Friday, December 31, 2010

The Day Social Security Fails

Austrian Economists, and anybody capable of doing simple arithmetic, have all said that Social Security is in near danger of bankruptcy. For many years the date to watch was 2018, and recently due to Great Depression Two it has moved up to 2016.

The date is based on when Social Security starts paying out more than it receives in revenue. The predictions, based on extensions of existing trends, is that the surplus revenue would slowly diminish until finally the fund breaks even, and then as the trend reverses would cause annual deficits in the Social Security budget.

That leads to two possible interpretations of what will happen next.

Those who fervently believe in government, in spite of all the evidence, are convinced that there will not be a problem until 2038 (previously 2042) because the Treasury Bonds that comprise the Trust Fund will be cashed in.

Everyone else considers 2016 to be the day the program goes bankrupt.

To cash in the treasury bonds will require that the federal budget be running a surplus.

Even though the Social Security budget is running lean, barely breaking even, this problem could be dealt with even now by politicians with courage and intelligence to tackle the hard problems. Based on that this problem will not be dealt with until the last moment, at which time it will be too late.

But none of this is new. Why mention it now? It was previously noted that there was a potential for the United States government to attempt to shore up the losses by seizing private retirement funds.

It is already happening in Europe.

Planning for the future is the responsible thing to do - depending on the government to provide is both irresponsible and unethical. But planning for the future is also something that the government may be making it more difficult to do and punish people for doing.

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