Wednesday, March 20, 2013

Chief Actuary for SS – Raid the Retirement Fund!


Stephan Goss, the chief actuary for Social Security (SS) provided a detailed report on the status of the SS Disability Fund (DI) to the House of Representitives. The short story is that DI is going bust in a few years. The options to fix this problem were spelled out in the report. The extremes of the required “fix” range from an immediate cut in DI benefits of 16%, or an increase in DI payroll taxes of 20%.

Nothing new there. But, there is aPlan B” for the DI Fund. The solution is to raid the SS Retirement Fund for the deficits at DI:


A simple tax-rate reallocation between OASI and DI, as was done in 1994, could equalize the financial prospects of the trust funds avoiding reserve depletion until 2033.


Note: “Simple tax-rate reallocation” means $40+b a year….


Bingo! The raid on the retirement fund results in no cuts in benefits, and no new taxes. What’s not to like about that result? The gutless wimps in D.C. would love to kick the can down the road a decade, therefore the Raid solution is an obvious choice. (The consequence of the Raid would be to reduce the expected life of the Retirement Trust Fund by as much as five years.)


This is not the first time this has come up. The Congressional Budget Office, in its 2/5/13 report on the SS Trust Funds had these words in a footnote:


CBO’s baseline assumes that the Commissioner will pay DI benefits in full even after the trust fund is exhausted.


Note: For a discussion of the CBO report, see my article from 2/10/13 (Link).


Okay, we now have two legs of the government who have (functionally) suggested that a raid on the OASI fund is a possible fix for DI. Lightening does not strike twice in the same place very often, especially in Washington. The idea of raiding one fund to preserve another, has just gotten another big supporter. If the folks at AARP understood what was being proposed – they would flip their wigs!




The True Cost of the Disability Program

I have a list, (it’s pretty short) of the folks who I think are “doing the right thing” in Washington. Stephen Goss was on that list. I’m disappointed with him and his presentation of the “Facts” about the DI program.

Mr. Goss’s report to the House ran nineteen pages;  there are 14 charts. (Link) Everything a Congressman (or the public) could ever want to know about the DI program is spelled out in detail.

But, Goss completely left out the most critical cost of DI. The Chief Actuary failed to identify a cost directly related to DI. The numbers are big – $80b in 2012. The estimate is for more than a trillion of over the coming decade. If you look beyond that time horizon, the costs that Goss failed to identify are in the mega-trillions.


Goss failed to provide the full picture when he did not disclose the DI costs to Medicare. Every individual who gets DI benefits ALSO gets Medicare.


In a report dated 3/14/2013 (Link), the Congressional Budget Office (CBO) accurately described the real costs of DI:


Total government spending on DI beneficiaries is substantially higher than DI expenditures alone.
Disabled beneficiaries receive coverage under Medicare, regardless of their age.
The cost of Medicare benefits received by DI beneficiaries was about $80 billion in 2012; CBO expects that it will be $130 billion in 2023.


I give Stephen Goss an “F” for failing to provide all of the information needed to evaluate the DI program. How do you sweep a trillion dollars under the carpet?






  1. It doesn’t matter when you have a reserve currency.

    lol, well that’s the answer we’re going to get isn’t it? from the likes of krugman and his followers.

    Oh, unless a republican is elected in ’16. Then, all of a sudden, according to krugman and his idiot followers, all these future debts will amazingly and instantly be the worst catastrophe that has ever happened to the US and it’s all republicans fault.

    There could not possibly be anyone left who actually believes the krugman and the democrats actually believe anything they say about anything. Every single bit of their tripe is about not one thing except power.

    How many times does one have to watch them do a 180 when it’s their party in power to figure that out?

  2. Very interesting, Bruce. I was not aware of disabled beneficiaries receiving Medicare. I do recall , though, learning years ago, that after one has collected disability benefits for, I think, 2 years, he is eligible for Medicare, at any age.
    This raiding of the trust fund by DI ftrom the retirement fund has been done in the past, I believe.
    In addition, the idea of raiding the trust fund (actually 29 trust funds) has been regularly performed by the Treasury for years, to pay for current expenses. That’s why we have several trillion dollars of intragovernmental debt, not intragovernmental equity. Raiding for the purpose cited here, will not provide the option for the Treasury to raid for more general expenses, as has been done in the past.
    These 2 entities are incompatible: when it comes to government excess expenditures they cannot be directed for certain purposes.
    Heck, even the (non) ex cess expenditures, when they come from taxes, go into the Treasury’s general fund, when they become indistinguishable from other monies. That’s exactly what occurs with all taxes, be they income, FICA, etc. Taxes are used for the general welfare, not for retirement or disability benefits. It is this important point that allowed Social Security to pass constitutional muster in the first place.
    Don Levit

  3. Public Employee Union says:

    Just so none of you have to ask the question: public employees have a separate but equal pension system. Ours is fully funded. No, we will not be raiding our retirement savings under any conditions

    Screw the public!!!

  4. Bruce-

    Still have my father’s ID as Chief Budget Director & Administrator of the US Railroad Retriment Board from 1963. He quit making OMG…$14K/yr. Worked at 844 Rush Street in the Loop (Chicargo wuz the largest RR employee hub, so for once the feds made sense where to place the retirement operations), the triangular bldg. The 6-8 bozos now doing his job (and likely not as well) make over $2MM/year with far less RR employees. And have cars & bennies to boot, no doubt. Hey, dad came home one day with “Milwaukee Road RR” pinochle & playing cards (2 decks) one day. What a corrupt bastard ;-)….I inherited $17K when mom died after him in 1970…due to both of their medical expenses. Let’s just do simpe math today.

    I survived & prospered, and might not have if the $$$ erre there due to “modern” govt largesse. Let’s do the math nationwide. Yes…not looking good.

    Mr Gibbon would take that to note on decline & fall.

  5. Obama bin Biden says:

    The SS Administation employs actuaries?

  6. Chance You Take says:

    Reading this is all very depressing.

    I think that alone qualifies me for SSI Disability…

  7. I’m sorry, but I keep forgetting what you wrote after I see that wonderful Gil Elvgren print…….

  8. Best “sweeping under the rug” picture ever.

    Bruce, thanks for the blog. For entertainment value, can you make a hard prediction for Cyprus next week?

    I say Cyprus is beyond the limit of a sustainable common currency, and Germany recognises it. So Cyprus out of the EZ, no bondholders burned.