Social Security going bust: The inconvenient issue

Buried down deep in the Friday afternoon news dump is the not inconsequential news that Social Security is about to go bust – a lot faster than anyone had predicted earlier.  Investor's Business Daily sums up the coming fiasco pretty well:

The Social Security report finds that the "trust fund" will run out of money in just 17 years. The news only gets worse from there.

The program's unfunded liability over the next 75 years is now $12.5 trillion, which is up from $11.4 trillion last year and $4.7 trillion a decade ago. In other words, Social Security's long-term unfunded liability has increased by 166% in the span of 10 years.

And on a cash flow basis, Social Security is now losing money every year. Last year it was $54 billion in the red. In a decade the annual shortfall will reach $215 billion – after adjusting for inflation.

It's only by spending "interest" earned in the program's "trust fund" that Social Security can cover its current obligations. But remember, the trust fund is comprised entirely of Treasury debt. The federal government still has to borrow or raise taxes when the trust fund cashes in those bonds.

There's no getting around it: no matter how much the left claims the system is sound, it isn't.  It's going bust.  Let's describe what going bust is going to look like.

It's not going to be a nuclear explosion.  It's not going to be pushing Grandma in her wheelchair off the cliff, as the left enjoys positing whenever someone tries to bring up some means of averting a fiasco.

Social Security is so creepily structured that going bust is not going bust.  As with casinos, the house always wins.  The way "bust" happens is that recipients get an automatic 17% reduction of benefits overnight.  Living on that as your retirement program after paying in for decades?  Too bad.  The hard reality is, the government owes you absolutely nothing.  It can give you "what you paid in," at its customary zero-percent interest.  Compared to what you would have earned in stocks or bonds, it can give you more, or most likely, it can give you less.  And it's about an eighth to a quarter of your income you pay in, year after year, unable to save it for a real retirement account.

Demographics are probably the main reason it's happening – people having fewer kids has its impact, no matter how you try to spin it.  And now, with illegals claiming benefits, often more than they ever paid in, and the meth crisis ravaging Midwestern towns and throwing millions out of the productive labor force, the kitty that once held your money is being drained faster than anyone "anticipated."  The trust fund is anything but a trust fund – at least, not for you.

The whole issue was disgracefully ignored during the 2016 presidential election, as well as most elections before that one, with political consultants calling it "the third rail of American politics," as if the truth is too painful.

There remains, as ever, one proven way out outside slashed benefits and politicians blaming the other party as that happens.

It's called "the Chilean Model," as 2012 presidential candidate Herman Cain put it, in what was his valiant effort to get the voters to get serious about the issue.

The Chilean Model, the system of private savings accounts for retirement, is practiced in 30 countries.  It was developed on a nationwide scale by José Piñera, the former labor minister of Chile during the 1970s, when the country was a socialist rubble and the coffers were bare, and it has worked every time it's been tried.

Piñera faced considerable obstacles, no small ones from Big Labor, as well as numerous disinformation campaigns and Grandma-off-the-cliff scenarios.  He was able to overcome all of them and was stunned to find that the option he offered to Chile's workers was lapped up at far higher rates than even he anticipated.  The whole story is worth reading in these pages here.

If we don't do it, we go bust.  And not in an explosive way – in that sly, insidious crumbling ruin way the system currently provides for those who keep sweeping the problem under the rug.

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