OASDI Trust Fund
Posted 10-30-2012 at 09:45 PM by Mircea
And now the OASI Trust Fund.
This is actually the combined OASDI Trust Funds. Yes, the DI Trust Fund will be history (shortly) but they'll just combine both functions for payment purposes (and that's one of the things that will cause the trust fund to fail faster).
You are at $515 Billion for the year through October...and yes that includes the 2% reimbursement out of the General Fund, and you have 2 months to find $80 Billion. You could come close to hitting the mark, but not if your payroll keeps declining.
You can see from the High Cost Assumptions that the OASI Trust Fund fails in 2027 -- and people thought I was crazy when I was saying 2028 back in 2005 (before I knew you were going to have a recession).
Under the 2.89% History, the Trust Fund should be depleted by 4th Quarter 2023.
You can see the effects that a recession might have with the 2.0% GDP rate.
What happens when the Trust Fund is gone? That will be very traumatic.
Social Security claims a benefit cut across the board for everyone of 25%, but the reality is 28%-32%.
Initially, that will be $250 Billion gone from your economy. By 2030 that will be $1 TRILLION gone.
You can't yank $1 TRILLION out of your economy without negative repercussions any more than you can kill $250 Billion.
If the money comes out of your General Fund, you can see who quickly your National Debt will increase.
If the government cuts spending in order to avoid bloating the National Debt, then you've still cut $250 Billion out of the economy -- increasing every year to $1 TRILLION.
Seeing how your tax revenues are only $2.3 TRILLION, I don't think that's going to happen.
The alternative would be taxes, obviously about $1 TRILLION worth.
Why is this happening?
Well, like Boyle's Law in chemistry/physics where there's a relationship between the volume, temperature and pressure of gases, with social welfare programs, I guess you'd call it the Ponzi-Scheme Law.
There's a relationship between the number of working people, their wages, and the tax rates they pay.
In Wonderland™ you have a target income amount, and to get that amount, you need N number of people working averaging $X in wages and then you can set the tax rate at T% to reach your target goal.
If the number of workers declines, or wages decline, or in your case -- both the number of workers and wages have declined, then you cannot meet your target projections for revenues.
Like I said before I left back in 2008 or whenever, 5% Unemployment rate is completely meaningless, unless you also have a corresponding high Labor Participation Rate. That's becomes more problematic as wages decline.
The other fault is that the economists at Social Security were unrealistically overly optimistic about your economy.
You can look at Table VI.F6 Economic Variables and see the flaws there.
Your GDP is supposed to be $15.75 TRILLION for 2012. That's just not going to happen. And because it won't, and because your GDP isn't going to grow at 4.34% in 2013, your GDP will not reach $16.44 TRILLION, and the GDP rate for 2014 will not be 5.22% and you won't be at $17.3 TRILLION.
Based on those faulty assumptions, Social Security then says that for 2013, it will get 4.66% in FICA tax revenues for a total of $766 Billion.
No, that's not going to happen, so there's a short-fall, and short-falls add up over time causing the Trust Funds to be depleted faster.
Can you fix that?
Yes, but it will not be easy, and there will be a severe price to pay.
Next week, I shoot down some of the idiotic suggestions like increasing the retirement age and other delights, and then I'll show you how you can fix it, and what will cost you.
Unless you need bombs or supplies on target on time I'm really bad at estimating time. I have to be overnight in hospital Friday/Saturday. Maybe I can take my laptop. I'll just tell them it's a really big MP3 Player or something.
This is actually the combined OASDI Trust Funds. Yes, the DI Trust Fund will be history (shortly) but they'll just combine both functions for payment purposes (and that's one of the things that will cause the trust fund to fail faster).
You are at $515 Billion for the year through October...and yes that includes the 2% reimbursement out of the General Fund, and you have 2 months to find $80 Billion. You could come close to hitting the mark, but not if your payroll keeps declining.
You can see from the High Cost Assumptions that the OASI Trust Fund fails in 2027 -- and people thought I was crazy when I was saying 2028 back in 2005 (before I knew you were going to have a recession).
Under the 2.89% History, the Trust Fund should be depleted by 4th Quarter 2023.
You can see the effects that a recession might have with the 2.0% GDP rate.
What happens when the Trust Fund is gone? That will be very traumatic.
Social Security claims a benefit cut across the board for everyone of 25%, but the reality is 28%-32%.
Initially, that will be $250 Billion gone from your economy. By 2030 that will be $1 TRILLION gone.
You can't yank $1 TRILLION out of your economy without negative repercussions any more than you can kill $250 Billion.
If the money comes out of your General Fund, you can see who quickly your National Debt will increase.
If the government cuts spending in order to avoid bloating the National Debt, then you've still cut $250 Billion out of the economy -- increasing every year to $1 TRILLION.
Seeing how your tax revenues are only $2.3 TRILLION, I don't think that's going to happen.
The alternative would be taxes, obviously about $1 TRILLION worth.
Why is this happening?
Well, like Boyle's Law in chemistry/physics where there's a relationship between the volume, temperature and pressure of gases, with social welfare programs, I guess you'd call it the Ponzi-Scheme Law.
There's a relationship between the number of working people, their wages, and the tax rates they pay.
In Wonderland™ you have a target income amount, and to get that amount, you need N number of people working averaging $X in wages and then you can set the tax rate at T% to reach your target goal.
If the number of workers declines, or wages decline, or in your case -- both the number of workers and wages have declined, then you cannot meet your target projections for revenues.
Like I said before I left back in 2008 or whenever, 5% Unemployment rate is completely meaningless, unless you also have a corresponding high Labor Participation Rate. That's becomes more problematic as wages decline.
The other fault is that the economists at Social Security were unrealistically overly optimistic about your economy.
You can look at Table VI.F6 Economic Variables and see the flaws there.
Your GDP is supposed to be $15.75 TRILLION for 2012. That's just not going to happen. And because it won't, and because your GDP isn't going to grow at 4.34% in 2013, your GDP will not reach $16.44 TRILLION, and the GDP rate for 2014 will not be 5.22% and you won't be at $17.3 TRILLION.
Based on those faulty assumptions, Social Security then says that for 2013, it will get 4.66% in FICA tax revenues for a total of $766 Billion.
No, that's not going to happen, so there's a short-fall, and short-falls add up over time causing the Trust Funds to be depleted faster.
Can you fix that?
Yes, but it will not be easy, and there will be a severe price to pay.
Next week, I shoot down some of the idiotic suggestions like increasing the retirement age and other delights, and then I'll show you how you can fix it, and what will cost you.
Unless you need bombs or supplies on target on time I'm really bad at estimating time. I have to be overnight in hospital Friday/Saturday. Maybe I can take my laptop. I'll just tell them it's a really big MP3 Player or something.
Total Comments 0
