Tags: social security | trustees report | infinite horizon projections

What to Look for in the Forthcoming 2017 Social Security Trustees Report

What to Look for in the Forthcoming 2017 Social Security Trustees Report
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Thursday, 15 June 2017 01:48 PM Current | Bio | Archive

The 2017 Social Security Trustees Report is not yet available. When it comes out the program will draw a few days of intense media scrutiny before it is returned to the back burner for another year.

There are three factors in the report that will draw little if any attention even during the coverage blitz. These are unfortunately the critical issues upon which everyone should be focused. They are how big the problem is, what is driving the problem, and who is going to be affected.

How Big Is The Problem?

The report will likely contain a section called "INFINITE HORIZON PROJECTIONS." In the 2016 report, the trustees disclosed the program expects to have $11.4 trillion dollars in promises for which no one expects the system to generate cash. That figure is the amount of cash that we needed to invest on December 31, 2015, in order to make good on the promises.

After the trust fund is exhausted, benefit levels under current law will be reduced.

The Cost Of Time

This section also explains the cost of the passage of time. In 2016, the cost of doing nothing was roughly $500 billion. In other words, we spent nearly 6 times more not fixing Social Security than the government spent on education.

The key sentence will look something like this: If there had been no changes in starting values, assumptions, laws, or methods for this report, then the open group unfunded obligation would have increased to $11.2 trillion solely due to the change in the valuation period.

The drivers of this cost only get worse with the passage of time. The reason is simple. Every year, the meaning of the phrase "short-term financing" changes. In 2017, "short-term" will refer to the year 2017 through until 2091. Thus we are trading a relatively low-cost year like 2016 for a very expensive one in 2091.

The other problem is that we didn’t invest any incremental cash on December 31, 2015. Even if nothing changes, we would need to invest more on December 31, 2016, just to offset the loss of theoretical investment earnings.

Who Is Affected?

According to the 2016 OASDI Report, the combined Social Security Trust Funds are projected to become insolvent in 2034. That means that they believe that the system has roughly a coin-flip chance of paying full benefits in 2034. They expect the system to deliver a 21 percent benefit cut, one that would grow with time.

The Social Security Administration believes that about half of the people turning 69 this year will live long enough to be affected. Based on U.S. census figures, that means that more than 80 percent of voting aged Americans will be affected by these changes.

The Committee for a Responsible Federal Budget provides a tool that will tell you at what age you will be when the exhaustion of the Trust Fund arrives with consequences.

Brenton Smith writes on all aspects of Social Security reform, translating the numbers and jargon of the issue into terms that everyone can understand. His work has appeared in Forbes, MarketWatch, Fox Business, The Hill, and a number of regional newspapers. To read more of his reports — Click Here Now.

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The 2017 Social Security Trustees Report is not yet available. When it comes out the program will draw a few days of intense media scrutiny before it is returned to the back burner for another year.
social security, trustees report, infinite horizon projections
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2017-48-15
Thursday, 15 June 2017 01:48 PM
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