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January 12, 2005



It seems to me that "bankrupt" might very well be an apt way to describe Social Security's future. To say that someone is bankrupt is not to say that they have zero income and assets -- it is surely not "zip, nada, less than zero". One might in fact still have assets and be "bankrupt" (take Donald Trump, please), merely more debt than assets. If you had zero assets and bills that exceeded your income, wouldn't it be fair to say you'd be bankrupt? If you sold your house and everything you owned, used up your savings and your salary, wouldn't you be "flat bust" when your rent came due? That is the situation Social Security will be in once the "trust fund" (an asset of questionable value if it's owned by the government) runs out.

On a separate topic, is it true that personal accounts would particularly benefit African American males? I know their mean life expectancy is lower than that for whites, but what are the modes? That is, if black men tend not to live as long largely because a great number of them die in their teens and twenties, so that a 30 year old white man and a 30 year black man had roughly equivalent life expectancies, it seems like personal accounts wouldn't change much, since it's unlikely that a 23-year-old who died a violent death would have much money in that personal acount. Anyone have any information about this?


I'm looking for one straight answer to this question.

If we don't raise taxes and/or add a Social Security repayment item to the federal budget (forcing taxes for other budget items), when does the Social Security run out of cash (i.e. bankrupt, busted) ?

The answer to this question is the "point of chaos" that we all must dread. No tax, except on the other guy, is ever painless and easy. When you and the other guys become overtaxed or feel truly overtaxed, "chaos" will seem easy to live with.


See Donald Luskin's article at NRO for a reasonable reply to the "Social Security is Solvent" manra.


See Donald Luskin's article at NRO for a reasonable reply to the "Social Security is Solvent" mantra.


Ryan - re the life expectancy question, that is a very shrewd point, and I say that mainly because we have already addressed it! (What are the odds?)

We recently said this:

[Reform] Proponents have also noted a racial angle to this. Twenty year old black males, about to commence a lifetime of payroll taxes, have a life expectancy of about 65 [make that 70, but there is 5 year gap relative to white males].

Here is the CDC site with the numbers you want.

From Neo: The answer to this question is the "point of chaos" that we all must dread.

My current view is that we will have a political crisis when some significant number of younger workers realize that, absent reform, the money to pay their statutory benefits will not be there. In this theory, folks would be incensed to think that, in the year before the breakdown, everyone got a full check, and the year afterwards, everyone got cut by 25%. I would clamor for a bit of smoothing to re-arrange the pain.

Right now, due to the accounting mechanism we call the "Trust Fund", the CBO says that everyone will get a full check through about 2050, i.e., another 45 years. That means that someone who thinks they will live to 85 will always collect full benefits if they are older than 40 today.

Hmm, so doesn't that mean we should be having a crisis? Surely there are plenty of sub-40 workers.

Paul Callahan

Look, Bush didn't say that Social Security will be "flat bust." He said "I want you to think" that it will be. There in a nutshell is the honesty and forthrightness that we have come to expect from the man. Is there anyone who seriously doubts that Bush wants us to think that Social Security is going to be flat bust unless he pursues his privatization policy?


Bankrupt - spankrupt ... it's a RED HERRING folks.

Look, I pay $546 a month for the rest of my life in insurance premiums for an product that is going to MAYBE pay me $1,750 a month for however long I live after age 70.

It's the BIGGEST SCAM in insurance. Its ONLY usefulness is SNEAKING TAXES into government coffers which are THEN SPENT by the government, but not spent on the thing they were collected for. God I wish the blogosphere would wise up and QUIT ACCEPTING THE PREMISE.

CBS News was HUMBLED. Why, because someone QUESTIONED THE PREMISE: Are the documents real?

Why hasn't the blogosphere done the same with Socal Security?

If you eliminated Social Security WITHOLDING, and instead, forced people to write a check for their Social Security premium at the end of the year, Social Security would be RIDDEN OUT OF TOWN ON A RAIL. Nobody would want it.

After all, who wants an insurance policy GUARANTEED to pay you an amount that is LESS THAN POVERTY in your old age?

Put another way: Suppose I was running for president and that this was my main platform: "Ladies and gentlemen, if elected president, I plan to tax you and your employer a total of 15% of your income; so that when you retire, the government can send you enough money so that you will qualify to be counted among our country's poorest people and also qualify for food stamps."

Do you think I would get even as many votes as Joe Liberman?


Bankrupt probably has no real definition other than having filed or about to file for protection in bankruptcy court. This doesn't strictly apply to social security. However, insolvency is a key term in bankruptcy. It means liabilities exceeding assets. Social Security's liabilities already far exceed its assets. Under the current system, I have already "earned" retirement benefits by paying into the system, even though I won't retire for another 20 years. There is an unfunded obligation to me and others who have paid into the system.


Bankrupt, to me, has always meant being unable to pay what you owe. Being able to pay 75% doesn't keep you from being bankrupt.

If I told my landlord I could pay 75% of my rent every month, he'd kick my ass out on the street.


Oh, Paul Callahan - Look, Bush didn't say that Social Security will be "flat bust." He said "I want you to think" that it will be.

Read it again. He said "I want you to think about a Social Security system that will be bankrupt."

Parsed properly, he said "I want you to think about [it]" and "[it] will be bankrupt."



If that's the definition you want to use, aren't we already insolvent in the rest of the budget (and will continue to be, thx to the Bush tax cut)? (from, I think, MaxSpeak)

Paul Callahan

Read it again. He said "I want you to think about a Social Security system that will be bankrupt."

I want you to think about a pig that can fly. While you're thinking about this, tell me if my previous sentence is synonymous to the assertion "I want you to think about a pig, and a pig can fly." Hint: it's not.

Another hint: "that will be bankrupt" is a restrictive clause (no commas). Thus this sentence is not about just any Social Security system, but specifically about one that will be bankrupt ("flat bust" in Bush's original statement).

Since our present Social Security system isn't going to be "flat bust" under any circumstances such as Mr. Bush describes, it follows that he is referring to another, possibly hypothetical, Social Security system. I may be leaping to conclusions, but I assumed he was referring to the hypothetical Social Security system he wants us to think about while he scares us into accepting his latest snake oil economic plan.

Hope this helps.


Hey folks, while you're trying to decide the semantics of flat broke or bankrupt--terms with pretty common definitions: lacking sufficient funds to pay current obligations, and without a rescheduling of those obligations (meaning paying less than is owed), the continueing relationship between the parties will cease.

Now, someone explain how the current construct of the Social Security system is NOT a pyramid scheme--which offered by anyone else, would land them in jail.

SS was a fraud (life expectancy barely exceeded age 65) when it was enacted, the reasons it was enacted--70 years later--no longer exist (old age welfare and raising taxes during a depression), and it is immoral (transereing income for young wage earners to wealthy seniors, blacks are unfairly discriminated against due to lower life expectancy, government has spent the SS surplus for the past 20 years).

(And some suggest Bush has been slightly less precise with his language, LOL.)

On what principles do any of the defenders of SS (herein) wish it to continue? Please enlighten me.

Paul Zrimsek

It's just occurred to me that Bush's critics have managed to show us the way forward here without, perhaps, quite realizing that they've done it. All we have to do is put together two of their main talking points:

(1) SS isn't really in trouble; if worse comes to worst we can just let the estimated 27% cut in benefits happen in 2042 and retirees will still be better off than they are now;

(2) Medicare is a bigger problem anyway.

...... and suddenly we see a way to kill two birds with one stone: Cut SS benefits by 27% now and use the savings to fix Medicare! Even after the cut, retirees will still be getting more than they would have gotten in 1968; how could they complain?


While is it that the defenders of the status quo cannot seem to grasp that the definition of bankrupt is "unable to pay your bills as they come due"? I really don't understand it: are they being willfully obtuse or are they just ignorant? Come 2042, Social Security is not going to be able to pay scheduled benefits as they come due. That is the very definition of "bankrupt".

Brian Carnell

And note that even those rosey scenarios in which SS can pay a whopping 73 percent of its benefits in 2042 are built on ridiculously conservative estimates for increases in lifespan.


Bush is right. SS will be bankrupt.

Saying they could still pay 75% of the benefit is a joke.

I guess Argentina didn't go bust and default, since they are willing to pay some odd cents on the dollar to cover their debts.

Oh, Citibank, I'm not bankrupt...I can pay you 75% of what I owe.


Who defending Social Security here (or attacking Bush's proposal) would, if starting from scratch today, design it EXACTLY as it is now? Anyone? Anyone?

I didn't think so.

So now the question is, given what we have, how do we move forward in a way that is fair to both current (an soon to be) recipients AND current (and prospective) taxpayers? Seems to me a split plan of guaranteed benefits predicated upon the old model and a new mandatory savings/investment plan similar to 401Ks is the way to go, transition costs notwithstanding (as if there is a way to reform SS without transition costs...).

Or do you have a better idea (and the status quo isn't an acceptable answer)?

Kendall Gelner

Brian has the exact same angle I am coming from - what are the estimates for future longevity the current financial model is based on?

Consider this. Some scientists believe that people that are younger than about 50 right now, will be the first people to hold a year 200 birthday party - that is, that technical advances coming in the next 20-40 years will have a significant impact on the average life expectancy.

Even if you don't agree with the 200 figure, as the link Brian posted points out that the model expects an average increase of only six years over the next seven decades. Can any of you honestly believe that with seventy years of medical advances behind us our lifespan will only increase by a total of six years? In the link I provided above Leroy Hood (a biotechnologists who helped unlock the human genome) thinks it will be an increase of 10-20 years in the next 30.

That's one reason why myself and all my coworkers (between 30 and 40) consider all social security taxes as simply money down the drain, or at least a tax like any other that we'll not get anything from personally. Not one of us ever expects to see a cent from the program. It's not even that we mind paying it, oddly enough - we know we can't just stop paying into the program without hurting a lot of people.

But we also know this is a major problem that people are just sitting on (all parties). To proclaim it is not an issue and wait for some major breakthrough to raise life expectancy by a few years in just the next decade or two to prove out the fallacy is just lunacy. When you have a large enough ship headed for an iceburg, you have to start turning early.

If any kind of privatization took place, what might happen is that workers would start to realize "Hey, this is my money and not just another tax" in a way the social security statements do not. I'm not even sure if that is good or bad for social security in the long term to wake up workers as to what is going on, but it sure beats sitting around waiting to see which generation gets the loaded chamber when they look for benefits.


I would appreciate it if you don't take the WAPO's information at heart.


Isn't there a limit on what is paid into Social Security? It's not 12% of wages, because no one has to pay more than IIRC $82,500 into social security in any one year. Those making beaucoup bucks don't pay anywhere near the 6% of wages that is the portion of lower wage earners. Also, what happens to the employer portion if it's more than $82,500? Does the employer still pay their 6% no matter how much?


Where is it? I don't see the assertion that this is a veiled admission that the U.S. Govt is or will default on the IOU's,hehe!! that are the funding for future liability.
Where is the furor over having taxes increased in 1977 to avert this very thing and having those fund absconded for myriad governemnt uses most of which we could have all done just fine without?
Where is the honesty about these two points? It's like they don't exist.

J Mann

Oh, come on, Tom.

I dare you to get a job at US Air, and argue: "we're not bankrupt, we still have enough income to pay 73% of our debts."

If you owe more money than you make, and you have no assets, and you will owe more money than you make for the foreseeable future, then you are flat bust. Sorry.


An excellent chart on the Social Security trust fund is at

Of course the Social Security trustees use a 1.8% economic growth rate. The date when the trust funds runs out of assets and can only pay 73% of scheduled benefits is now 2045, as a result of 4% growth in 2004. If we average 2.5% growth, the trust fund may never run out of money.

For an abundance of links to factual Social Security information visit a recent MyDD diary at:

Another interesting chart from the S.S.A. provides a short term projection of the combined Old Age and Survivors trust fund and the Disability trust fund:

Check out the net increase in assets column. This is the surplus that Bush is spending on tax cuts and corporate welfare. Over the next ten years Social Security will produce a little less than a one trillion dollar surplus. That's the reason Bush reneged on his debate pledge to institute a lock box. He's transferred about $600 billion in surplus FICA payments during his first term to his tax cuts and has big plans for the additional trillion dollars that Social Security will be generating.

If Social Security is generating a one trillion dollar surplus over the next ten years, why is this a crisis? Check out an excellent 1/16 NY Times article by Roger Lowenstein that Josh Marshall points to:


I just noticed a html link. Let me try a couple of extra informative links:

From the Center on Budget and Policy Prioritieswe have a Special Series: Putting Social Security in Context


Well that certainly seems to have worked nicely. There seems to be an awful lot of confusion on one point; probably from relying on NRO and Powerline. Of very special interest should be the report in the CBPP special series Where will the money come from after 2016?.

"The Social Security commission's report (and several recent op-ed articles by supporters of private accounts) contends that starting in 2016, one or more of four developments must occur: other government programs will be cut, taxes will be raised, Social Security benefits will be reduced, or the government will run deficits. The commission's report argues that one of these developments has to occur: where else will the money come from?

But the commission's report is mistaken. As the analysis presented below shows, if the Social Security surplus is walled off and devoted to paying down the publicly held debt (with exceptions in years when the economy is weak), the savings the federal government will realize in interest payments on the debt will more than cover the increased Social Security costs. In short, the Treasury will be paying interest to Social Security instead of paying interest to private bondholders."

Darned if that doesn't sound like a version of Al Gore's lock box. Best idea he every had ... well, aside from inventing the internets.


That is pretty clever - I wonder how many people were fooled by it (and I will admit, I am wondering if the Jolly Buddah was fooled by it).

This CBPP proposal amount to a double-counting of interest. IF we pay down the publicly held debt, it is because we are accumulating a large Soc Sec Trust Fund, which *already* earns interest. The CBBP proposal amount to saying, let's run the Trust Fund up to 4 trillion, and retire 4 trillion of public debt. Then, take the interest we would have been paying on the 4 trillion of public debt, and credit it to Social Security.

Well, sure, except that we are already projecting interest payments to Social Security on the 4 trillion in the trust fund. I have no doubt that doubling the interest rate would extend the life of the trust fund, but so what?

And I will be pummelling ther Times magazine article soon enough.

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