hope you all picked out a favorite cat food.

Here’s how Social Security has worked for the last few decades:

Every year, the Social Security tax receipts are used to pay out that year’s Social Security benefits.  Because of the positive ratio of contributors to beneficiaries so far, the system takes in more money every year than it pays out.  The excess is then borrowed by the Fed.gov for other purposes, in exchange for a shiny IOU that goes into the “trust fund”, a big-ass filing cabinet full of IOUs.  This has been going on for decades now with monotonous regularity—the government has been treating the SS surplus as a consequence-free loan, kicking that particular debt-laden can down the alley for future administrations to worry about.

Well, the good times have come to an end.  This year, the Social Security payouts will exceed receipts, an event that the Congressional Budget Office predicted for the year 2016 at the earliest.  From now on, the SS administration has to start cashing in all those IOUs to make up for the difference (which is only going to grow in the future.)  The government, in turn, has to pay back those IOUS out of the general fund as needed.

The really fun event is going to be that day when even those IOUs in the trust fund are going to run out.  The CBO estimates that blessed event to occur sometime around 2030, although the economic downturn has no doubt brought that date closer to maturity as well.  At that point, Social Security will be hopelessly upside down, with obligations (checks to be written) vastly exceeding receipts (collected SS taxes), and no more IOUs to make up the gap.

Anyone with more than rudimentary math skills can see that the entitlement payouts are going to cause a fiscal meltdown at some point not too awfully far into the future.  Almost half our budget already goes into Medicare and Medicaid—and that’s not even counting the new health care reform expenditures or Social Security payouts (which don’t count against the general budget at present, because they carried themselves until this year.)  Unless the government raises taxes and drastically cuts back on entitlements, the Fed is going to be slap-ass broke by 2030 at the latest.  This is not wookie-suit alarmism, it’s simple math.

(You want to see some major social unrest?  See what happens when the government starts issuing crayon-written IOUs instead of Social Security, welfare, military and civic service payroll, and tax refund checks.  That’s what’ll get the majority of the electorate out into the streets with bricks and molotovs.)

What’s needed is for the folks in charge to get some fiscal responsibility and make some hard choices, and for the electorate to stop the “I got mine, Sonny” attitudes.  Both are about as likely to happen as a fleet of Zorbonian spaceships landing in D.C. tomorrow with their cargo holds full of money to make up the little shortfall we’re facing.  People don’t want to hear that the music may be about to stop with no more chairs for them to sit on when it does, and politicians want to keep their jobs, so everyone is going to spend all their brain power looking for ways to just kick the can down the alley again for another generation or two.

Me, I don’t expect to see a single red cent out of Social Security on that day in 2036 when I reach the eligible age, because that particular fiscal house of cards will have long collapsed by then.  I’ll just have to finance my retirement the old-fashioned way: by putting away enough cash while I can work to buy my Alpo and Fancy Feast when I can’t (or don’t want to) work anymore.  I’ve already resigned myself to the fact that all the SS contributions I have ever paid in, and all the ones I will pay in until SS goes bankrupt, have already been pilfered by the preceding generations.

Our system went down the shitter the moment the people in charge discovered they could borrow money by promising that someone else’s kids and grandkids would pay back the loan.  What we are experiencing right now is just a prolonged demise, with all the players having a vested interest in keeping the whole thing going for just a little while longer.  Après moi, le déluge, and all that.

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47 thoughts on “hope you all picked out a favorite cat food.

  1. Carteach0 says:

    This much has been obvious for many decades. The answer is easy to understand, like losing weight. “Eat less, exercise more”…. and the reason people don’t do it is the same…. “That is sooo haaaaaaard! Can’t someone else do it for meeeee?”

    No… someone else can’t do it, and it can’t be put off for the future any longer. I agree… there won’t be anything there when I come calling for my stolen money to be returned…. and society is going to seriously change at that point.

  2. scotaku says:

    Fortunately, Zorbonian money is indistinguishable from Fancy Feast. Fortunate for us, that is.

    Somewhere around the mid-1980s I figured out that I would most likely not see a penny of this “Social Security” thing. Sadly, I did not begin to stockpile for the future, but in my defense I was sixteen. Now that I’m within an understandable range of being eligible for collecting… I’m terrified. Not that I’ll have to work until they nail the coffin shut, or that I’ll have to eat Zorbonian specie, but rather that the dotGov will create some massive structure to try to manage all the mess, instead of letting us handle it.

    I know, it’s crazy. Probably just seeing things where I shouldn’t. But will it become a crime to try to take care of myself, I wonder.

  3. Brian J. says:

    So many in this country believe that collapse cannot happen because this is the United States, where it has never happened.

    The only American exceptionalism they believe in is the fiscal magic.

    I actually had a lib friend tell me, “I want someone to tell me that we can give out the benefits unchanged and fix the problem by not taking any action,” or words to that effect. Congratulations, voting for the people who lie to you like that are what has gotten the nation into the problem state.

  4. Tam says:

    Anybody of my generation who ever expected to see a single red cent of Social Security is, not to put too fine a point on it, a little thick.

  5. Blackwing1 says:

    Even if, “…a fleet of Zorbonian spaceships landing in D.C. tomorrow with their cargo holds full of money to make up the little shortfall we’re facing” occurs, and even if they drop off stacks of $1,000 bills, the effect is no different than the Fed printing the same amount of currency. The value of the $ goes down, and it simply purchases less.

    Wealth is created by work, by changing the value of something so that somebody else wants to exchange something that they have of value for it. In a free market, that exchange of values is win-win, since both parties believe that what they’re trading is of less value than what they’re getting.

    When the dot-gov starts running those printing presses full-time to make up for all of the promises of cash outlays, all it’s going to do is give us (at best) Carter-era inflation. Interest rates will have to climb (time-value of money), and nothing the gummint can do will stop it (unless they actually CUT spending, of which they are politically incapable).

    At worst the country will be looking at Wiemar-era inflation; the wage-and-price controls that will follow will (of course) make things even worse. Zimbabwe, any one? Or look at the course that Venezuela is following.

    In times like that, being massively in debt is actually a good thing…you bought your house/boat/car/jewelry with currency that was actually worth something, and then get to pay back that debt with currency that’s getting more worthless every day. Prudent people, who pay off their debts and save money, will actually pay a penalty since the interest earned won’t even begin to cover the loss due to inflation.

    As Rand said, we’re being punished for our virtues, while the parasites are being rewarded for their vices.

  6. LittleRed1 says:

    My folks, barely Baby Boomers (born in early ’42) never planned on Soc Sec, and they always warned little bro’ and I not to count on it. One of the family’s great giggles was at bro’s college graduation, when the college awarded an honorary degree to the then head of Social Security. She proudly proclaimed that the system was solvent until at least 2010! The education and sociology students cheered wildly, the others not so much, and most of the parents looked at each other, sighted and clapped politely.

  7. og says:

    Catfood? Mweh. I intend my golden years to be a moveable feast of USDA prime legislators. They’re being fattened up now.

  8. anonymous says:

    Just the most visible example of the unsustainability of welfare.

    That’s not a popular notion in these parts, however, where Q-Tips outnumber workers three-to-one, and overwhelmingly self-identify as “conservative”.

    But it is what it is.

    AT

  9. Boat Guy says:

    Dunno if I’d be putting aside “cash” Marko … there will likely come a time when a wheelbarrow full of “Federal Reserve Notes” won’t buy you that can of Fancy Feast. The real question is “How soon will that day come?”

    • bluntobject says:

      This.

      Domestic debt defaults are relatively rare, from what I understand, and with a huge amount of domestic debt I doubt the US would be willing to default on it except as a last resort. On the other hand, the neat thing about domestic debt (from the Fed’s perspective) is that you can inflate it away just by printing more money.

      • I really don’t see any way out of it. I think the last two cards they can play to delay the inevitable are “pass a tax that looks like healthcare, but doesn’t pay anything out for years” and “force everyone at gunpoint to convert their IRAs into US saving bonds (force everyone to buy the US debt, because China and Japan and India won’t any more)”

        Both of those may buy us another decade. Maybe.

        The only other way out is to change the “double secret Cold War” we have now with China into a real shooting war (which we can start it right quick by voiding any T-bills that don’t happen to be held by our allies)

        Teh feds might bring in maybe 30% in taxes this year compared to what the gov’mint will actually spend. How long until the Debt is over twice what’s left of the GDP?

        • bluntobject says:

          I doubt we’d get that far before India, the PRC, and any other foreign bondholders said “OMGWTFBBQ” and dumped T-bills most fucking pronto. It’ll be the national equivalent of a bank run — no-one wants to be the guy still holding dollar-denominated debt when the Fed stops being able to pay.

          Papering over the cracks and propping up the illusion of normalcy might get us another ten years — I doubt that anyone with T-bills really wants to think that they’re gonna become worthless. But eventually someone’s going to fail to ignore the indicators.

  10. Old Soldier says:

    Knowing SS is a bad joke, the wife and I have been saving (via IRA’s and 401k’s) a decent amount of change for the day in 2033 when we turn 65.

    Now I am assuming that sooner or later they will “Argentenia” our retirement savings, taxes are going to rise to the point where other savings are impossible, and the federal debt will be paid off by printing money.

    In other words, I will live out my golden years as an Indian chief living in a tepee and hunting for dinner.

  11. laura says:

    I am 27 years old, graduated (public) high school in 2000, and was lucky enough to have an economics teacher that taught us the fundamentals of investing, living frugally, and the importance of saving. He pushed us to read pro-capitalist tomes, focusing specifically on Atlas Shrugged. More than once he asked us, “Who is John Galt?” He was a millionaire, who received his teaching degree after he became one, so he could teach high school kids to become millionaires just like him.

    He also taught our class that our Gov’t system for SS is an incredibly flawed system, and that our generation would never see a penny of the money we paid into SS during our working years. This created such a firestorm of discussion, with the entire class coming to a consensus that the Gov’t taxing our generation for SS was equal to highway robbery.

    Then, we realized, if we didn’t pay SS, the IRS would come after us.

    Looking at my last pay stub (Feb 26, 2010) I have paid $263.65 in FICA-OAS, and $61.66 into FICA-Med this year already. Two months, and the Gov’t has already taken $325.31. My 2010 estimate for SS pay-in will be $1,951.86. I don’t even want to start calculating the amount I’ll have paid in by the time I hit 35 or 40. It makes me physically ill.

    Fantastic teacher. Too bad he retired the year after I graduated.

    The sad thing is, just as Old Soldier was saying, is that the Gov’t will probably take my retirement savings as well (I have a 403b), and so I’ve been doing everything I can to prep for the worst. I stockpile water and rotate/refresh my inventory every 6 months. I buy MRE’s whenever I can find them on sale. I’ve taught myself how to knit, crochet and sew. I’ve learned how to leech lye, render fat, and make cold process soap. I do lots of gardening, canning, drying, freezing, and if it wasn’t for me living inside the city limits, I would probably be raising my own meat too. Next on my list of learning is basic building. Figure I’ll build a chicken coop in the garden this year. Fresh eggs would be nice.

    Anyway, sorry for rambling. Just frustrated.

    Keep up the awesome posts, Marko!

    • ZerCool says:

      Good on ya. If I wasn’t married I’d be asking for your hand. :)

      I’m a (local) gov’t employee and have a pension plan. I don’t *really* expect to see much of that pension. So, I save my own money on the side. At some point I should think about putting it into tangibles instead of banknotes…

    • Satanam in computatrum says:

      Want to be even more ill? Your SS and FICA taxes are only half of what’s paid. Your employer pays the other half…instead of paying it to you. Little payroll sleight-of-hand, there.

    • ErnestThing says:

      Haven’t you heard? Bunnies are the new Chickens. :)

      http://tinyurl.com/yk6m7mf

      • laura says:

        I do love rabbit meat.

        But the house I live in, I purchased less than a year ago. My neighbors are incredibly understanding and supportive people, but I don’t want to push them too hard, too fast.

        I would rather slowly acclimate them to the fact that they are living next to an “urban farm” and not thrust it on them suddenly. Keeps them on my side, and away from complaining to the city.

        I figure, get the new garden started this year (already have 200 from seed plants growing in the living room), build a coop and maybe add a couple chickens, and share my bounties with the neighbors, as it is easier to share eggs than rabbit meat. Some people aren’t down with eating little bunny FooFoo. That way, when I do add rabbits they will (hopefully) be more supportive than anything else.

        But yes. I do want meat rabbits. I would love to raise a meat goat or two as well (aww poop, what I really want is a pig and a cow), but that is not going to be possible at all with my city’s zoning laws. Oh well.

  12. dpatten says:

    Wait till the fedgov takes a gander at all them shiny 401Ks and 403Bs, sitting out there just beyond their reach, and decides that those would be just the thing to fill back up the coffers of SS.

    It worked in Argentina, right?

  13. Dog food is probably closer to your basic nutritional needs than cat food.

  14. DirtCrashr says:

    At worst the country will be looking at Wiemar-era inflation; the wage-and-price controls that will follow will (of course) make things even worse. Zimbabwe, any one? Or look at the course that Venezuela is following.

    We can’t even follow Venezuela – at least they have a commodity for sale that people want – oil. We can’t hardly even drill anywhere, anymore, due to Ecoweenies.

  15. DaddyBear says:

    I think I’ll follow this guy’s advice. He seems reasonable:

  16. Ken says:

    Ecoweenies are stringy, but (technically) edible. Then we drill.

  17. Drang says:

    “Fancy Feast?” Dang, Marko’s planning on livin’ high on the hog!

  18. anonymous says:

    Certainly “creative accounting” and government raids on the OA fund have played their part in this sham called Social Security.

    But while we’re doing “simple math”, anyone care to compute the maximum total contributions a worker would have made beginning in 1945 and retiring in 1985 at age 65? Double that figure for employer payments and add accrued average passbook interest based on “his” fund as if it were actually accumulating.

    Then figure what his draw would be beginning in ’85 and ending this year when he finally croaks at age 90. Subtract that total from the total arrived at in the scenario above.

    That negative figure would be the prime culprit in today’s insolvency. Sorry, Mom and Dad, but that by any measure is welfare.

    AT

  19. jimbob86 says:

    “You want to see some major social unrest? See what happens when the government starts issuing crayon-written IOUs instead of Social Security, welfare, military and civic service payroll, and tax refund checks. That’s what’ll get the majority of the electorate out into the streets with bricks and molotovs.”

    Yeah, I can imagine what would happen if the electorate took to the streets with bricks and molotovs, vs. a .gov equipped with Predator drones, automatic weapons and a compliant press…… and so can the electorate. I don’t think the moochers will say squat, until they isn’t anything left for them to mooch, and everyone is equally free to freeze in the dark. After that point, what’s the point?

    • Marko Kloos says:

      They won’t take to the streets against the government. They’ll take to the streets to claim the stuff they think they’re owed.

    • Kristopher says:

      Jimbob: they are already getting crayon drawn IOUs.

      The Fed is selling unsellable bonds to the SS admin in return for those useless IOUs.

      Think Zimbabwe Dollars.

  20. Overload in CO says:

    I expect to receive what I’ve put in to SS. However, I don’t expect the dollar to be worth what it was when I put the money in. Therefore, I’ll only get a fraction of what I put in, in terms of purchasing power.

  21. Arkh says:

    At least, you’re living in the USA. Some europeans will have reality hit them before you.
    10 years top and you’ll have Spain, Portugal, Italy and France crying for money.

    And China won’t be able to help the rest of the world as they have a fucked up economy too.

  22. markm says:

    Don’t expect to have to wait for those IOU’s to run out before the organic fertilizer hits the rotary impeller. All those IOU’s ever were, were promises by politicians to raise the money with taxes on younger people when the time came. Half those politicians are dead or retired already, making their promises even more worthless than they were in the first place, and the tax rates are already approaching the point where raising them further lowers the amount collected.

    Which leaves either default by inflation, or just plain default.

  23. Gerry N. says:

    Rabbits. More meat per pound of feed than chickens, quiet, and less susceptible to diseases. Not as messy to slaughter and clean. No eggs, though.

    Rabbit manure is not as “hot” as chicken requiring much shorter composting time, and once composted is a very excellent fertilizer for veggies.

    Gerry N.

  24. staghounds says:

    Yes, you will get every cent. And it will be worth almost nothing.

    If you had told someone starting work in 1965 that he would get $1000 a month from Social Security on retirement in 2010, he would have said “You are crazy- that’s a fortune!”

  25. davefla says:

    When the time comes, I figure to offer the .gov a deal: we can call it even in return for a couple hundred acres of what they’ve been tying up in perpetuity, out west. Why, I’d even agree to hold off on exercising mineral rights for the first ten years – in exchange for property tax concessions/subsidies, of course.

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