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June 8, 2018 | Social Security Payments Exceed Income: “Trust Fund” Will Be Wiped Out by 2034

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The notion there is a trust fund is ludicrous but let’s look at this story through the eyes of a WSJ report.

The Social Security program’s costs will exceed its income this year for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.

This is three years sooner than expected a year ago, partly due to lower economic growth projections, according to the latest annual report the trustees of Social Security and Medicare released Tuesday. The program’s income comes from tax revenue and interest from its trust fund.

The trust fund will be depleted in 2034 and Social Security will no longer be able to pay its full scheduled benefits unless Congress takes action to shore up the program’s finances. Without any changes, recipients then would receive only about three-quarters of their scheduled benefits from incoming tax revenues.

The report also said that Medicare’s hospital insurance fund would be depleted in 2026, three years earlier than anticipated in last year’s report. Absent changes, the program then would be able to handle 91% of costs.

The nation’s aging population is boosting the costs of Social Security and Medicare, while revenue gains lag due to slower growth in the economy and the labor force.

About 61.5 million people receive retirement or disability benefits from Social Security and 58.4 million receive Medicare.

Dear WSJ

You sounds as pathetic as Al Gore in 2000 with his Lock Box theory.

In order to have a trust fund, there has to be something in it. There is no money. It’s all been spent.

The notion of a “Trust Fund” is as ludicrous as me writing a check to myself for $1 trillion dollars then declaring I am the world’s first trillionaire.

What is true and relevant is that payments exceed income. To the extent that payments exceed revenue, US deficits and overall debt rise.

Lock Box Debate

Full Lead-In

There is no fund. For reasons unknown, there is still a bit of trust. There shouldn’t be.

Mike “Mish” Shedlock

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June 8th, 2018

Posted In: Mish Talk

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