Google+ Followers

Tuesday, May 28, 2013

Matt Taibbi Gets Social Security Wrong - Very Wrong

Matt Taibbi writes for Rolling Stone.  He is a card carrying Leftist, but I read his stuff anyway.  He is in the top five on the ZPP (Zingers Per Page) hall of fame.  I wouldn't want to be the target of his wrath, he has a way with words that keeps me coming back for more.  Few can verbally disembowel in the way that Taibbi can.  For the last few years he's been targeting the Unholy Wall Street / Government Alliance, so he's had a lot of practice and material on which to practice his craft.

This is why I was so surprised to see him completely wrong in his latest column about the Government Ponzi Scheme known as Social Security: "After spending much of the past decade borrowing from, among other places, the Social Security trust fund to pay for massive tax cuts and bank bailouts, America's wealthy are now turning around and demanding both $5.7 trillion in new tax breaks and significant cuts to things like Social Security, which incidentally is self-funding and running a huge surplus."

A "huge surplus"?  I understand it's politically correct to defend, at all costs, the Sacred Cow that is Social Security, but the program was doomed from the start.  The people who stated as such, John T. Flynn, Garet Garrett, Albert J. Nock et al. have been wiped from the history books, erased in a sense, from the record.  Even a free spirit and fearless and independent minded person like Taibbi is either not allowed, or not able to deviate from the establishment path.  The Bewildered Herd as well, has been conditioned to, in lockstep, repeat the mantra that 'social security is running a surplus'.  They do this because they have been told to do so by the Establishment Media and Politicians.

It's time for Reality Therapy.  Mr. Taibbi, you're uncharacteristically very wrong.

Social Security is bankrupt.  How do I know this?  The people who run the program - the Trustees, say so.  Here's the link to the 2012 Annual Report: http://www.ssa.gov/oact/tr/2012/tr2012.pdf

The trustees of the report tell us it is running a deficit: "In 2011, Social Security's cost continued to exceed both the program's tax income and its non-interest income, a trend that the Trustees project to continue throughout the short-range period and beyond. The 2011 deficit of tax income relative to cost was $148 billion, and the projected 2012 deficit is $165 billion." (Page 2)

Here is the key phraseology from page 10: "Annual OASDI cost exceeded non-interest income in 2010 for the first time since 1983. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period."

Did you get that? Without interest payments from the government, the trust fund will be in negative cash flow for the next 75 years.  The Trustees say there is no immediate problem for the trust fund, as long as the government keeps paying interest. But there is a problem.  The payments are already coming from the government now.  This is the right hand of the Federal Gov't paying the left hand.  If you ran your business or finances like this you'd be behind bars.  The 'interest' on the non-marketable IOU's are being paid for by government fiat.  With 'fiat' currency as well.  But wait, there's more:

There will eventually be this problem:  "Nevertheless, total trust fund income, including interest income, is more than is necessary to cover costs through 2020, so trust fund assets continue to grow. Beginning in 2021, cost exceeds total income and combined OASI and DI Trust Fund assets diminish until they become exhausted in 2033" (page 10).

Did you get that? Exhausted. That is bureacratese for "bankrupt."

Then what will happen? The Social Security Administration will cut the promised benefits.  "After trust fund exhaustion, continuing income is sufficient to support expenditures at a level of 75 percent of program cost for the rest of 2033, declining to 73 percent for 2086" (pages 10-11).

I am in agreement with Gary North when he states:  "This means that the promises made to those who paid into the system will be defaulted on. The program will be unable to meet its obligations."

I am also in full agreement with Kyle Bass:

"Very few participants are aware of the enormity and severity of the problems the developed world faces. Those that are aware are frantically trying to come up with the next solution to the debt problems. In our opinion (which hasn't changed since 2008), the only long-term solution is to continue to expand program after program until the only path left is a full restructuring (read: default) of most sovereign debts of the developed nations of the world. . . ."

I find it entertaining to see someone like Taibbi get something so catastrophically wrong. Anyone who says that Social Security is solvent is either an economic ignoramus, or drastically ill-informed.  What do they know that the Trustees of the fund itself do not?  Just because someone writes for a major newsmagazine, and has a following and a way with words, does not confer upon that person the authority to state untruths.  Mr. Taibbi should know better.

No comments: