Wednesday, November 24, 2010

The latest shaky house of cards

NPR (?) does its job for once, helpfully pointing out that another one of the Federal government's Ponzi schemes, this time Social Security, is essentially insolvent because Congress has been raiding the surplus for decades to the tune of 2.5 trillion dollars or so. 

What happens when the full brunt of Baby Boomer retirees hits the system is anyone's guess, but most of those guesses aren't predicting good outcomes:

"The federal government owes $2.5 trillion to the Social Security trust funds. And if the government doesn't pay that money, it will default on its debt — something the U.S. has never done in its history."

Since our government is already about $13 trillion in the hole, the odds of actually being able to pay that money back is somewhere between none and zilch. 

If you are, oh, under 40 or so, you'd best not count on Social Security to be there once you hit retirement age.  Plan accordingly.


Bike Bubba said...

Actually, the main reason Social Security ins involvent is not because of lending to the federal government. The main reason it is insolvent is because the birth rate has dropped by about half since 1937, and the actuarial tables rely on a robust birth rate

The low birth rate, in turn, results in no small part from people being told "Uncle Sam is picking up the bill for your retirement." Before 1937, people knew that they either needed children or savings to have a comfortable life after work.

In other words, Social Security systematically destroys the very actuarial assumptions it needs to work by its very nature.


Douglas Hester said...

Very true, Bert, but those missing trillions would have served to push the insolvency date of reckoning back a very long way. As it is, I would not want to be the SSA administrator anytime soon.

Bike Bubba said...

Nope. The surpluses had to be invested somewhere, and do you want government bureaucrats filling out proxy cards for companies after investing in the stock market?

Contrary to the "standard line," the money isn't gone. It's invested, and invested in the only place I'd want to allow government types to follow.