Tag Archives: Social Security trust fund

How Congress deals with Social Security Disability going broke next year

The warnings began several years ago, that Social Security Disability Insurance (SSDI) will go broke next year, in 2016 — an admission by none other than SSDI’s administrators or trustees, who include the secretaries of the U.S. Treasury, Department of Labor, and Department of Health and Human Services.

See DCG’s “Feds: Social Security Disability Fund Goes Broke Next Year

Under the Obama administration, SSDI had become a new form of welfare, with an unprecedented number of Americans receiving disability benefits. (That is not to say that all SSDI recipients are undeserving.) In 2013, a record number of 11 million (10,962,532) Americans were on SSDI, which is 147,335 more people than the total population of the country Greece.

With news of the program’s imminent insolvency, legitimate SSDI recipients who depend on the monthly checks are panicked. See, for example, here.

You should know that those checks will keep coming, at least until Social Security itself goes broke 19 years from now, in 2034.

Social Security Disability kicking-the-can-down-the-road

Congressman Xavier Becerra (D:Calif.) has introduced a bill, HR 3150: the One Social Security Act, that would avert a 19% cut to disability benefits in 2016 by merging the SSDI Trust Fund with the Social Security Trust Fund (Old-Age and Survivors Insurance or OASI).

Becerra says HR 3150 “does not add a penny to the deficit or the debt” and “does not change Social Security’s overall financial condition” because the merge will pay all Social Security benefits “using trust fund reserves that current Social Security beneficiaries helped build up through their own contributions.”

Those claims are, at once, deceptive and highly dubious.

Simon Black, founder of Sovereign Man, explains:

On January 31, 1940, the very first Social Security check ever delivered went to Ms. Ida May Fuller, a former legal secretary who had recently retired.

Ms. Fuller had spent just three years paying into the system, contributing a total of $24.75 to Social Security.

Yet her first check was for nearly that entire amount. Quite a return on investment.

She went on to live past 100, collecting a total of $22,888.92, over 900 times the amount she contributed to the program. Her story is quite the metaphor.

If you’re not familiar, Social Security is comprised of two primary trust funds: Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI).

Essentially, all of the taxes paid in to Social Security end up in one of these two trust funds.

The trust funds then ‘manage’ the money to generate a rate of return, and then pay out distributions to program recipients.

Now, the funds are overseen by a Board of Trustees which is obliged to submit an annual report on the fiscal condition of the program. It ain’t pretty.

The Disability Insurance (DI) fund is particularly ugly. In fact, the trustees themselves wrote in the 2015 annual report that “[T]he DI Trust Fund fails the Trustee’s short-range test of financial adequacy…” and, “The DI Trust Fund reserves are expected to deplete in the fourth quarter of 2016…”

In other words, one of the two Social Security trust funds is just months away from insolvency. […]

The other trust fund, OAS, is projected to “become depleted and unable to pay scheduled benefits in full on a timely basis in 2034.

Which means that if you’re 47 or younger, you can kiss Social Security goodbye.

Bear in mind, these aren’t my calculations. Nor are they any wild assertions. They’re direct quotes from the trustees themselves. […]

Late last week, several dozen members of Congress introduced the “One Social Security Act”, HR 3150, to solve this problem.

And let me tell you, their solution is bold. Fearless. And brilliant. [Sarcasm Alert!]

HR 3150 attacks the looming insolvency of Disability Insurance by eliminating the fund altogether.

So instead of having two separate funds for two distinct purposes of Social Security, the legislation aims to combine them into one unified fund.

That way, with just one fund, there won’t be any separate reporting about DI’s insolvency.

It’s genius! They make the problem go away by eliminating the requirement to report it.

There’s just one small issue. Legally, they have a word for this. It’s called fraud.

You and I would go to prison if we commingled funds like this. But in the hallowed halls of Congress, this is what passes as a solution.

This is so typical– solving problems by pretending that they don’t exist and destroying any element of transparency and accountability.

This pretty much tells you everything you need to know about government. […] These people aren’t the solution. They’re the problem.

And don’t think that ‘voting the bums out’ will affect anything. Elections merely change the players, not the game.

The only way forward is to invest in yourself, particularly in your business and financial education. Make plans based on the assumption that Social Security doesn’t exist.

And if, by some miracle, it’s still there by the time you retire, you won’t be worse off for having built a larger nest egg thanks to the financial acumen you developed.

In other words, Congress fixed the SSDI-going-bankrupt problem by, once again, kicking the can down the road.

Of course, any informed person knows that the Social Security Trust Fund exists only on paper. That “trust fund,” along with every other federal government program, is already insolvent because the Untied [sic] States of America has a national debt in excess of $18 trillion, which is 103% of America’s GDP. That’s the official figure; some economists estimate the debt to be much, much more.

The day of reckoning for that debt will come, when we run out of road to kick that can.

kicking can

But hey, why worry? Be happy!

Let’s just stick our heads in the sand, take our “fair share” — even those here in illegally — and just leave the day of reckoning to our children and grandchildren!

See also:


The Day America Committed Suicide

“Every nation has the government it deserves.”

So observed a very wise man — Count Joseph-Marie de Maistre (1753-1821), a French philosopher and diplomat.

Future historians (if there are any) will record that on November 6, 2012, the no longer United States of America committed suicide.

We, the Opposition — comprised of Conservatives, Christians, Libertarians, and Patriots — had been telling ourselves that the polls showing a tight race must be wrong. Because the pollsters over sample Democrats. Because “nobody” have landline phones anymore. Because so many polling organizations are corrupt. Because….

In the end, it turns out the polls not only were right, they were overly optimistic for Romney.

In the end, the Electoral College vote count wasn’t even close:

332 for Obama v. 206 for Romney

In the end, instead of Romney winning by a landslide, it was the POS winning by an avalanche. The POS even won the popular vote: 62,615,406 vs. Romney’s 59,142,004. [Source: FoxNews]

Romney won Alabama, Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Carolina, No. Dakota, Oklahoma, So. Carolina, So. Dakota, Tennessee, Texas, Utah, West Virginia, and Wyoming.

POS won California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Washington D.C., and Wisconsin.

In the end, the swing states of Ohio and Virginia swung to the POS. As of this writing, Florida — with 97% of precincts having reported — is still a toss-up (O 50% vs. R 49%). Not that it matters.

Was it massive Demonrat electoral fraud that did it?

Was it Demonrats’ intimidation — all the threats of riots and assassination, and videos of 97-year-olds threatening to “burn this motherfucker down” and of Romney supporters being maimed, decapitated and exploded — that got to gutless voters?

We can debate all we want. Sure, there’ll be feeble efforts at “investigating” and of lawsuits. But the POS’s so-called Department of “Justice” under his henchman, the so-called “U.S. attorney general” — Amerika’s chief law enforcer! — Eric Holder, will simply stonewall everything.

But I do know this:

The sheeple who voted for the POS so that they’ll keep getting government handouts, welfare, and entitlement checks are in for a rude shock. Amerika is broke. As we Cassandras have been warning here on Fellowship of the Minds:

  • Our national debt is over $16 trillion — more than Amerika’s gross national product.
  • The main Social Security program — the so-called SS “Trust Fund” — will run out of money even sooner than we’d been told — by 2023, instead of 2033. When that happens, BY LAW your Social Security checks will be cut by 25%.

The above bankrupt dates will now be shortened now that the POS and his Demonrats have four more years to overspend, without restraint. And if you think taxing “the rich” will plug the gaping deficit hole — not that taxing “the rich” 100% can fill the hole — you’re delusional.

Unlike the delusional sheeple sucking on Big Government’s teats, “the rich” have both the resources, the means, and the will to simply leave the “United” States. Just as “the rich” in France have and are, after the French sheeple voted in a socialist government that immediately imposed a draconian 75% tax on “the rich.”

Congratulations, my fellow selfish, lazy, envious, covetous, willfully ignorant, stupid, and just plain evil Amerikans.

Yesterday, you voted for a thoroughly evil man and evil party. In so doing, you voted for your own doom. The next four years will be four years of one financial disaster after another. The next four years will see your constitutional freedoms fall, one after another. And if you complain, you sheeple will finally discover:

  • What Obama’s senior adviser consigliere, the Iran-born Marxist Valerie Jarrett, meant when she vowed: “After we win this election, it’s our turn. Payback time. Everyone not with us is against us and they better be ready because we don’t forget. The ones who helped us will be rewarded, the ones who opposed us will get what they deserve. There is going to be hell to pay. Congress won’t be a problem for us this time.No election to worry about after this is over and we have two judges ready to go.”
  • Why there’ve been sightings across Amerika of trucks jammed full of “Martial Law” signs. (FOTM decided not to report this, not wanting to make you “nervous” before the election.)

*Faithful Catholics who attend Mass weekly went for Romney.

For as long as Obama, the Demonrats, and WordPress choose to keep the Internet free, Fellowship of the Minds will continue to chronicle Amerika’s descent into the abyss. Just don’t be surprised when one morning you fire up your computer to come on FOTM to discover we’re not around any more. When that day comes, don’t say I haven’t warned you….

In sorrow,


Fed’s low interest rate is killing Social Security

Already, we are told that Social Security (SS) is in trouble, forecasted to start paying out more in benefits than it takes in by 2017, and to go completely broke by 2033.

But there is yet another reason why Social Security is heading to ruinage even faster — the Federal Reserve’s low interest-rate policy. The reason for that policy, of course, is to keep America’s GARGANTUAN national debt from ballooning even faster than it already is.

But the Fed’s policy means U.S. Treasuries offer record-low interest rates. (As an example, the last auction of 10-year Treasury Note, on July 6, 2012, yielded an interest rate of 1.544% !) This is creating a problem for retirees who, in their work years, had been frugal and conscientiously saved to secure their “golden” years, but now find themselves unable to live off the paltry interest generated from their savings and must dip into their principal. The Fed’s policy is also a problem for investors, among whom is none other than the Social Security Trust Fund (SSTF).

Writing for ZeroHedge, July 4, 2012, Bruce Krasting explains that in June of each year the SSTF reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

But Ben Bernanke’s Fed Reserve has set interest rates at zero the past four years. The result is that in 2012, the 1960’s formula has finally caught up with the SSTF. It got murdered on this year’s rollover.

Data from the Social Security Administration (SSA) show that $135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA’s income by $5.7B annually. Over the 15-year term of the investments, that comes to a loss of $86 billion. It gets worse.

Bernanke has pledged that he will keep interest at zero for a minimum of another two years. Since the formula used to set interest rates for SSA looks back over the prior three years, this means SSA will be stuck with a terrible return on its investments until at least 2017, which means still lower investment returns for the next five years.

A total of $543 billion of securities with an average yield of 5.6% is coming due. The reduction in income from the 4.2% drop in yield translates to $23 billion a year, totalling $350 billion for 15 years. It gets worse.

Not only will SSA’s interest income substantially drop over the coming decade, the problem is exacerbated because SSA has provided projections for its interest income over this time period that don’t jive with this reality.

In its 2012 report to Congress, the Social Security Administration maintains it will earn an average of 4% over this period. That is not possible any longer. Given the Fed’s low interest-rate policy, the most SSA could earn is an average of 2.3% (it could be significantly lower). The drop in yield translates to a reduction in income of $535B over the forecast period.

Based on a realistic assessment of interest income at SSA, the trust fund tops out in 2015, its peak value will be ~$2.823B. The SSTF has reported that the TF will top out at $3,061B, and that milestone will not be reached until 2021. Essentially, the train wreck will happen 6 years earlier then assumed, and the TF will be $250B short. It gets worse.

The other key ingredients in the SS “pie” are tax receipts from workers and the amount of monthly benefit payments (the assumptions used is that GDP growth will average 4%, and unemployment falls to 5.5% –  no recessions over the ten-year horizon). These are not realistic assumptions. This means that once the SSTF hits its peak in 2015, the run off in assets will happen very quickly.

The SSTF has stated that the date in which the Trust Fund falls to zero will be 2033. The actual termination date of the Social Security Trust Fund is much closer than that. It could come as early as 2023.

Anyone who is 55 or older should be worried about this. Based on current law, all Social Security benefit payments must be cut by (approximately) 25% when the Trust Fund is exhausted. This will affect 72 million people. The economic consequences will be severe. The drop in SS transfers translates into a permanent drag on GDP of 2%. In other words, when this happens, the country will be unable to have any significant positive growth for a long time to come.

Given the prediction that the Social Security Trust Fund will fall to zero by 2023, that is in 10-11 years, if you are or will be receiving Social Security, you should expect your SS checks to decrease by 25%. Make your plans accordingly!

But the news get even worse.

Even before 2023 arrives, in just FOUR years, by 2016, the first of the Social Security funds — SS disability — will be broke, having plain run out of cash. This will trigger a 21% cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty. [Source: Washington Post]

In summary, the monetary policies of Ben Bernanke and the Federal Reserve aren’t just breaking the backs of small savers, they are killing Social Security. The results will be:

  • Social Security Trust Fund will run out of money even sooner than we’d been told — by 2023 (instead of 2033). When that happens, by law Social Security checks will be cut by 25%.
  • Social Security Disability will run out of money even sooner, in just 4 years by 2016. When that happens, your disability checks will be cut by 21%.

If you don’t make plans for the impending disaster now, you’re in willful denial. Don’t say you haven’t been forewarned!


Red Alert! China Dumps 97% of Its U.S. Treasury Holdings

Friends, this is what we’ve been dreading. The killer punch is dealt to the U.S. economy. China — the country that purchased most of America’s debt in the form of U.S. Treasury notes and bonds — has divested 97% of its holdings.

The U.S. government has been operating by borrowing and borrowing and borrowing. Now it is faced with two stark choices:

  1. Either raise the artificially low interest rates on those Treasuries so as to entice buyers, which means certain inflation, if not hyperinflation; or
  2. Continue to keep interest rates depressed, which will result in even more dumping of those Treasuries by big holders such as China. With no one buying those Treasuries, the U.S. government can no longer function as before.

Some of the implications for ordinary Americans, not the very rich, are:

  • If you’ve been frugal and are a saver, you’ll probably be O.K. because as the prices of goods increase, so will the interest rates on your savings — that is, assuming you’ve invested in conservative (vs. speculative and, therefore, unpredictable) financial instruments.
  • If you have credit card and other debts, the interest rates on your debts will rise, along with inflation. So, please, pay off those debts ASAP!
  • If you are on fixed income, you’ll have less unless you get cost-of-living adjustments commensurate with the rate of inflation.

Why this isn’t headline news in every newspaper and TV channel is beyond my comprehension.

UPDATE (6/5/11): The headline “China Divests 97% of Holdings in US Treasury Bills..." finally made it onto Drudge Report today.


Terence P. Jeffrey of CNSNews.com reports today, June 3, 2011: 

China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of  the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S.  Treasury securities. Thus, until October, China’s overall holdings of U.S. debt  continued to increase.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March. […]

As of March 2011, overall Chinese holdings of U.S. debt had decreased to 1.1449 trillion.

Most of the U.S. national debt is made up of publicly marketable securities sold by the Treasury Department and I.O.U.s called “intragovernmental” bonds that the Treasury has given to so-called government trust funds—such as the Social Security trust funds—when it has spent the trust funds’ money on other government expenses.

The publicly marketable segment of the national debt includes Treasury bills, which (as defined by the Treasury) mature in terms of one-year or less; Treasury notes, which mature in terms of 2 to 10 years; Treasury Inflation-Protected Securities (TIPS), which mature in terms of 5, 10 and 30 years; and Treasury bonds, which mature in terms of 30 years.

At the end of August 2008, before the financial bailout and the stimulus, the publicly marketable segment of the U.S. national debt was 4.88 trillion. Of that, $2.56 trillion was in the intermediate-term Treasury notes, $1.22 trillion was in short-term Treasury bills, $582.8 billion was in long-term Treasury bonds, and $521.3 billion was in TIPS.

At the end of March 2011, by which time the Chinese had dropped their Treasury bill holdings 97 percent from their peak, the publicly marketable segment of the U.S. national debt had almost doubled from August 2008, hitting $9.11 trillion. Of that $9.11 trillion, $5.8 trillion was in intermediate-term Treasury notes, $1.7 trillion was in short-term Treasury bills; $931.5 billion was in long-term Treasury bonds, and $640.7 billion was in TIPS.

Before the end of March 2012, the Treasury must redeem all of the $1.7 trillion in Treasury bills that were extant as of March 2011 and find new or old buyers who will continue to invest in U.S. debt. But, for now, the Chinese at least do not appear to be bullish customers of short-term U.S. debt.

Treasury bills carry lower interest rates than longer-term Treasury notes and bonds, but the longer term notes and bonds are exposed to a greater risk of losing their value to inflation. To the degree that the $1.7 trillion in short-term U.S. Treasury bills extant as of March must be converted into longer-term U.S. Treasury securities, the U.S. government will be forced to pay a higher annual interest rate on the national debt.

As of the close of business on Thursday, the total U.S. debt was $14.34 trillion, according to the Daily Treasury Statement. Of that, approximately $9.74 trillion was debt held by the public and approximately $4.61 trillion was “intragovernmental” debt.