CBO: Social Security Stronger Than Thought

WINS NEWS ^ | 6/14/04

[areafiftyone]

WASHINGTON (AP) -- Social Security's long-term prospects are better than previously thought, a congressional report said Monday, estimating the program won't become insolvent until 2052, a decade later than projected earlier this year.

The report by the nonpartisan Congressional Budget Office still paints a bleak financial picture for the future of the retirement system, which faces significant strain as the aging baby boom generation retires.

But the report's projection will jump-start debate this election year about President Bush's proposal to revamp the system by adding personal investment accounts.

The bipartisan trustees who oversee Social Security predicted in March that the system's shortfall would be 1.89 percent of taxable payroll, or about $3.7 trillion.

But using rosier economic assumptions over the next 75 years on such things as inflation and productivity, congressional budget forecasters said the shortfall would be 1 percent of taxable payroll.

"While the differences in the estimates should be fully studied by economists and actuaries, they are not an excuse to delay strengthening Social Security," said Sen. Lindsey Graham, R-S.C., who has introduced legislation to overhaul Social Security to let younger workers invest some of their payroll taxes in the stock market through personal accounts.

"Even with the more optimistic assumptions used by the CBO, the long term deficits facing Social Security do not go away," he said.

But opponents of plans to partially privatize Social Security say the new report raises questions about the severity of system's finances.

"The CBO report shows just how tentative estimates about the problems of Social Security are, and how absurd it would be for policy-makers to dramatically alter the program based on those numbers," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.

Both reports pegged 2019 as the year the system will start paying out more in benefits than it takes in payroll taxes.

Analysts say that date is likely more significant because the insolvency projections count on funds owed the system by the government in the so-called trust fund. Those funds, however, already been spent and must be repaid.

[Dr. Frank fan]

privatization would yield significantly higher retirement incomes and make virtually all retirees financially independent. But explaining this to the lefties is well-nigh impossible. I have always resisted the easy assumption that people on the left are just stupid, but this is one of the issues that makes me wonder.

They are not stupid.

Your assumption that lefties are interested in virtually all retirees being financially independent was flawed from the beginning. ;-)

[M. Dodge Thomas]

Please stop taxing 6.5% of my check and let me put it in my own account! If that amount equals the max I can have in an IRA, 3k at this time, then at 10% over the next 40 years I'll have 1.5 million.

DALBAR has a long-running analysis of actual investor returns, and it is not pretty reading.

Since 1984 the average fixed-income investor realized an annualized return of 6.08%, compared to 11.83% for the long-term Government Bond Index.

The average equity-fund investor realized an annualized return of 5.32%, compared to 16.29% for the S&P 500 Index.

The average money-market fund investor realized an annualized return of 2.29%, compared to 5.82% for Treasury Bills and 3.23% for inflation.

Money-market fund investors lose money after inflation.

http://tinyurl.com/xru1

(Of course, everyone knows they are going to be the exception.)

This isn't an argument for not seeking higher returns on SS "investments".

But it ought to be pretty sobering reading for those who expect that on the average individuals will do better in control of their own investments - one of the dirty little secrets about SS is that it exists in part as a forced "investment" plan to protect the astute, the well educated and the lucky from having to provide for the foolish, the ignorant and the unlucky. Basically, it's a buy-in with current taxation on a claim against the tax revenues of a presumable much larger later GNP - there is no way that feasible investment plans for the majority of wage-eaners will provide for even minimally secure retirement in any other way.

And if instead your neighbor insists on investing in perpetual motion, apricot-pit cures for cancer and Tech Stocks with a P/E of 70, the rest of us eventually end up picking up much of the tab.

[qam1]

Xer Ping

Ping list for the discussion of the politics and social aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details.  

[Corporate Law]

I thought that was the purpose of "The Day After Tomorrow", to be the big scare/boost for the Rats.

[JohnnyZ]

I want my FREE MONEY.

I want MY free money too! And free health care.

[reformedliberal]

They understand it all too well.

One of the revelations I had during Reagan's 1st term was that the Left DOES want us dependent and poor. Self-sufficiency, independence, prosperity, let alone WEALTH for EVERYONE is exactly what they are fighting against.

Notice that we have *good* news:SS will not be bankrupt until after 2050 w/more optimistic projections and the left must scramble to make it look like they are trying to *save* it.


When it not only may not need much saving, but it is going to be reformed and privatized in W's 2nd term if we can get enough conservatives into the Senate.

Their worst nightmare. We may only need SS for retirement for those of us over 40 and after that, people will have comfortable retirements earned by saving and investing their own money themselves.

The horror.