CBO releases social security update

Next Time someone screams social security must be privatized, refer to this.

Without changes in law, CBO expects that the Social Security trust funds will be exhausted in 2043. If that point is reached, the Social Security Administration will not have the legal authority to pay full benefits and the amounts that could be paid would be about 17 percent less than those scheduled under current law.

Many of the factors that will affect Social Security’s long-term finances are subject to significant uncertainty. Thus, a full exposition of projected finances includes both the expected outcomes and the inherent uncertainty surrounding such projections. In the report, CBO presents the range of outcomes for which there is an 80 percent chance that the actual value will fall within that range. For example, although CBO projects that Social Security outlays will equal about 6.1 percent of GDP in 2033, our uncertainty analysis indicates a 10 percent chance that outlays will be less than 5.4 percent of GDP in that year and a 10 percent chance that outlays will exceed 6.8 percent of GDP.

The Obama administration has some very good proposals to fix this shortfall and obviously social security is nowhere near the pressing problem health care costs.

By several measures, health care spending continues to rise at a rapid rate and forcing businesses and families to cut back on operations and household expenses respectively.

In 2008, total national health expenditures were expected to rise 6.9 percent -- two times the rate of inflation.1 Total spending was $2.4 TRILLION in 2007, or $7900 per person1. Total health care spending represented 17 percent of the gross domestic product (GDP).

U.S. health care spending is expected to increase at similar levels for the next decade reaching $4.3 TRILLION in 2017, or 20 percent of GDP.1

In 2008, employer health insurance premiums increased by 5.0 percent – two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,700. The annual premium for single coverage averaged over $4,700.

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Toxic taxes

I recall that I used to wonder how Europeans kept complaining about American inflation when I had to pay $5 for a cup of coffee in Rome (20 years ago). Of course I then flew about an hour to Budapest where I could get a complete breakfast with coffee for much less than that. We all know the story of how prices get set and envelopes get pushed. Social Security is the cow that no one dares to topple and it is indexed to the CPI. But the taxes that support it are a bitch to increase, even in nominal terms. Go to Canada and they complain about taxes, but we (and they) survive our trips there. Go to Germany and pay for gasoline by the litre. Then go to Switzerland and admire their roads and train system, all built with tax revenues. Somehow, people survive. But here in America, if you suggest that incomes above a certain number might get taxed more, it is the end of life as we know it. We all think we might be rich some day, and wouldn't it be a calamity if we had to pay taxes? But the Germans, the Canadians, and even the Swedes keep showing up for work. So what is so sacred about paying executives a hundred million a year and then making jokes about how a GS-14 couldn't possibly be smart enough to do that job? Wall Street has played one hell of a practical joke on us, but somehow we've stopped laughing.

Frank T.

Frank T.