A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.

Wednesday, May 3, 2006

If only the drunks didn't have the checkbook

Last week's report from the Social Security Board of Trustees confirmed that the internal financing of Social Security remains solid for more than thirty years out. In 2040 reserves will be gone and absent adjustments benefits would be reduced to 74 percent of those promised, which are more generous than any delivered today. That is a long way from the calamity predicted by Bush in his drumbeat for privatization. Unfortunately it also discounts the damage the man is doing to the operating budget and the economy as a whole.

Social Security reserves are kept in the form of government bonds, a secure enough instrument if the knotheads were not in charge. But in case you didn't notice, the budget is running in the red zone and has been for the five-plus years Republicans have controlled all branches of government.

Ten years out, at the same time debt service becomes a serious problem for the budget, the Social Security fund will stop subsidizing it. We have gone into debt at the very worst time, baby boomers. It won't matter if our first class ticket says IBM, In God We Trust, or Fidelity, we're not getting to Shangri-la if the plane comes apart in mid-air.

[The real internal financing problem is with Medicare, as we will report next week.]

The Center on Budget and Policy Priorities says the cost of the Bush tax cuts is three times the shortfall in Social Security. Surprised?

Interesting that the Trustees still continue with the "infinite horizon" boondoggle introduced in 2003. Actuaries and other honest observers shot the thing down so thoroughly, you'd think they wouldn't patch it up again. Most of those "infinite horizon" deficits which were used to scare us kick in after 75 years (two-thirds after 2080) and so are subject to assumptions that must be channeled from Nostradamus.

Again, though, the near-term danger is not Social Security's financing, it is the buffoon who has the checkbook.