For those of you who still think there is time to dilly dally before we fix our entitlements (essentially arguing as Homer Simpson did when running for garbage collector "can't someone else do it!"), well that time is up. Check out this paragraph from the Social Security Trustees Report released yesterday:
The projected assets of the DI Trust Fund decline steadily, fall below 100 percent of annual cost by the beginning of 2013, and continue to decline until the trust fund is exhausted in 2016. The DI Trust Fund does not satisfy the short-range test of financial adequacy because the test requires that the trust fund remain above 100 percent of annual cost throughout the short-range period.
Just as a reminder that Social Security consists of two parts. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program. Disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. So it is this second fund that is going bankrupt in just 4 years, the OASI fund is supposed to be good until 2035. Though that has some rosy assumptions built in like no recessions. Ever. Which is pretty amazing considering the 3.4% of GDP worth of tax increases coming next year. The real date of bankruptcy could easily occur before 2030. By their own admission, the Social Security Trustees are constantly over-estimating income:
Anyway, back to the DI program. While smaller than the OASI program, it is still a behemoth compared to just about everything else. In 2011, it paid out a total of $132 billion and they estimate that payments will balloon to $201 billion in 2021. That is one hell of a big program to have to bail out and that is probably what the next President will have to do, in one form or another. Could he borrow from the OASI program? Sure. But that will only accelerate the date of its bankruptcy, probably to some point in the middle of the next decade.
The promises the government made to people are bankrupting this country and we can't wait anymore before tackling them. The more we wait the worse it will be. Doesn't it make more sense to reform a retirement program when the beneficiaries affected are 45-55 years old rather than when they are 65 and have no time to alter their finances?
The worst part is that I have no faith in either Obama or Romney to do what is needed. If you want to manage the decline, they are your men. If you want to actually change something for the better, they clearly aren't. Time to pray for a miracle.
Cross posted from libertarian neocon's blog.