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War Is Coming: Panic Over Impending Social Security Crisis

Women, serious, business

“Boomers inherited a fantastically wealthy country, and have, through a whole variety of methods, looted the patrimony left to them, and now expect to suck on Social Security and Medicare until they die, leaving behind misery.”

By Brenton Smith

Back in the 1960s, the Beatles ask the question: “will you still love me when I’m 64.” The Boomers, now in or approaching that age, are finding out that the answer is no, maybe even hell no.

Recently, The Atlantic published a piece that asserted:

“The Boomers’ sense of entitlement was beginning to manifest itself in the long battle over what are known as ‘entitlements’ — especially the original and largest, Social Security and Medicare — and what they say about our attitudes toward future generations.”

In A Generation of Sociopaths: How the Baby Boomers Betrayed America, the author said:

Boomers inherited a fantastically wealthy country, and have, through a whole variety of methods, looted the patrimony left to them, and now expect to suck on Social Security and Medicare until they die, leaving behind misery.

Are the Boomers responsible for the financial state of the entitlement programs? The answer is yes and no.

The No answer:

♦️ First, without the Boomer generation these programs would have skidded into insolvency decades ago. The surge in population created excess revenue while the future cost of benefits remained off the balance sheet.

♦️ Second, these programs pre-date the boomers, and by the time that the bulk of them could vote, voters elected a Congress that reigned in benefits.

The Yes answer:

♦️ The 1983 reform which reduced benefits and increased taxes focused these changes on people who were in Gen-X and later.

♦️ These voters have supported the third rail politics that have shut down any attempt at reform of these programs.

Brenton Smith writes on all aspects of Social Security reform, translating the numbers and jargon of the issue into terms that everyone can understand. His work has appeared in Forbes, MarketWatch, Fox Business, The Hill, and a number of regional newspapers. To read more of his reports — Click Here Now.

One Response to “War Is Coming: Panic Over Impending Social Security Crisis”

  1. As a boomer who has studied SS since the very early 70’s and wrote a computer model in an attempt to find a solution to SS Problems, I have to agree and disagree with Brenton.

    First the problem began in 1935 with authorizing payments to those workers who were over the age of 25 when the program began. Based on work history and the scheduled 2% payroll tax on the first $3,000 of wages and the legislative increase in the payroll tax by 1% every three years until it reached 6% in 1949 was its first major error. Ida May Fuller paid $51.62 (including US Treasury at 3% $2.12, employee & employer contributions $49.50) during her life time. Her first benefit check was $24.75. At this rate Ida was paid back everything in 2.05 months. Had she lives to her cohorts average life expectancy she would have collected $6,675 more than she paid in, but she lived to 100. collecting nearly 1,000 times what she paid in.

    Now Ida was not alone, there were millions of Ida that collected far more than actuarially possible. In simple terms any cohort prior to 1938 was incapable of paying enough payroll tax, plus credited US Treasury Interest to fund their own benefit.

    It did not help that congress legislated a suspension of the automatic payroll tax increase because they thought the increase would hurt the fragile economy.

    This led to the near collapse of SS in 1950. The tax and base were increased by 50% and they began enrolling the remaining 50% of non covered workers into SS. These non covered workers had low, unsteady wages and would draw benefits far in excess of what their payroll tax contributions would produce. In simple terms, this second tier SS workers were used solely to fund benefits for the first tier SS workers of 1937-1950.

    SS never produced much in the way of a yearly cash surplus. During periods between 1957 and 1965 SS-OASI ran negative cash flows. Between 1971 and 1983 SS-OASI ran continuous negative cash flows.

    The Greenspan Commission’s Recommendations were implemented by congress in 1983: Increase the tax and base, increase the retirement age for those then under age 38 (not generation x, but boomers and everyone who came later) and began subjecting benefits of up to 50% to taxation. This was later increased to 85%.

    The boomers out numbered all other voting blocks. Seniors numbered less than 20 million. Yet boomers allowed these changes to take place. Boomers had the chance to make a change and they did not. They failed to act.

    Millennials’ outnumber boomers. It only makes sense. They are the offspring of boomers, a baby boom; a boom begets a boom and a bust begets a bust. Millennials’ have the ability to vote in representatives to change SS should they choose to do so.

    Can SS be fixed? When Bernie Madoff’s Ponzi Scheme failed, what was done? First they recouped as much of the money they could. They then began paying those who were fooled. Customers will have received about 60 percent of what they are owed when the distribution is finished, the trustee said. Who is responsible?

    Today SS-OASI has well over $35 Trillion in unfunded liabilities. If SS were closed down today and only those with enough credited work history were paid, the fund would need over $38 Trillion in the bank earning 5% a year. The problem is there is less than $2.8 Trillion and it is earning less than 3.2% a year.

    Who is to blame; politicians and/or voters?

    There is no painless solution. The increase in the unfunded 75 year solvency period used by SSA Trustees between 2000 and 2016 has grown at an annual rate of 9%. SS revenues have growth at an annual rate of 3%. Unfunded liabilities are growing three times faster than revenues.

    In Reality this is no different than a money pit;

    Something of value, which, for some reason or another, has continued to absorb considerable amount of payments due to its continuing failure to live up to expectation.

    A possession or financial commitment that creates substantial ongoing expenses, especially one whose costs are considered to be unsustainable.

    I believe we are on the cusp of the War between Generations. As boomer, I know full well SS is a complete and utter failure. I love my five children and I want them to do better than I have. They deserve freedom to live their lives. They and their generation and younger generations are unable to do so. For Boomers to be paid their Scheduled benefits would require the SS-OASI payroll tax to rise to nearly 18% up from the recently reduced rate of 10.6% to 10.03 https://www.ssa.gov/oact/progdata/oasdiRates.html

    I will stand with my five children and not with my fellow boomers when this war comes.

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