PM PDT by Extremely Extreme Extremist (FR's most controversial FReeper)
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To: Conservative Coulter Fan
reporting.
5 posted on 05/01/2006 12:33:54 PM PDT by pabianice
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To: Conservative Coulter Fan

what bleeping trust fund?


6 posted on 05/01/2006 12:33:58 PM PDT by babble-on
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To: Conservative Coulter Fan

I guess those treasury bills are not such a good investment afterall.



Adding 11 million illegal aliens to the ranks of our citizenry is not going to help this situation. If you lose money on each retiree, you don't make it up on volume--particularly when the retirees in question don't pay much in taxes, but get sweetened benefits because they are poor.


7 posted on 05/01/2006 12:34:07 PM PDT by Brilliant
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To: Conservative Coulter Fan
Ending Generational Slavery: The Case to End the Social Security System

Six Misconceptions About Social Security

And the Winner Is ... Social Security: The 10 Most Harmful Government Programs

Is Social Security Constitutional?

Is Social Security Constitutional? (2)

Small Government R.I.P.

"The people never give up their liberties except under some delusion." --Edmund Burke, 1784
8 posted on 05/01/2006 12:37:08 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: Conservative Coulter Fan

I never heard a Ponzi scheme called "trust fund" before.


9 posted on 05/01/2006 12:37:15 PM PDT by WriteOn (Truth)
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To: Conservative Coulter Fan
Even members of his own party refused to support the benefit cuts that would have accompanied the establishment of private accounts for younger workers.

Cowards.

10 posted on 05/01/2006 12:37:22 PM PDT by rhombus
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To: WriteOn

Ken Lay is a better bookkeeper.


11 posted on 05/01/2006 12:40:19 PM PDT by Moonman62 (Federal creed: If it moves tax it. If it keeps moving regulate it. If it stops moving subsidize it)
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To: WriteOn

"In 1916 an Italian immigrant named Charles Ponzi created an investment fund that paid large dividends without making any investments. Money from new investors was transferred to old investors while the new investors received money from newer investors yet. The system had flexibility and boldness and worked as long as an ever-expanding pool of suckers could be found. Charles Ponzi made a profit on this, and so does the U.S. Government." - P. J. O'Rourke, on the subject of Social Security.


12 posted on 05/01/2006 12:40:34 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: Conservative Coulter Fan

That can't be right...the dummocRATs said GWB's attempt to do something about it last year was just an empty scare tactic.(sarc)


13 posted on 05/01/2006 12:44:56 PM PDT by AmeriBrit (ILLEGAL IMMIGRATION IS A WEAPON OF MASS DESTRUCTION, IT INCLUDES TERRORIST SLEEPER CELLS!!)
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To: Conservative Coulter Fan
Are SS benefits tied to inflation because if not we should just let the benefits not increase so in 40 years people are still getting 400 dollars but that wouldn't buy them a dinner at Outback.
14 posted on 05/01/2006 12:46:20 PM PDT by RHINO369
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To: babble-on

what bleeping trust fund?
-----
This is the pile of worthless, never-to-be-paid IOUs, that the great government has created by stealing the SS trust fund (I think one actually existed) to buy votes. SS is now a bona fide TAX because the government spends EVERY cent they take from America in SS TAXES. Nothing is saved. But our pols, all of them, still think they have the public duped and dumbed-down enough to swallow that swill. Oh, don't worry - they will find a way to take more of the publics' wealth so they can keep spending...


15 posted on 05/01/2006 12:47:04 PM PDT by EagleUSA
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To: Brilliant; All
"People tend to think of their Social Security benefits as an actual account, in their name, which contains cash or investments. In reality, the Social Security trust fund contains nothing more than IOUs that have no value beyond a promise to impose higher taxes on future workers. The annual surpluses that many thought were being used to build up a reserve for baby boomers have been spent on other government programs or to reduce the government debt." --The Heritage Foundation, Social Security Basics

How the Social Security Trust Funds Differ from Real Trust Funds

Private sector trust funds invest in real assets ranging from stocks and bonds to mortgages and other financial instruments. Assets are held only for a specific purpose, and the fund managers are liable if the money is mismanaged. Funds are managed in order to maximize earning within a pre-agreed risk level. Investments are chosen that will provide cash at set intervals so that the trust fund can pay its obligations.

The Social Security trust funds are very different. In the words of the Office of Management and Budget (OMB):

“The Federal budget meaning of the term "trust" differs significantly from the private sector usage...the Federal Government owns the assets and earnings of most Federal trust funds, and it can unilaterally raise or lower future trust fund collections and payments, or change the purpose for which the collections are used. “ (Analytical Perspectives, Budget of the United States Government, Fiscal Year 2000 (Washington, D.C.: U.S. Government Printing Office, 1999), p. 335.)
Even more important, the Social Security trust funds are only “invested” in a special type of Treasury bond that can only be issued to and redeemed by the Social Security Administration. As the Congressional Research Service noted:
"When the government issues a bond to one of its own accounts, it hasn't purchased anything or established a claim against another entity or person. It is simply creating a form of IOU from one of its accounts to another." (David Koitz, "Social Security and the Federal Budget: What Does Social Security's Being Off-Budget Mean?" Congressional Research Service, May 5, 1998.)
As a result:
“These [Trust Fund] balances are available to finance future benefit payments and other trust fund expenditures--but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, make it easier for the government to pay benefits.” [Italics added] (Analytical Perspectives, Budget of the United States Government, Fiscal Year 2000 (Washington, D.C.: U.S. Government Printing Office, 1999), p. 337.)
In short, the Social Security trust funds are really only an accounting mechanism. They show how much the government has borrowed from Social Security (see below for details), but do not provide any way to finance future benefits. --The Heritage Foundation, Social Security Basics
16 posted on 05/01/2006 12:47:08 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: babble-on

"Superficially, Social Security appears to be just a government pension plan for the elderly. Rather, it is a pyramid or Ponsi scheme. It is not based on sound principles of insurance. Private insurance companies invest the premiums of their customers in stocks and bonds and other income-producing assets. Real wealth is created. Later, the earnings from that wealth is used to pay annuities or pensions. But Social Security is not a savings-and-investment program. Social Security taxes (premiums?) create no wealth. The payroll taxes are not invested, but are used to pay current retirees and survivors under the program. It's called a pay-as-you-go system. Some call it an intergenerational income-transfer program. It is indeed!" --Dr. Judd W. Patton


17 posted on 05/01/2006 12:49:20 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: RHINO369
They are...

Retirement benefits are calculated using a worker’s highest 35 years earnings. If the worker has an earnings record of more than 35 years, years with the lowest earnings are dropped. Only those earnings that the worker paid Social Security taxes on are counted. Thus, if the worker earned $100,000 in 2001, that year’s income would be counted as $80,400 for determining benefits, since the worker only paid Social Security taxes on that lower amount.

Earnings for previous years are indexed so that all years are measured by the same ability to purchase goods and services. This indexing increases past earnings to account for both inflation and increases in average wage growth. (See below for how past earnings are indexed.) For instance, if it would take $11.48 in 2002 dollars to equal $1.00 earned in 1951, and $1.53 to equal $1.00 earned in 1990.

Once all 35 years’ earnings records are indexed to the same standard, they are added together and divided by 420 (the number of months in 35 years). The result is the Average Indexed Monthly Earnings (AIME), and is used to calculate Social Security benefits. --Determining Average Indexed Monthly Earnings (AIME)
18 posted on 05/01/2006 12:51:44 PM PDT by Conservative Coulter Fan (I am defiantly proud of being part of the Religious Right in America.)
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To: Conservative Coulter Fan

Well now...sure didn't make sense to add prescription drugs as another entitlement did it? Keep in mind many illegals tap into this too...I'm at my wit's end with the upside down world.


19 posted on 05/01/2006 12:53:37 PM PDT by Faithfull
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To: Conservative Coulter Fan

Very interesting. I always wondered why the SSA kept records on peoples earnings. Radio host adam carolla would get his every year and then talk about how he went from making 4000 in one year to making 1.5 million two years later.


20 posted on 05/01/2006 12:55:50 PM PDT by RHINO369
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