March, 2015, By The Numbers, Part 1: Social Security Going Bust, Pentagon Losing Weapons, and More

On a semi-regular basis we revisit the theme ”by the numbers” just to check in on the state of the country and political class using actual realities and their underlying numbers, not the spin or lies from our politicians. You see, politicians usually have nothing to gain by looking at reality and the numbers since they are more than likely to have screwed up reality and our lives in the first place.

That is why they would rather lie and deceive than tell the truth. But that approach can be destroyed by looking at the hard numbers behind the mess they have created. I once worked for a boss whose favorite saying was: "There is nothing more devastating to an opinion than the right number.” And that is what we try to do with this theme, devastate politicians’ opinions by looking at the right numbers.

So let’s take a look at the numbers that have recently cropped up and again prove that the political class in America continues to be one of the worst set of people to ever hold office, given the state of the country, the many ways they screw up our wealth and government functions, and their inability or non-desire to step up and tell the truth.

1) One can really tell how inept our current politicians are by looking at how incompetently they operate government functions. According to a recent Social Security Administration (SSA) inspector general audit report, there are 6.5 million active Social Security numbers on file that indicate the owners of those numbers are over 112 years old but there is no record of their death. Given the reality that the 2013 Census update shows that there are just over 6 million living Americans in the country who are over 85 years old, it is highly doubtful there are 6.5 million Americans who are over 112 years old, the numbers make no sense.

But it does make sense if you consider the very real possibility that these Social Security numbers are still active because they are being used fraudulently to rip off the SSA and the American taxpayer. It could be that the sons and daughters of deceased holders of these SSA numbers are still receiving the SSA checks of their dead relatives. It could be that illegal aliens are using the numbers to get benefits or get jobs using dead folks’ SSA numbers. It could be that organized crime is using the numbers to get disability or retirement checks fraudulently. Whatever the cause, you can be sure that the American taxpayer is being ripped off. 

A couple of comments here:

• Why did it take an auditor’s report to figure this out? 
• Is the SSA so screwed up that they had no idea that millions of people could be ripping off the system?
• Didn’t anyone there think to compare the characteristics of their list to the Census findings?
• According to Wikipedia, there are a grand total of sixteen Americans confirmed to be over 110 years old living in the country today? Didn’t anyone at the SSA think that might be an easy and important number to look up?

Unbelievable incompetence that could be avoided with some simple number analysis. Here is another simple idea: find out who those sixteen Americans are who are over the age of 110, identify what their Social Security numbers are, and then deactivate the remaining 6.5 million numbers that the inspector general identified and then sit back and see who yells? Whoever yells is likely a criminal in some respect who can then be arrested for fraud. 

The others will likely melt away once they know the scam is over, saving the American taxpayer a lot of wealth. But even simple plans like these are too much for the political class to grasp so expect the 6.5 million number to hang around for a long time.

2) According to a recent Washington Post article, the Pentagon also has a numbers problem in that it is unable to account for $500 million worth of military aid given to the Yemeni government. Given that the Yemeni government was recently overthrown it is highly likely that the half a billion worth of taxpayer funded weaponry is now in the hands of one of three terror groups operating in Yemen: ISIS, Al Qaeda, or Iranian supported terrorists. Half a billion dollars, a nice round number used to fund terrorists.

3) The Heritage Foundation recently did some real nice number analyses regarding the Federal budget which should shake up a lot of people who have an opinion but no data to support their opinion. Let’s start with the fallacy that the wealthy in this country do not pay enough in taxes. 

Using Federal government tax data from 2011, the latest data available, Heritage’s analysis found that:

• The top 10% earners in this country pay a whopping 68% of all Federal income taxes. 
• The top 1% of earners pay more than a third of all Federal income taxes (35%).
• Another way to look at the numbers is that the top 10% of earners earn 46% of the earnings in this country but pay 68% of all Federal income taxes, a tax to earnings ratio of almost 1.5, i.e. their share of taxes paid is 50% more than their share of earnings earned.
• The top 1% of earners earn 19% of all earnings but pay 35% of all Federal income taxes, a tax to earnings ratio of 1.84, i.e. their share of taxes is 84% higher than their share of earnings earned.
• The bottom 50% of earners earn 12% of earnings but pay only 3% of all Federal income taxes so their tax to earnings ratio is .25, i.e. their share of taxes is 75% lower than their share of earnings and their tax to earnings ratio is more than seven times lower than the ratio for the top 1% earners.

Given these numbers and results, it is pretty hard to make the case that the wealthy, higher earners do not pay their fair share of Federal income taxes. These numbers just reaffirm that we do not have an under taxation problem in this country, we have a Federal government over spending problem.

Another set of numbers to prove that there is not an under taxation problem in this country is to look at the wealth of Bill Gates, the wealthiest American, and the Federal government’s budget. The Federal government is spending money at the rate of about $10.4 billions per DAY. According to Forbes latest analysis, Bill Gates is worth about $78 billion. 

Rather than tax Bill Gates at a higher rate, let’s get crazy and say that somehow the Federal government confiscated everything he owned, about $78 billion worth of wealth. If we divide his wealth by the run rate of Federal spending we see that Gates’ entire wealth could operate the Federal government for just over seven days. His entire wealth, seven days, eight days tops of government operations.

If you just raise his tax rate, the increase in taxes collected would not even operate the Federal government for a few hours. We have a government that spends too much, we do not have a government that does not tax enough, the numbers do not lie.



4) Let’s dive deeper in the Heritage analysis, starting with Social Security numbers. The following numbers show the annual Social Security Administration cash flows over the years, adjusted for inflation, where a surplus means that in that year they collected more in Social Security taxes than what was paid out and deficit years means more was paid out than what was collected in Social Security taxes:

INFLATION-ADJUSTED DOLLARS (2014)



Source: Social Security Administration.

The numbers are pretty clear:

• Up until 2009, the cash flow of the SSA was positive, i.e. it collected more in Social Security taxes than what it paid out in Social Security benefits, a good thing. 
• But starting in 2010, that surplus turned negative with the deficit quickly growing to a whopping $79.7 billion in just five short years in 2014.
• While the SSA forecasts a slight reduction in that deficit.negative cash flow in the next few years, given the current set of rules, numbers and realities of the Social Security system, deficits will soon skyrocket, reaching an annual deficit of $337 billion by 2032, four times higher than it is today.

This is just more proof that the Social Security “trust” is an accounting and numbers trick foisted on us by the political class. There is no trust fund. There is no pile of cash or stack of gold bars and sheets of Google stock that can be used to offset the growing negative cash flow. The trust fund is an accounting trick that the politicians used to get access to Social Security wealth long ago, leaving us with growing Social Security deficit numbers that will very soon be unpayable under the current benefit scheme. The numbers do not lie even if the politicians do when it comes to Social Security.That will do it for political numbers today, more to follow tomorrow. Today we learned that dead people still get Social Security benefits, the Pentagon lost half a billion dollars worth of military gear, the wealthy already pay most of our taxes, and Social Security is quickly becoming insolvent. The numbers do not lie.