Table Of Contents Of U.S. Federal Budget, Social Security and Medicare, PART 1 (fb-index2.html)

Revised 7/2/01 -- See fb-changes.html for what's new and a revision history.
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TABLE OF CONTENTS

Index page (fb-index.html)

Table Of Contents (THIS PAGE, what you are looking at now) (fb-index2.html)

Revision History And What's New of this federal budget web site (fb-changes.html)

Abbreviations, Conventions, and Definitions (fb-7.html)

Citations, References (fb-8.html)

Links To Other Web Sites (fb-9.html)

#### Part 1 - Introduction (fb-20) ####

[A1] Information, Not Propaganda. But a Bias to the "Big Problem" Point Of View (15)

[A2] The Trust Funds "Assets" Are Just Promises That Future Taxpayers Will Pay (16)

[A3] Statements from the OMB and the CBO About the Social Security Trust Funds (17)

[A4] Where Will The Treasury Get The Money To Redeem The Trust Fund Bonds? (18)

[A5] Money Will Have to Be Found to Redeem $7.8 Trillion Of Social Security Trust Fund Bonds (19)

[C] No, The Social Security System Is Not Going to Go "Bust", "Bankrupt", Or "Insolvent" (21)

[-] The Social Security Trustees Are Using Pessimistic Demographic and Economic Assumptions ??? -- See Appendix E

[D] But Fixing SS Will Take More Than A 2.07 Percent Of Payroll Increase In Payroll Taxes -- It Will Also Require About $7.8 Trillion From The General Taxpayer by 2035 (22)

[E] The National Debt Matters (23)

[E1] Interest on the Federal Publicly-Held Debt Costs Over $930 per capita in higher taxes (24)

[E2] A Higher National Debt Lowers The Fiscal Safety Margin (25)

[E3] But Aren't The Interest Payments On The Debt Just A Redistribution? (26)

[G] 7.8 Trillion In Perspective (More Like $1.5 Trillion Today) (28)

[H] The Combined Cost Of Social Security And Medicare (29)

[H1] A Near Doubling Of The Payroll Tax Rate Needed? (30)

[H2] But Even So, Real Take Home Pay Will Increase (32)

[H3] On the other hand, some consider the Intermediate forecast optimistic (33)

[H4] While others consider the Intermediate forecast pessimistic (34)

[H5] Real GDP Growth Rate - More On (35)

[I1] Media Reports Are Confusing At Best, Misinformation Or Deliberate Deception By Half-Truth At Worst (37)

[I2] On The Other Hand, Loose Usage Of Words Like "Insolvency" and "Bankruptcy" Mislead In the Opposite Direction (38)

[I3] Based On Misinformation, People Are Making The Wrong Decisions (39)

[I4] There Is The Belief That Today's Booming Economy Means There Is Not a SS and Medicare Problem (40)

[I5] Misinformation Is Leading To Bad Legislation (41)

[I6] It Is Impossible To Fix The Problem Without First Understanding What The Problem Is (42)

[K] Summary Conclusion (44)

[K1] Assumptions (45)

[K2] Real Take Home Pay Will Increase (46)

[K3] The Social Security Trust Fund Assets Are Of No Help (47)

[K4] Surpluses Pay Down The National Debt (48)

[K5] We Must Maintain Fiscal Restraint For The Pleasant Scenario To Occur. The Non-SS Surpluses Are Very Fragile (49)

[K6] Unexpected Events Can Also Derail The Pleasant Scenario (50)

[K7] The Size Of Government (Taxes and Spending as Percent Of GDP) Will Grow. And Entitlement Spending Will Crowd Out Other Federal Spending (51)

#### Part 2 - Discussion (fb-30) ####

[B] The Basic Demographic Problem (53)

[B1] The Huge Baby Boomer Population Will Begin To Reach Age 65 in 2010 (54)

[B2] Covered Workers Per Social Security Beneficiary (55)

[B3] The Number Of Beneficiaries A Worker Will Have To Support Will Increase 70% Between Now and 2040 - from 0.294 Beneficiaries To 0.500 Beneficiaries (56)

[B4] The Total Dependents Counter-argument: No More Elderly + Children In Future Than In 1960s (57)

[B5] In 1983 Congress Raised SS Taxes To Save For Boomers' Retirements (58)

[C] SS Trust Fund Operation (Basic), 1985 - 2075 (59)

[C1] SSTF Increases From $42 B in 1985 to $762 B in 1998 to a peak of $4456 B in 2021. Then Declines to Zero In 2034 (60)

[C2] After the SSTF Is "Insolvent", Present SS Tax Rates Will Still Finance 67 to 72% Of Promised Benefits For Decades Beyond (61)

[C3] Table Of SSTF Operations, 1985 - 2075, in Billions Of Dollars (62)

[C4] Currently, and Until 2014, Social Security Is Running An Operating Surplus (63)

[C5] The Social Security Surpluses Are Loaned To the Treasury General Fund In Exchange For Intergovernmental IOUs (64)

[C6] The General Fund Spends The Money. Lately, Most Is Being Used For Debt Reduction (65)

[C7] If The General Fund Pays Back The $7.8 Trillion, Then Social Security Is Only 2.07 Percent Of Payroll Short Of Being Solvent For 75 Years (66)

[E] Good News: When There Is A Budget Surpluses, The Money The General Fund Borrows From the SSTF is Used To Pay Down The Publicly - Held Debt (68)

[F] Social Security and Medicare Cost (as % of payroll) to nearly double by 2040 (69)

[G] History: Payroll tax rate has gone way up, so has maximum salary taxed (70)

[H] Social Security Payroll Tax Explained, And What A 2.07 Percentage Point Increase Means (71)

[I] Solving Social Security Only Requires 2.07% additional taxes - NOT! (72)

[J] Real After Tax Pay Will Increase (Per Intermediate Projection) (73)

[J1] Even Assuming The Employee Absorbs The Entire Payroll Tax Increase, The Employee's Real Take-Home Pay Will Increase 26% Between 1999 And 2040, And Another 27% Between 2040 And 2070 (74)

[J2] The Detailed Math Behind The Above Conclusion (75)

[L] OASDI (Social Security) Operation, in Detail, 1985 - 2075 (77)

[L1] The SSTF and General Fund Are Both Treasury Department Accounts. Federal Government Transactions, Internal Transactions, and SSTF Transactions (78)

[L2] The Column Headings Of The SSTF Table (79)

[L3] Table - Operation of the Social Security Trust Fund and the Social Security Program (80)

[L4] 1998 In Detail (81)

[L5] SS Operating Surplus Peaks in 2001, Becomes Deficit In 2014. SSTF "Assets" (Including Interest) Peak In 2021, Become Zero In 2034 (82)

[L6] The SSTF Assets Are General Fund Liabilities, And Thus Are Not A Resource For The U.S. Government To Draw Upon To Pay Beneficiaries (83)

[L7] SS Becomes A Problem For The General Taxpayer In 2014 When SS Begins to Run An Operating Deficit (84)

[L8] The Real SS Operating Surplus Declines After 1999 (85)

[L9] Where the $7809 figure comes from (86)

[M1] I'm Entitled To At Least What I Paid Into The System All These Years, Plus Interest? (88)

[M1.A] Social Security Taxes Have All Been Spent On The Current Elderly and Current General Federal Programs, Nothing Has Been Saved Or Invested (89)

[M1.B] The SS Surpluses Were Not Saved, Rather They Were Used To Reduce Our Income Taxes (90)

[M1.C] Yes, Our Elderly Deserve To Be Taken Care Of, As They Have Taken Care Of Their Elders. But They Aren't Necessarily Entitled to Get Back Their SS Taxes Plus Interest (91)

[M1.D] Previous Generations Paid Much Lower SS And Medicare Tax Rates (92)

[M2] Federal Taxes Are Too High, But Don't Cut My SS and Medicare (93)

[N] What About Privatizing, Or Investing Some SS Revenues In The Stock and Bond Markets? (94)

[N1] Social Security is Earning Very Small Returns, or Even Negative Returns? (95)

[N1.A] Senator Rod Grams: The SS System Is Broken, Some Are Receiving Negative Returns (96)

[N1.B] The "Return" That the SS Program Is "Earning" (97)

[N1.C] SS is More Than A Retirement Program. It is Also a Disability Program (98)

[N1.D] Current SS taxes pay benefits to Current Retirees and Disabled (99)

[N1.E] Surplus SS Tax Revenues Are Not Being Saved For The Future (100)

[N1.F] Surplus SS Tax Revenues Are Funding Current General Federal Programs, Thus Lowering General Taxes (101)

[N1.G] The Interest the SSTF Earns Is Meaningless (102)

[N1.H] The Big Picture: The SS Program Is In Trouble After 2013 (103)

[N1.I] Boomers Borrowed From The SSTF, Gen Xers Will Have To Pay It Back (104)

[N1.J] In Summary, The Ways The SS Program Differs From A Pre-Funded Retirement Program (105)

[N2] Privatization - All We Have To Do Is Invest The SSTF In Private-Sector Stocks And Bonds? (106)

[O] Some Solutions (107)

[O1] A Review Of The Situation (108)

[O2] Use the Surpluses to Eliminate the Publicly-Held Debt (109)

[O3] Then Invest Any Surpluses in Private Sector, and State and Local Securities (110)

[O3.A] Government Pension Programs Already Invest In The Private Sector Without Allegations Of Political Interference (111)

[O3.B] Other Risks (112)

[O4] Diversification - Some In Private Sector, Some in State and Local Government Bonds (113)

[O5] Transition Slowly Towards A Fully Prefunded Program (114)

[P] Medicare, Medicaid, Healthcare (115)

[P1] Medicare Part A (HI - Hospital Insurance) (116)

[P2] Medicare Part B (SMI - Supplementary Medical Insurance) (117)

[P3] Medicaid (118)

[P4] SS, SSI, Medicare, and Medicaid Costs From 1998 to 2009 (119)

[P5] For More On Medicare, Medicaid, and Senior Health Care (120)