(CNSNews.com) – “Social Security is insolvent,” Boston University economics professor Laurence Kotlikoff told the House Subcommittee on Social Security at a hearing on Capitol Hill Tuesday. “And it’s not bankrupt in 30 years, or 20 years, or 10 years. It’s bankrupt today.”
“This is not my opinion. This is the only conclusion one can draw from Table IVB6 of the 2013 Social Security Trustee’s Report.”
“This table reports that Social Security has a $23 trillion fiscal gap measured over the infinite horizon,” noted Kotlikoff, who also served as a senior economist on President Ronald Reagan’s Council of Economic Advisers.
“Twenty-three trillion dollars is 32 percent of the present value, also measured over the infinite horizon, of Social Security’s future revenues. Hence, Social Security is 32 percent underfinanced, which means it is in significantly worse financial shape than Detroit’s two pension funds taken together.”
And “the system’s off-the-books debt is growing at leaps and bounds – by $1.6 trillion between 2012 and 2013 – thanks to the approaching retirement of vast numbers of baby boomers.”
The “combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027,” it continues. However, “depletion of combined trust funds reserves” will occur in 2033.
Kotlikoff also told House members that Social Security is now in “worse financial shape today than when the Greenspan Commission ‘fixed’ it” 31 years ago.
“Today, we are looking, in the current 75-year projection widow, at 31 years of negative cash flows, which the Greenspan Commission knew were coming and willfully ignored,” he said.
The economist also accused the system’s trustees of a “disinformation” campaign to keep Americans from finding out that “Social Security is in dire financial shape.”
“To pay its scheduled benefits in full through time, the Social Security system needs a 32 percent immediate and permanent increase in the future path of payroll tax revenues,” Kotlikoff noted. “Alternately, to prevent having to raise its FICA payroll tax rate, the system needs to immediately and permanently cut all benefits payments by 22 percent.”
He also pointed out that Social Security, which is 32 percent underfinanced compared to its obligations, “cannot be bailed out by the rest of our fiscal system,” which is 58 percent underfinanced. In April, Kotlikoff told CNSNews.com that “the nation’s true fiscal gap is $205 trillion. The nation is completely broke.”
Full article: Economist: Social Security in Worse Shape than Detroit’s Pension Funds (CNS)