A little voice on a cold, crisp night

While we are all enjoying our Christmas bounty, here a little voice to whisper in our ears. From the New York Times:

PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. "When they found him, he had no electricity and no running water in his house," said David Anders, 58, a retired district fire chief. "He was a proud enough man that he wouldn't accept help."

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

Congress has known for decades that Social Security and Medicare would run out of money right about now. Anyone who suggested that something be done about this was accused of wanting to destroy Social Security. Nothing was done.

So tuck your loved ones in, makes sure candles are out, and check the rib roast dry aging in the bottom of the fridge. But don't forget that there really isn't any such person as Santa Claus.

Comments

[J Rae]

"Congress has known for decades that Social Security and Medicare would run out of money right about now."

Is "now" a relative term? Is it 2017, 2035, 2049 or is it January 1, 2011?

So what do you think...cut the old folks off? Raise the retirement age on manual laborers? Raise the current income cap on who has SSI deducted? Privatize it and turn our trust over to Wall Street? Bury it in the backyard? Or did you have a happy ending to this heart warming Christmas story.

Funny, I noticed in the story that no businesses, wealthy or politicians were hurt. Good for them.

[A.I.]

Steps were taken to keep SS solvent and you know it. As has been pointed out to you many times, the SS trust fund has reserves of about $2.5 trillion. That along with ongoing revenue collection is progected to allows SS to meet its full obligations till 2035 or so. Even if nothing is done and current projections prove correct, SS would not stop payments. It would still have ongoing revenues which would allow reduced payments to retirees. So, it would be nice if you would quit perpetuating the lie that SS has run out of money and worse, comparing it to a fund that stopped payments all together.

I know you think the trust fund is a myth. That said, I'm still waiting for you and others to equip me with the proper account accesses to transfer all your dollars to my accounts as you must conseder them worthless since they are backed by the "good faith and credit of the United States"--the same backing enjoyed be the SS trust fund.

[George Mason]

J Rae; The inconvenient truth is that if people had made conservative investments with Wall Street, instead of social security (an obvious misnomer), they would be far ahead of where they are with social security ( a federal Ponzi racket).

[Donald Pay]

George,

What's a conservative investment?

Social security pays beneficiaries far in excess of what they put in. It's been doing that for 75 years. The only way that ends is if the conservatives end up wrecking social security by having the financial wizards on Wall Street who brought us the crash get their hands on that money.

[A.I.]

So George, if SS were abolished, I have a few questions:

Would the amount that would be invested in stocks be all of what is paid into SS or just what would be left after paying premiums for a disability insurance policy comparable to that included in SS? And assuming you want a fair comparison, how much better would the return be after investing only the non disablility insurance portion?

Would those who didn't have the good sense to invest be left with no income in their post-earning years or would they be forced to buy into some sort of "conservative" investment scheme? If the former, would noninvestors simply be left to die once their money ran out? If the latter, what entity would define and approve acceptable investments and how would contribution be enforced.

Would those who didn't by disability insurance be left with no income health care if they did become disabled, or would they be forced to by private insurance, etc.

If private accounts suffered major losses--as has happened often and happened recently, would there be any provision for retirees whose incomes could drop precipitously through no fault of their own? In other words, would "Wall Street bailouts" be guaranteed" by the government (taxpayers) and if so, what affect would that have on risk taking by investment managers?

If your answer to any of this is people could be given a choice of whether to invest in private accounts or SS, forget it. That scheme would destroy SS and lead to all of the above questions and more.

Of course none of my questions are new. Nor are the reasoned and balanced answers which lead our forebears to establish a government sponsored system that provides a degree of "social" security and to call it, none to suprisingly, Social Security.

[George Mason]

The SS Trust Fund (Lock Box) is one of those myths that lives on. It never has existed. Donald is correct about the payouts and that's the whole problem. SS is pay in pull out. There are no individual accounts accruing interest or growing equity. The WSJ article about Pritchard, Al pointed out that the politicians who run the town were advised the program was unsustainable in the 1970's, just as the politicians in Washington who oversee SS were advised in the 1970's that they were running a Ponzi scheme. The Obama administration admitted this year the program is bankrupt. The inflow is less than the out go. Much of this was caused by politicians attempting to buy votes by continually adding payouts and eligibility. (We will all soon be labeled as disabled). Pritchard, Al. is a microcosm of what will occur to many states and SS if the problem is not addressed. The only two Presidents to address the problem got nowhere (they were both Republicans by the way).

[duggersd]

AI, why don't you lend me $100,000? I promise to have a trust fund that I will use to pay you after five years. And when you come to me to pay you back and I do not have the cash, I will give you the IOU's I put into the trust fund instead of money. Will that take care of my obligation to you? The fact of the matter is you would not lend money in this type of a situation. If I do not have the money, it does not matter how many IOU's I give you, what you have is worthless, just like the money in that trust fund you keep crowing about. Nobody is denying there is a trust fund. We are just denying there is any money in it. There are IOU's. And they are worthless. The only difference is the US has the ability to print money. Ask your local econ teacher what happens when a government does that.

[A.I.]

I've been listening to this same drivel for over 40 years. Not one person who said SS was broke/would never pay him his benefits missed a single check nor has anyone not recieved his SS benefits in the 75 years the program has existed. So answer the questions I pose above or accept the fact that you are arguing against successful program that was established before you were born--or at least old enough to have political opinions. And admit you have no better alternative.

[Donald Pay]

AI is right. Any problems Social Security might have meeting its obligations are decades away, and those problems can be fixed easily by tweaking the tax or making small changes in the benefits. Unless the conservatives' plans for wrecking SS take hold, SS is in no danger. That will never happen because the minute conservatives try to privatize SS or refuse to pay the debt owed to SS recipients, they will be voted out of office, if not strung up.

[William]

AI,

Are you arguing that since Social Security hasn't "missed a single check" that it's solvent in the long term?

“When the level of the trust fund gets to zero, you have to cut benefits,” Alan Greenspan - "He said there were only three choices: raise taxes, lower benefits or bail out the program by tapping general revenue."

http://www.nytimes.com/2010/03/25/business/economy/25social.html

[Donald Pay]

William, do you not understand that Greenspan was talking about 2037? What year are we in now?

[William]

Donald,

I'm not arguing that next months Social Security checks will fail to be delivered. I'm saying we have a structural deficit that needs to be addressed. Right now, as a nation, we're living on money we don't have. That can't continue indefinitely. Social Security is just one of the problems and can't be viewed in isolation.

[Donald Pay]

William, I agree. We need to address the structural deficit. But you seem to be addressing issues that have nothing to do with the structural deficit. Here's how you deal with the structural deficit: end the wars, end the Bush-Obama tax cuts to the wealthy, get people back to work.

[William]

Donald, you could do all those things and barely make a dent in the deficit. Federal spending is growing faster than Federal revenue. Since 1965, taxes and spending have been rising. Federal revenues have dropped recently due to the economic recession while spending has reached a record high.

If future taxes are held at the historical average, spending on Medicare, Medicaid, and Social Security will consume all revenues by 2052. Because entitlement spending is funded on autopilot, no revenue will be left to pay for other government spending, including constitutional functions such as defense.

[Donald Pay]

No, William, if you did the three things I listed you would just about eliminate the deficit today. You will have to do additional things to get future outlays in Medicare, Medicaid and SS under control, but you don't need to do those things to get today's deficit in order.

[William]

Donald, let's examine how much "the wealthy" already pay. Remember too, the wealthy can afford to shield and move assets from excessive taxation much easier than we "regular folks". The effective rate of tax revenue is about 19%, regardless of the tax rates.
http://www.nationalreview.com/corner/254034/hausers-law-reality-isnt-negotiable-veronique-de-rugy

In 2008 (the latest year for which accurate data are available), the bottom 95 percent of income-earning households in the U.S. – a group that surely includes “middle-income taxpayers” – paid 41 percent of the revenue taken in by Uncle Sam from the personal income tax, while the top 5 percent of income-earning households paid 59 percent of this tax revenue. And looking only at the top 1 percent of income-earning households – surely “the wealthy” – they paid a whopping 38 percent of federal personal income tax revenue.
http://cafehayek.com/2010/12/tax-cuts-for-the-rich.html

As to the wars, as of February 2010, around $704 billion has been spent based on estimates of current expenditure rates, which range from the Congressional Research Service (CRS) estimate of $2 billion per week to $12 billion a month, an estimate by economist Joseph Stiglitz.

As to "growing the economy" by "getting people back to work", I'm all for it! Less government intrusion, a flat-tax and controlling our borders to curb illegal immigration would certainly help with that.

[Lynn]

Donald stated, "That will never happen because the minute conservatives try to privatize SS or refuse to pay the debt owed to SS recipients, they will be voted out of office, if not strung up." Ridiculous. If the country goes bankrupt, there will be no people to vote out of office, there will be no money to pay anybody anything, and someone else (like China) will own us and control us. STOP THE SPENDING!!

[duggersd]

OK, AI. You are right. How about that loan?

[A.I.]

I'll tell you what dugger, I'll loan it to you in Lehman Brother's stock which we will value at it price at the close of trade December 31, 2007 and you can sign over rights to your social security benefits as collataral.

[larry kurtz]

You poor saps: http://www.amazon.com/When-Technology-Fails-Revised-Expanded/dp/1933392452

[KB]

I wonder if Prichard, Alabama had its own A.I. and Donald Pays. No doubt it did. Every time someone pointed out that they were on the road to disaster the Prichard A.I. said that there was the obligations were backed by the full faith and credit of Prichard, and the Prichard Donald said: hey, the crisis won't happen for decades!

A.I.: It's not a matter of whether you or I believe in the S.S. Trust Fund. It's a matter of what the trust fund is. Every penny paid into Social Security goes either to fund a recipient or into the general treasury to be spent on other things. The trust fund consists only of IOU's. Maybe the full faith and credit of the U.S. will be good in the future, or maybe not. You seem to think that the trust fund is an asset that can be drawn upon. That is nonsense.

Putting the day or reckoning further into the future does nothing to fix the system.

[William]

Larry,

I do agree with your book recommendation. Most people are unprepared for austerity, regardless of it's cause.

[A.I.]

KB: Is there some sort of conservative mindset that inspires the use of "believe in" as a term to use when referencing questions that are empirical--I don't believe in global warming, for example--even though it is inappropriate unless referencing matters of faith? Which is to say, I do not "believe in" SS, I know it exists. I know it is a contract between generations meaning what I pay in goes to current retirees or disabled workers (100% currently) or to a trust fund and what my children pay in will do the same. I suppose there is some degree of faith involved like the U.S. will continue to exist, our children will not abolish the program leaving us holding the bag and the U.S. will remain solvent enough to make good on the "IOU's" to which you refer. So do you really have so little "faith" in our children or our nation that you do not "know" SS can and will continue to function more or less as it has for generations?

That brings up the question of why you would claim SS faces immediate and dyer problems. It most certainly does not--unless America defaults on a whole host of obligations. So is it in hopes of turning some or all retirement funding over to the private sector? And if so, I refer you back to my earlier questions concerning just how that will work. Are you or any one of the other SS naysayers posting here going to answer them?

Oh, and one more question: Are you at all concerned about your own pension fund through the State of South Dakota? I may be wrong, but I would bet that some portion of the state retirement fund is invested in U.S. Treasury's which are worth about as much as those SS IOU's you continue to decry being backed by that mythical "full faith and credit" thing. I can come up with lots of that Lehman Brothers stock I offered duggersd. Want to trade it for your future SS benefits and what ever portion of your state pension might be backed by treasury's?

[Lynn]

The way the present gov't and previous ones have and are spending, it is entirely possible that the gov't will default on their obligations in the future, whether by inflation, deflation, or being taken over by the Chinese or some other up and coming world power that owns us financially. When SS was created, people didn't live as long and there were many workers for each retiree. Presently people are living longer, retiring younger, and there are fewer worker bees as compared to retirees. There is no way it can continue indefinitely. Also, it was never meant to be the sole means of support for the aging populace, it was only meant to supplement. There is a problem with SS continuing, and ignoring it because retirees are still continuing to get their checks is not going to address or solve the issue.

[A.I.]

The conversation is evolving into the sublimely preposterous. By the standard you set Lynn, no pension fund or, for that matter, nation can survive indefinitely. That, of course, is pure hooey. Ask the Germans who have had a form of social security since 1799 or the Greeks who have had some semblance of a nation since long before Christ.

Much of what is written here is written as though we are the only nation confronting budget problems or problems funding a SS-type program. In fact over 170 nations have some type of SS program (http://www.ssa.gov/policy/docs/progdesc/ssptw/). One take-away from that: the long-term viability of America is relative to the viability of other nations. They have challenges too, meaning we are not as bad off as some here would suggest.

[William]

A.I.

It appears as if our fundamental disagreement is simply this, can the US government continue spending at its current pace, or not. I think not.

BTW, how well did Germany's "social security" perform in the Weimar Republic and the Third Reich?

[A.I.]

William: I don't recall saying we should continue current levels of spending--which I take to mean deficit spending. I'm just saying conflating SS and current budget problems is inappropriate at best as SS is not contributing to current deficits in any significant way.

Unless, that is, you want to replace SS with private accounts. And if you are truly worried about current deficits, maybe you should consider the costs of transitioning from a social to private system. If that were done, the money now going from payees to recipients would instead go into private accounts. Thus money owed to current retirees would all have to come from other taxation or borrowing. And since we with rare exception refuse to tax ourselves at a rate that comes even close to balancing our budget, it would all be borrowed money.

[William]

AI,

What I would suggest is raising the age of eligibility (more rapidly than proposed by the deficit commission), eliminating the income cap and means testing. In one sense, our entitlement spending is a "Boomer Crisis" that we've been aware of for decades and it's our fault it hasn't been adequately addressed long before now.

[pension loan]

A Pension loan is an unsecured loan which lets you borrow a positive percentage of your pension fund as a loan - up to 50%. There's no credit checks and you do not require to show your income. A poor credit standing does not matter. The loan can be used for any purpose.

[Doha]

Hmm I'm facing a sailimr situation with the dayjob. I can relate still in the air. Been promised some more time for the beginning of the year, but that doesn't give me a feeling of security either (IT contracts, and all that everyone trying to cut down we'll see). Glad you don't have dependents, and have prepared for it.But.. you raise a great point. There is more to life than just preparing for times like these. I believe these days you have to be flexible, and swim with the current. At the same time, one has to build one's own security, and you've got something good going with your art and your story. I think the introspective side of your work is very very valuable, and that you can make that work for you looking for alternatives on how this can benefit you in the long run, being innovative, and resourceful. I believe in you, man you can do it. Many a time I've read your stories and felt so good about being able to apply the thoughts to my own life. You remind folks that life is not just work, and there's a bigger purpose to the dance. Best of luck, my friend. Rooting for you all the way.

[Estefani]

The r? Response h? Ngt.Home company down? E has its value. It is a kind of Gesch? Ftsmodelle. Adoption Records prove? No one there? is a mod? the extra? coenmmtary. Some people in this area have large r? E achievements by the fact that some of them spend their time and money into this Bereich.Es monetery are two types of house mod? The business down?, They all give chance of r? ussir. Acturally two m? Me, one is an EN? H-mod? It, the other is the mod? The formatting? level. They all have their value? Because of insurance vielf valid stratification of r? el Lebens.Die initial registration res soci? t? s MLM cat? category (such as Nu Skin, Amway, the market? is Am? America). You? Your a rookie H? Reseller forward, we should do is simply on the ground? Correct, they are revruiting RETAILOR. The r? Bin outcome at the company? Required for major Abl en f? Sesumme? Pay RETAILOR r, f? Therefore leads? a price? lev? products. If the person in the Gesch? Ft is not a great sales person from? Tail and he did not have time, human capital and monetery. The reult is great? monetery and time was lost? t? wasted?. Most of them end up with a large capacity? storage containers? Tons of products in their second Keller.Die? My cat? Category is a mod? The formatting? level of the initial registration cat? category. (For example, Melaleuca) This type of soci? T? Gesch they recruit? Target? Are partners worldwide, offering a unique opportunity for revenue sharing. Peolple in this kind of Gesch? Join Ft safe. No investment monetery. The company offers everything white? not? e mandetory large inventory in a commitment to monthly purchase of 12 months by ann? e, and press? s to sell in a month. Take the example of Melaleuca require only that their marketing manager, you can buy? 35 points every month, as well as a normal customer would be pleased? T tun.Ein 22 Sch? Es record success? S and f a record? Magazine Nf Inc500 appointment. All t? Moignent of success? S Melaleuca products and services and success? S overall Unternehmens.Auch that they contribute to manifest? Significant re? r? Ussita this type of M home new business background? es? Dl Beweisen.Ben? CONFIRM more information, if you pla? T contact me on rozelavender @ gmail. COMSAR

[Maiko]

Russia's officials have iussed work permits in the country only those foreign companies that pay them bribes. Some examples of corruption scandals:- Ikea Fires 2 Executives in Russian Bribery Case- Russia Launches Criminal Probe Of Daimler Bribery- HP Executives Under Investigation for Russian Bribery ChargesIKEA, Daimler, Hewlett-Packard, who's next?

[Felipe]

Here's the thing: you need to be able to handle an egeemrncy or unexpected expense if and when it arises. You can do this by having a pile of money in a money market fund (great) or by having availability on a low interest bearing credit card (good). You need to make sure you always fall into one of these catagories or both, preferably. Don't worry about your student loan debt if you have a low interest rate (below 6%). You might want to go ahead and try to pay your car loan down if you have a high rate (above 6%). I chose 6% because the best savings accounts/money markets are currently earning just over 5%. You'll be doing better to pay down the debt if your savings rate will be lower than the interest you're paying. Plus if you pay down the car loan, you will have a huge monthly expense gone, which will free up more income and lower your DTI ratio (which is good in case you want/need to get another loan, like a mortgage, anytime soon).

[Shekhar]

I would start a baby emergency fund of $ 1000. This will cover most emreeencigs except loss of a job. This is good finances as well as piece of mind.Second pat yourself on the back. You did accumulate debt, but not nearly as bad as others (myself included) and more importantly you want to pay it off.Next you need to promis to yourself that you will not accumulate more debt (outside of a house)Then pay the minimum on that student loan and attack the car loan with every extra cent you have until it is paid off, then attack the student loans.Don't get mixed up in credit cards!!!!If you are a reader (or even if your not), check out Dave Ramsey's Total Money Makeover It will detail out the steps to becoming debt free and wealthy and it works

[Andree]

i do not know of any brokerage firm that will allow that and i have taedrd through ameritrade, scottrade, etrade, and schwab..for their own reasons, they demand that an account be funded through either electronic transfer, personal check, or cashiers' check you can try drawing down on the cash limit of your credit card by way of one of their checks, deposit it, and then draw out of your account a round about way but it would work just fineany way you look at it, it's a hassel

[Wira]

I don't believe you can do it but if you can .. you'd be coeridnsed by most investors to be nuts .You just failed one the most important indicators of good money management. Don't do this.

[Joline]

have a ps3 and use it to play media files, but compared to the C200 the ps3 media plyear is a big pile of garbage. I have both the C200 and a PS3 . PS3 Media server works well, but you need your PC to be on (obviously) and it is re-encoding on the fly. I have found that the PS3 does not play in higher profiles. Not even a hacked PS3 with Showtime Player. If you want to play games and play some video files go w/ aPS3. For strictly video file viewing go with the C200.

[Peter]

Why is it ok when your watching BD or gainmg but not when streaming audio? It't not like it gets louder or anything? And the BD Drive in my computer is louder than my PS3 when its humming along at max spin (And I have an older 80GB Model, Best at the time I bought it, So it would be louder than a newer one) So the popcorn can't be that silent if a BD Drive you install is louder than a PS3.. The Popcorn is a joke at that price when the PS3 does everything it does and a lot more..