- As of mid 2009, there were concerns that the Social Security administration would begin deficit spending around 2016, early than previously expected. The reason for this earlier deficit spending arrival was the fact that more people were unemployed (resulting in less funds flowing into the Social Security Trust fund) and more people were starting to take their benefits sooner than expected because they had lost their jobs. Thus, in less than a year we went from a 2016 date to a 2010 date, as it applies to deficit spending in this entitlement program. The political class either lied about the date or are lousy forecasters. In either case, troubled times are here. The larger issue is how can we be expected to believe Obama's health care estimates for the next ten plus years when he and the rest of the political class so badly missed the Social Security deficit spending date?
- The second Social Security lie is the one from the political class that tries to reassure us that Social Security is solvent until at least 2030 since it holds trillions of dollars in Treasury notes. These notes were "given" to the Social Security Administration over the decades so that politicians would feel better when they raided the Social Security fund for additional revenue (and waste). What they fail to tell us is that there is no pile of money sitting over at the Treasury Department that the Social Security Administration can receive when they "cash" their notes. That money has been spent long, long ago by the political class. Those "notes" are worthless since they will require the Treasury Department to go find funding to honor those notes, resulting in either more overall deficit spending and/or additional taxes on all Americans.
- Their third lie, and it is a doosy, is that the mandatory paying into the Social Security is a far better investment than investing the same money voluntarily in the stock market. I decided to prove whether this position was true by using my own Social Security payment history and the annual returns from a typical S&P mutual fund. I used the following assumptions that were used to construct a very simple worksheet:
- I loaded the spreadsheet with all of the annual contributions that my employer and myself were required to pay into Social Security over time.
- I assumed that the annual amount that was paid into the system was instead directed into a tax free S&P 500 mutual fund. I was unable to determine how much reinvested dividends would contribute to my annual return so I assumed it was zero, resulting in a more conservative estimate of return.
- I assumed that starting in 2010 I would move all of my accumulated gains and contributions into a conservative bond fund earning only 4% a year. Thus, I captured both the market cratering of 2008 and the market rebound of 2009.
- I assumed that I could get 4% investment return every year for the rest of my life and would begin withdrawing living expenses in 2015 when I was 62.
Again, the larger issue is how can we trust the political class and their health care reform estimates when they have so poorly or so deviously not known the truth or covered up the truth on Social Security? Very scary. More deficit spending, sooner than expected and before the massive health care reform bill and its likely bogus numbers begins to unravel. As we have said a few times in previous posts, we are definitely On The Eve Of Financial Destruction. The truth is out there, the lies need to be exposed but do we as Americans have enough strength to live with the consequences of exposing those lies?
Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.
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