Social Security – The Real Figures

The current Social Security Trustee’s report states “There were about 2.9 workers for every OASDI beneficiary in 2010. This ratio had been extremely stable, remaining between 3.2 and 3.4 from 1974 through 2008, and is lower for 2009 and 2010 due to the economic recession. (Oops, they neglected to state that in 1945 there were 42 workers per beneficiary.  Isn’t that like – material?) The ratio of workers to beneficiaries is projected to decline, even as (another assumption: “as” not – IF) the
economy recovers, because the workers of the baby-boom generation are being replaced in the workforce by lower-birth-rate generations. This ratio reaches 2.1 by 2035 when the babyboom generation will have largely retired, with a further gradual decline thereafter due to increasing longevity.”

Full Report at:  http://www.cnsnews.com/sites/default/files/documents/

2011%20SOCIAL%20SECURITY%20TRUSTEES%20REPORT.pdf

I have a problem with their “estimate” that there are 3 (rounded) workers for every beneficiary.  It begins with another material misrepresentation.  The Board of Trustees reports that there were 156,725,000 covered workers who paid SOME social security taxes in 2010 (And SOME is the critical word).  It also reported that there were 53,398,000 beneficiaries in 2010.  So… all you do is divide the workers by the beneficiaries and you get – Presto, 2.9!

NOT SO FAST!

First, anyone who paid ANY social security taxes (even one dollar!) was counted as a worker.  So if you worked for one day and paid $1.00 in social security taxes you were counted by social security as a worker supporting the system.

According to the Bureau of Labor Statistics there were 111,714,000 million FULL TIME workers in 2010.  Full time workers, not someone who worked for a few weeks or only a few hours a week all year, those are the workers one should use to determine how many workers are really supporting the system.

However, of that total there were 18,073,000 government workers (local, state, or federal employees).  (Note: The benefits for these employees are not paid for by the private sector.  They are paid for with tax dollars or borrowings which must be repaid. Consequently their payments are not revenue but expenses for the American taxpayer.).  Since they do not contribute to the system, these workers should also be removed from the base.

That leaves 93,641,000 workers to support 53,398,000 beneficiaries, a ratio of 1.75.  It would take a great deal of research to determine just how much all the part time workers contribute but you can assume that it isn’t a lot.  I would venture a guess that it would require four part time workers to contribute the equivalent of one full time worker.  That gives an approximate coverage ratio of two to one (down from 42 to one in the year before the baby boom generation started arriving).

Ladies and gentlemen, when the board of trustees uses such obviously flawed statistical analysis in something as simple as a coverage ratio, one should seriously question their other conclusions.

We’ve said it before, we’ll say it again: things are going to get a lot tougher in the years ahead.  Govern your actions accordingly.  Live beneath your means!  Our guidebook, available on this site, will help you save the money you’re going to need in the future while still living well today.  Try it, you’ll like it!

Today’s video:  http://www.youtube.com/watch?v=qyv3PJs-KBw&feature=related

Homeowners Escape Property Taxes

Buy Property Back at Fractions of a Cent on the Dollar

Detroit’s property tax rates, 65 mills for homeowners and 83 mills on other property owners, are the highest in the state, according to a recent Citizens Research Council of Michigan report. The average statewide rate is 31 mills for homeowners and 48 mills for other property owners.

Detroitproperty owners are using a little-known loophole to erase tax debt by letting their properties go into foreclosure and then buying them back a month later at the Wayne County Treasurer’s auction for pennies on the dollar.  Critics described it as a growing problem as the foreclosure crisis deepens. A record number of properties — nearly 14,300 — are expected to be auctioned this fall, and officials predict more owners will try to buy back their properties. Owners often buy back their properties using the same name under which they lost them. And there’s generally a low risk of getting outbid because of the glut of vacant land. Last fall, at least 6,847 parcels in Detroit went into the city’s inventory after they didn’t sell at auction.
The savings can be enormus.  At the September auction, the properties’ prices are the debt that’s owed.  But in October, the county treasurer sells offwhatever is left at a $500 opening bid. That’s where most of the sales happen,including owners buying back their properties. One owner bought back her storefront on West Seven Mile last year for $15,000, eliminating nearly $37,000 in debt. Another owed $23,100 on two buildings and a parking lot on Conant, but bought each back for the minimum $500.

Read the full article: http://detnews.com/article/20110907/METRO01/109070383/Owners-escape-tax-debt-by-rebuying-foreclosed-homes#ixzz1XT5KI87R

The Oh-Bomb-Ah Jobs Plan

Watch the video:  http://www.youtube.com/watch?v=lAD6Obi7Cag

Social Security Status Report

The Red Ink Continues and Continues and Continues…..

Income and Expenditure Summary:

Taxes  Received   FY 2010  $643.3 Bil        FY  2011  $661.9 Bil  2.0% increase

Benefits  Paid       FY 2010  $695.5 Bil        FY 2011   $719.8 Bil  3.5% increase

While both taxes received and benefit paid showed increases year over year, do you see the problem(s)?  Yes, first, in both 2010 and 2011 Social Security spent more than it took in: a $52 Billion cash deficit in 2010 and $58 Billion in 2011.
Additionally, note the percent increases: a 2% increase in income with a 3.5% increase in expenditures. At this rate of deficit increase, Social Security will be running out of money far sooner than current projections.

The increases in benefits being paid is the result of more baby boomers retiring.  The number of new beneficiaries this year is
now growing by 10,000 every day. That number will be rising every year for the next 14 years.

With structural unemployment somewhere in the 18% +/- 2% region (not the more politically popular, but less accurate, government unemployment figure of 9.1%), taxes received will continue to fall below current projections.

Additionally, I believe that there will be a cost of living adjustment in the 2% range in 2012 (NOT, of course, to coincide with any election).  The cost of living adjustment and increased number of beneficiaries will result in an increase in benefit payments next year of about $40 billion (5.7%). Meanwhile, FICA revenues may actually decline in 2012, increasing the financial squeeze.  I expect Social Security to run a deficit (and a growing one) for the foreseeable future.

The $2.65 trillion in the Social Security portfolio currently earns 4.25%.  The average maturity of its holdings is seven years.  The current rate on 7-year treasuries is 1.5%.  That means that there are a lot of “old” bonds purchased decades ago at higher rates of interest that are boosting the portfolio return.  The problem with these “old” bonds is that they are likely approaching maturity.  So, when a 15.5% bond purchased thirty years ago matures in 2011 and is paid off, the new rate on a replacement 30-year bond is only – 3.75%.  OUCH!  Therefore, I expect to see the interest earned on the portfolio to decline year over year – another cash flow problem.

All this will cause additional strain on the federal budget because until now all that cash generated from FICA taxes was a source of funds for government spending programs.  Now Social Security no longer generates a net cash inflow.  Actually,
Social Security will become a drag as it redeems its treasury bonds, notes and bills to cover the deficit.

How long can this continue?  I leave the answer to that question to wiser people than us.

Today’s video (what ever happened to the “better life”?) http://www.youtube.com/watch?v=jxNEiZhpinY

Public Pensions Under Fire inTexas

A group of high-powered Houstonbusiness leaders is starting a statewide campaign to overhaul retirement for future teachers, firefighters, police officers, judges and other state and local government workers.

“I think the state needs to get the hell out of this (pension) business completely,” said lawyer Bill King , who is forming Texans for Public Pension Reform with others from the Greater Houston Partnership, an über-chamber of commerce with business members representing $1.5 trillion in assets.  (We’ve been warning for years that the public pension system was going to come under attack.  This is just the beginning!)

King said he would support a constitutional amendment eliminating public pensions in the state and moving all government employees to retirement accounts akin to 401(k)s. Legislators would have to approve such an amendment on the ballot when they convene in 2013.

King, the son of a union pipefitter, said he was disappointed with the anti-worker tenor of the Wisconsin battle over collective bargaining rights. This campaign, he added, is not intended to bully public employees.  It’s about being honest with the next generation of workers that, while current workers are legally assured of their pension, taxpayers will not be able to afford to continue such a rich benefit in the future, King said.  (And it isn’t all that certain that the benefits for current workers will be spared.)

Texans for Public Pension Reform developed from King’s interest in the City of Houston’s pension liabilities. He said he was
shocked when he started looking at the city’s books to prepare for a possible run for mayor in 2009.  (And if you look at the books of a whole lot of cities, counties and states you’re likely to find the cupboards are bare.  Plan accordingly.  Live beneath your means.  Save!)

Read the full article:  http://www.statesman.com/news/texas-politics/battle-brewing-over-texas-public-pensions-1802578.html

Illinois Leads Nation in Job Losses

Illinois lost more jobs during the month of July than any other state in the nation, according to the most recent Bureau of Labor Statistics report.  After losing 7,200 jobs in June, Illinois lost an additional 24,900 non-farm payroll jobs in July. When it comes to putting people back to work, Illinois is going backwards. Since January, Illinois has dropped 89,000 people from its employment rolls.  The report also said Illinois’s unemployment rate climbed to 9.5 percent. This marks the third consecutive month of increases in the unemployment rate.

Illinois started to create jobs as the national economy began to recover. But (and it a big “but”) just when Illinois’s economy seemed to be turning around, lawmakers passed record tax increases in January of this year. Since then, Illinois’s
employment numbers have done nothing but decline.

Read the full article: http://www.illinoispolicy.org/news/article.asp?ArticleSource=4362

(Wow!  Now there’s a surprise!  Who coulda’ guessed?)

On this blog back on Jan 31, 2011 we ran the following headline:

“Illinois Governor Quinn Detonates Nuclear Bomb on Jobs”

We had the following commentary: “In a stroke of economic brilliance, Illinois Governor Pat Quinn turned the entire state radioactive to business and taxpayers. Governor Quinn signed off on a bill that hikes personal income taxes 67% and corporate taxes by 46%. The personal income tax rate has now rises to 5%, up from 3%. The corporate income tax rate rises immediately to 7 percent, from 4.8 percent. The increases are “expected” to produce $6.8 billion a year for the “four years” it’s in full effect.

Interestingly, no real political effort seems to have been expended to cut into the bloated benefits of the public employees and cronies of the state– surprise!

Incidentally, while on the campaign trail Quinn promised voters he would – veto any income tax hike that would raise Illinois’ rate over 4 percent. Recall our pre-election “joke”, Senator’s Choice, Heaven or Hell? The joke’s on you, Illinois, Welcome to Hell.

And here’s a news flash, don’t be surprised when the actual revenues collected from these additional taxes falls far short of the $6.8 Billion “expected” and don’t be surprised when the “four year period” is- extended

Gee…who could’a guessed?

Today’s video:  http://www.youtube.com/watch?v=YCDcp5xwNFA

Social Security Disability on Verge of Insolvency

Laid-off workers and aging baby boomers are flooding Social Security’s disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency. The stampede for benefits is adding to a growing backlog of applicants — many wait two years or more before their cases are resolved — and worsening the financial problems of a program that’s been running in the red for years. This year, about 3.3 million people are expected to apply for federal disability benefits.  That’s 700,000 more than in 2008 and 1 million more than a decade ago.

New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts.  About two decades later, the much larger Social Security retirement fund is projected to run dry as well.  The disability system is in much worse shape and its problems defy easy solutions.

Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no
longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.  The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.

Read the full article:

http://news.yahoo.com/social-security-disability-verge-insolvency-090119318.html

The Great Collapse Has Officially Begun

PhoenixCapital Research – 8/20/11  “What’s happening right now is not just a market crash, bear market, deflation, or any other item related to just one asset class.  Instead, this is a collapse of the entire US monetary and political system and the mentality of spending one’s way to wealth.

For 80-plus years, the US has operated under a crony capitalist system in which politicians dole out political and economic favors to the chosen few whose bribes/donations funded their campaigns.  This system was aided and abetted by the US Federal Reserve, which dealt with any and all economic issues by printing more money. Whether it was the Asian Crisis, Long Term Capital Management, or the 2008 Crash, the Fed dealt with the issue by opening the floodgates and flooding the financial system with liquidity.

“Aside from making moral hazard (the notion that those large firms who screwed up were never actually allowed to fail) the bedrock of the financial system, the Fed, also blew a credit bubble which in turn funded bubbles in virtually every asset class: bonds, stocks, real estate, emerging markets, even some commodities.

Indeed, the vast majority of US economic growth over the last 40 years has been fueled by the Fed’s loose money policies. When we account for inflation, the US economic “miracle” of the last 30 years is in fact not all that miraculous. Take away easy credit and Fed funny money and the US GDP has barely grown at all since the ‘70s.

“When your entire financial system is built on debt eventually you hit a brick wall. We did this in 2008. The Fed barely held the system together by going “all in” and funneling over $11 trillion in bailouts, backstopping the major US banks, and transferring north of $2 trillion in garbage debt to the public’s balance sheet (these are just the moves we know about).

“This effort has now failed as the world collectively realizes that the Fed cannot hold the system together. This began to become clear when QE 2 spent $600 billion and the US got at most three months’ worth of improved economic data (while inflation exploded throughout the global economy, leading to riots, coups, and more).

“In simple terms, we’ve now entered the Real Crisis, the END GAME, for our current monetary system. Before the dust settles on this mess, the US and its political, economic, monetary structure will look very very different.

“However, before we get there, we will see riots, civil unrest, possibly martial law, for certain a Government shutdown, bank holidays, a debt default/ restructuring, the re-instatement of the Gold
standard or something like it (possibly a basket of commodities), food shortages, and more.  We will also see trade wars, possibly another World War, a temporary backlash against globalization, a de-consolidation or fragmentation of corporate America, and other items.

“In plain terms, we’re entering a period in history that will rival the Revolutionary war. This country will be very very different by the time this has ended. Many people will lose everything in this mess. Yes, everything!  So if you have yet to take steps to prepare for this, you need to get moving – NOW!”

-PhoenixCapital Research Aug 20, 2011

Read the full article: http://gainspainscapital.com/

Today’s video:  (the sound problem will be over after the first minute)  (Try to keep track of the years, statements were made in different years – some comments back in 2005)

http://www.youtube.com/watch?v=ureyMyhsTdE&feature=related