Isn't the Social Security debate all hype and exaggeration 3553

Begin with the Trustees' Reports, Scott (and other users).

There are serious problems with Social Security and Medicare. The deceitful defenders engage in euphemisms when discussing these, or they simply lie, or omit everything except to hint at the facts, with qualifications:

"Social Security and Medicare are fundamentally sound." False. "All that is needed" here begin the qualifications, admitting the truth implicitly if not explicitly "is a small handful of changes and fine-tunings" deliberate deception as to the magnitude of what is to come.

Begin with the Trustees' Reports. Note that the problems with these two monster enbreastlement programs aren't limited to themselves, but to everything else because they constrain the ability of the federal government to do other (often more appropriate as well as, instead, consbreastutional) things.

"... Public concern about the financial status of Medicare and Social Security tends to focus exclusively on the HI and OASDI Trust Fund exhaustion dates when benefits scheduled under current law can no longer be paid in full. But there are more immediate and fundamental reasons why Medicare and Social Security financing reform is needed: namely, the two programs together will place rapidly mounting draws on Federal general fund revenues long before trust fund exhaustion, and their financing in the long term is far more problematic than suggested by the 75-year actuarial deficits for HI and OASDI.

The rapidly mounting financial shortfall in these programs is illustrated in Chart E. It shows, as a percentage of GDP, the gap between annual HI and OASDI tax income and the cost of scheduled benefits, plus the 75-percent general fund revenue contributions to SMI's Part B and Part D. The initial negative amounts for OASDI in 2004 and for more than a decade thereafter represent net revenues to the Treasury that result in the issuance of Treasury bonds to the trust funds in years of annual cash flow surpluses. Conversely, the positive amounts for OASDI and HI initially represent payments the Treasury must make to the funds to supplement tax income to help pay benefits in the years leading up to exhaustion of these trust funds, then their widening financing gap thereafter.

The Social Security tax income surplus in 2004 is projected to be more than offset by the shortfall in tax and premium income for Medicare, resulting in a small overall cash shortfall that must be covered by transfers from general fund revenues. This combined shortfall is projected to grow each year--such that by 2018 net revenue flows from the general fund to the trust funds will total $577 billion, or 2.6 percent of GDP. Since neither the interest paid on the Treasury bonds held in the HI and OASDI Trust Funds, nor their redemption, provides any net new income to the Treasury, the full amount of the required Treasury payments to these trust funds must be financed by increased taxation, increased Federal borrowing and debt, and-or a reduction in other government expenditures. Thus, these payments--along with the 75- percent general fund revenue contributions to SMI--will add greatly to pressures on Federal general fund revenues much sooner than is generally appreciated. ..."

What is not hype and exaggeration, but the opposite, is the problem with private pensions that are underfunded and often dumped onto the federal government (for us taxpayers to pay for). United is probably the most significant instance of this insofar as its threats to dump its pension plan is concerned, but it is larger than that, and even with the airline industry, United is being watched as a model for other airlines to dump their pension plans onto PBGC -- which has statute limitations on how much they'll pay people for replacement pensions. This is not a case of hype, but the opposite, failure to devote enough attention to what already has been happening and threatening to happen, before it gets much worse in the next 10-20 years. To people with contemporary lifestyles, most Boomers, defined benefit (traditional) pension plans are something long gone. There is no such thing as a "pension" and it's little other than an historical artifact and quaint piece of material for occasional humor when one hears people referring still to pentions. But they still exist and are a separate, big time plant. Attention with the problems related to this issue currently are on the airline industry.

United

The Pension Benefit Guaranty Corporation (PBGC) will file an objection in bankruptcy court today to provisions in UAL Corporation's debtor-in-possession financing agreement that purport to prohibit the company from making required contributions to its pension plans.

Delta

But there also is a new wrinkle: fear that its pilots could jump ship en mbutte because they are worried about their pensions amid United Airlines' threat to terminate its employee retirement plans. Several hundred Delta pilots have retired early in recent months, and more have threatened to, CEO Gerald Grinstein told reporters. ...

Pilots union spokesman Chris Renkel said pilots would be less likely to retire early if Delta would heed the union's request for the company to promise not to try to take away any employees' accrued benefits.

So far, Renkel said, Delta has refused to guarantee the future availability of lump-sum payments pilots can get if they retire early.

US Airways, on the verge of a possible second bankruptcy, already proposed ending its pilot pension plan. Delta, Northwest, and American Airlines have underfunded pension plans.

Dave Simpson