BREAKING:AP: S&P Downgrades U.S. Debt From AAA part 2

Each report is based on their projections from that time. If I were to hazard a guess, the data from the 1997 report was pulled before the dot com boom, which boosted revenue projections. I'm sure you have some other theory though.

I thought you didn't believe in these projections?

You seem to think that social security paying only 75% of what's owed is some kind of victory. You're basically all over the map. First there is nothing wrong with social security, then it will only be able to pay 75% of benefits, but not to worry, it's 75%!

Wow.

 

The dot-com boom? That's a good one! Off-budget receipts were flat at 4.8/4.9 percent of GDP across 1997-2000. Unless the SS Trsutees had projected that these would suddenly plunge in the direction of zero over those years, the fact that receipts continued to come in at the same old rate as always was not what caused the huge error in their projections. Like to guess again?

Sure, and I've already stated it multiple times -- the Trustees projections go far overboard on pessimism. The years 1997-2000 comprised a period of solid economic growth. The number of years of solid economic growth included in the Trustees 75-year projections is zero. Every time we have one, their projections get knocked in a hat. That's why I picked 1997-2007. A decade is a solid chunk of time. There are some good Clinton years in there, then some rather not so good Bush years, and then what Bush fans like to think was a recovery. And over those ten years, the Trustee-projected date of trust fund exhaustion did not get ten years closer. It got three years further away instead. Why? Because even with a mix of economic outcomes from year to year, the Trustees assumptions are hopelessly pessimistic and are not to be relied upon.

Then you were wrong as usual. Projections are a very valuable tool -- in the right hands and when run with a reasonable baseline and assumptions. All projections are of course run to err on the side of caution. No analyst wants to walk into his policymaker's office to explain that the crisis he had projected to be ten years away is now going to hit next week. Hence, all projections deliberately make things look worse than what they really are. That's expected. But CBO's projections for Social Secuirty are very pessimistic. Those of the SS Trustees are flat out off the charts. So many things have been low-balled by so much that the chances of their projections holding up over ANY extended period of time are nil.

You seem to think that SS will be out of money when the Trust Fund is. What a deep understanding of the system you have. There was no trust fund full of money until 1983. The trust fund was programmed in those days to be empty again by about 2050. This is SUPPOSED to happen.

And yet it may not. If the SS Trustees are only a little bit off in their assumptions of future economic growth, future net immigration, or future additions to life expectancy at retirement, then guess what happens? Nothing. That's right...the trust fund in such cases projects NEVER to run out of money, and even if we do exactly nothing at all, SS will be able to pay 100% of currently scheduled benefits until the end of the 75-year projection window and beyond.

On the other hand, if some or all of the Trustees assumptions should somehow turn out to be valid, and if today's workers are not so driven by intelligence and foresight as were those in 1983 and thereby choose to do nothing at all about it by then, the trust fund will indeed be exhausted. But far from cutting checks in an absence of cash as you so clumsily suggested earlier, there will still be funds on hand from then-current payroll taxes alone to pay about 75% of scheduled benefits, and that 75% of scheduled benefits will be worth MORE than what 100% of benefits is worth today. This is what empty-headed partisans with nothing standing behind them like to call an apocalypse. The worst will even capitalize it.

There is nothing wrong with Social Security. It has been tinkered and toyed with a dozen times in the past to keep it on track with current information and trends. While it doesn't look like it will be necessary at the present time, further such adjustments could easily be made if the need for them were to arise.

There is meanwhile a world of things wrong with the SS Trustees projections of the system's future. They have been crazily off the mark in the past, have ended up making major revisions with virtually every annual release of their report, and they still have beyond rationally pessimistic assumptions built into their projection model. Aren't they doing a nice job?

The actual chance that SS will ever pay out just 75% of scheduled benefits is extremely low. But if you were worried about even such small odds, there is something you could do about it right now: TAX YOURSELVES the money needed to make up for whatever shortfall you think might be coming down the road. That's what the baby boomers did. You all aren't gutless enough to fall short of baby boomer standards, are you?

 

You've provided zero evidence that your personal SS projections are right and the SS trustee's projections are wrong. Even when you offered up the CBO report it was only off 3-4 years from the Trustee one. Both show the same trends and are going in the same direction.

So, what actual evidence do you have that the Trustees and the CBO are wrong and you are right? Has there been some other study done that refutes those projections?

 

After reading this I have resolved never to lend to an American.



...although I might let a bum have a pick on my banjo.

 

Ah well, UK will likely be next.

 

Maybe. I'm putting my spare cash into American Sandals.

 

The Trustees themselves provide the evidence. In every year that is not at least as economically bad as the Great Bush Recession, their projected outlook becomes rosier each year simply because they have to replace the first year of their pessimistic projections with data representing what actually happened. Of course, they also get to add one new pessimistic year to the series as well, but it has to go way out at the very back end where it doesn't have any up-front effect. Over any significant period of time (such a ten years), the accumulated error becomes laughable. They project that Event-X will occur 32 years from now. Ten years later, they project that Event-X will occur 35 years from now. Excuse me? Shouldn't that be 22 years instead of 35? How could you have possibly screwed up by that much?

As noted, CBO's projections are also pessimistic, just not as absurdly pessimistic as those done by the SS Trustees.

Get out of your black-and-white binary world. It is not a matter of right and wrong. It is a matter of using more reasonable rather than less reasonable assumptions in running a projection. Do you believe that it is reasonable to assume that we will never again see a year with 2.0% or more in economic growth? Do you believe that even with all these baby boomers aging and retiring, it is reasonable to assume that net immigration will be no greater than flat over the bulk of the next 75 years? Do you believe it is reasonable to assume that the rate of increase in life expectancy over the last quarter of the 20th century will continue undiminished over nearly all of the rest of the 21st century? As a part of that, do you believe it is reasonable to assume that the rate of violent death among both men and women will be immediately reduced by 30% and that this reduction will apply over the rest of eternity? Do you finally believe that it is reasonable simply to ignore the SS Trustees long confirmed and quite well established history of pessimistic bias in making these projections?

 

To say that you would seem to be confused would be an understatement. Considering the wild swings in economic fortunes, the Trustees have been fairly consistent. The 2000 Trustee's report had the drop dead date as 2037. This was during a fairly good economic period.

The 2010 Trustee's report, after a terrible recession, puts the year at 2035. So a ten year difference yields a difference between the two projections of only two years, not 22 which you oddly calculated.

So you asked a good question, how could you have possibly screwed up by that much?

2.0% economic growth is starting to look like a best case scenario (thanks Obama!). Immigration is a matter of law, not some long term statistical trend. I guess you would prefer there be some pretty big guesses on possible changes in the law? I wouldn't accept that as a legitimate variable to screw around with. You have no idea what Immigration law might look like 10 years from now, but I think the most likely scenario is the current stalemate that we have, not some fantasy fine tuning of immigration law to bring in the most beneficial immigrants to the Social Security program.

Let's judge the trustees on what they've predicted against something that has already occurred.

The 2000 Trustee's report calculated the year that expenditures would exceed payroll taxes would be 2014. It actually happened in 2010. So it sounds like the problem with the Trustee's assumptions is that they are too optimistic, not too pessimistic as you've claimed.

 

LOL! Nothing drops dead when the trust fund is exhausted, assuming that it ever actually is. But let's recap. Between 1997 and 2000, the Trustees were obliged to move their projected date of trust fund exhaustion from 2029 to 2037. Over three years, they had to correct by eight years. This happened principally because over this continuation of what was already a fairly good economic period, the Trustees had projected economic growth to be 1.7% each year. Instead, GDP grew by 4.5%, 4.4%, and 4.8%. Would you like to know how many times over the past 50 years GDP has grown by 1.7% or less? The answer is eight -- 1974 and 1975 following the first oil crisis, 1980 following the second oil crisis, 1982 during the Reagan Recession, 1991 during the Bush-41 Recession, 2001 during the Lesser Bush Recession, and 2008 and 2009 during the Great Bush Recession. This illustrates one (but just one) of the Trustees' many problems -- in any year in which the economy is not suffering from some grave national crisis, their projections are going to be hopelessly biased to the pessimistic side.

There was nothing odd about my calculations, nor about the ten years I selected. I chose an interval composed of several good years, several bad years, and several years of weak recovery to about an average of the two. You have thrown away all of the good years and replaced them with catastrophic years, thereby defining the worst ten-year interval since the Great Depression. This of course is exactly what you NEED to do if you want to make the Trustees' projections look even remotely reasonable.

It was 3.0% in 2010. Thanks Obama.

The Trustees project both legal and illegal immigration. Not very realistically, but at least they aren't obtuse enough to want to ignore the matter.

With a few well-known exceptions, anyone who works is part of the Social Security system. Immigration status doesn't matter. You work, you have payroll taxes deducted from your paycheck. Undocumented workers have already paid tens of billions of dollars into SS, and unless the law is changed, they will never be able to draw a penny out. The fact is that immigration is a function of demand, and particularly of demand for services that immigrants are able to provide. As each baby boomer retires, there will be less than one new native worker available to replace him or her. That will create a labor vacuum all by itself. Aging boomers will create increasingly higher demand for home health care and other health related services. These demands generate relatively low paying jobs that natives do not much seek and that immigrants can quite capably perform. The long-term implications should be obvious, but they are not well reflected in the Trustees' projections.

Pfft! The only reason it "happened" in 2010 was the Great Bush Recession combined with stimulus legislation that exempted some income from SECA taxation and exempted some workers from the employer share of FICA taxation. All of the revenues lost to SS as the result of those exemptions were made up for by payments from the General Fund, but the Trustees don't include those as part of payroll tax receipts because someone other than an employer or employee paid them. As if that makes a difference to the financial situation of the system. The same thing will happen with the 2% reduction in employee FICA taxes. SS will still get the same amount of money as always, but the Trustees will pretend that receipts from payroll taxes are mysteriously drying up earlier than expected. By the way, the expenditure number they describe includes gross benefit payments. No netting is done for the $20+ billion worth of income taxes paid on benefits during 2010 that of course flowed right back into the SS Trust Fund.

Still, at the end of the day, the Great Bush Recession has done a great deal of damage to payrolls and thus to payroll taxes. This is not doing any favors to Social Security or those who depend on it in either the short-run or the long-run. Assuming however that the present calamity does not plague us over all of the next 75 years, projections done by the SS Trustees will continue to be examples of unwarranted statistical pessimism run utterly amok.

 

17thAndK wrote: "... ask yourself if you don't feel differently about what you have recently learned for having done it on your own, rather than having had me just stick a link in your face."

e: Truth is, withholding your source irritated me. That's how I felt and nobody believes otherwise. I'd like to say different, but I'm likely to behave in a similar manner the next time. All said, inexplicable figures were attained & Treasury provides an accounting of the trusts issuing activity. However, many of the same questions remain.

17thAndK wrote: "Accordingly, theirs [US Government agencies and trust funds] are non-marketable securities that cannot be traded on secondary markets... The public at large cannot purchase these securities. ... their investment activities specifically are not budgeted."

Yeah, that there has been $46.6 trillion worth of GAS securities transferred, issued or redeemed in just 10 months is obviously off-budget activity. The $2.5 trillion worth of intragovernmental debt that the SSTF is holding, which has taken many years to accrue, is the tiny portion that's subject to the so-called statutory debt limit.

17thAndK wrote: "All of this is actually carried out completely in the open and it can all be scrutinized by the public at will..."

I really haven't had the time to engage this subject, but what research I did perform didn't yield very much insight. True, readily available is information on intragovernmental debt or holdings & non-marketable securities. Plenty on Government Account Series (GAS) securities as well as issue & redemption activity. But what information exists on those topics pertains only to that which is subject to the statuary debt limit. Explaining the exorbitant $46.6 trillion worth of "redemptions" conducted within the various agencies or trusts of the federal government is insufficient at best. Contrary to your statement, none of this is widely known by or as accessible to the public as you imply. Nor is the nature of this activity explained, let alone scrutinized by any source in corporate media.

What I've tried to determine is what exactly necessitates such an incredible amount of intragovernmental issue & redemption activity each year? I've already asked you to explain, to justify this. You of course ignored that request. You obfuscated, deeming it far more relevant to note whether a redemption was incorrectly described as an obligation. You went on about the shift into "short-term and very short-term maturities ... magnified the redemption volume", but as you acknowledged initially, nothing is actually redeemed. They just paper over it with future obligations. No collective amount of surplus revenue could possibly come close to anything even remotely equaling such quantities. This activity has nothing to do with conducting the people's business. This is the bit of insight I did find:

Interesting... So, all those tens of trillions don't show up on the books because it's really just one part of the government owing another. Haven't you harped on about how Treasury and the SSTF were separate entities? They of course are, but apparently, not in any real fiscal accounting sense. As you have been told repeatedly, they are parts of a whole. You also went on about how these trust funds securities are in fact "assets", that their surplus revenues weren't raided.

So, according to the GAO & GPO, you have an asset in bookkeeping sense, but little else. The surplus funds are gone, they've been spent and there are no "real economic assets that can be drawn down in the future to fund benefits." That last sentence is interesting too, that huge, inexplicable balances in no way make it easier for the government to meet future obligations. What I consider far more important is that $52 trillion worth of securities, the vast majority of which are non-marketable intragovernmental holdings, have been redeemed with very little knowledge or understanding by the public. It's an open secret of sorts, done without any independent scrutiny or oversight. Like myself, the reader may be seeking a motive for all this. I see it as purposefully destructive fiscal policy, creating a cycle of endless debt that must be serviced, ultimately by the private sector. The genius of all this is that it's structured and presented as debt we owe ourselves.