Revised 7/02/01 -- See fb-changes.html for what's new and a revision history.
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This web site was written in September 1999, when the March 1999 Social Security Trustees Report was the latest report. Back then, the Social Security system was projected to have a negative cash flow beginning in 2014, and will thus have to begin redeeming the Social Security Trust Fund (SSTF) bonds beginning in 2014. It was further projected that the SSTF would run out of assets in 2034.
Two years later, in the March 2001 report, the Social Security system is projected to have a negative cash flow beginning in 2016 (an improvement of 2 years compared to the March 1999 report), and will thus have to begin redeeming the SSTF bonds beginning in 2016. It is also now projected that the SSTF will run out of assets in 2038 (an improvement of 4 years compared to the March 1999 report).
The surprisingly strong economic performance in the 1995 - 2000 period has accounted for the more positive outlook.
No matter how it is looked at, the outlook for the Social Security system from the standpoint of the federal government and future taxpayers (who will have to foot the entire bill) has improved over the past few years. But one should be cautioned about the large improvement in the SSTF insolvency date (currently projected to be 2038 -- a 4-year improvement over the 2034 date projected in the 1999 report). Remember that while the SSTF is an asset to the Social Security system, it is a liability to the federal government and future taxpayers.
In the 1999 report, future general taxpayers were projected to have to come up with $7.8 Trillion to redeem the SSTF bonds. That is $1.5 Trillion when expressed in year 2000 dollars or about $1.6 Trillion when expressed in year 2001 dollars. (Using present worthing at the 5-6% interest rates projected by the Trustees).
In the 2001 report, future general taxpayers are projected to have to come up with $12.1 Trillion to redeem the SSTF bonds. That is $2.1 Trillion when expressed in year 2001 dollars.
Thus, while the solvency of the trust fund is improving, it paradoxically is becoming an ever larger liability on future taxpayers!
However, given that future taxpayers are obligated by law to meet promised future Social Security benefits even after the SSTF has run out, the SSTF does not tell the whole story. The Social Security cash flow deficit in the years following trust fund exhaustion is projected to be substantially less in the 2001 report than was projected in the 1999 report. So over the 75 year projection horizon, the outlook for both the Social Security system -- and for the future taxpayers who must meet these obligations -- has improved since the 1999 report.
Nevertheless, I find it disturbing that media reports only report the health of the Social Security system according to the projected SSTF insolvency date; and very rarely mention the $12.1 Trillion cost to future general taxpayers to redeem the SSTF bonds.
Please visit the fb-changes.html to see a chronological history of changes and additions. The main ones added in 2001 are:
Quotes From Liberals Who Also Agree That The Trust Fund Is Not A Savings Plan added 7/2/01 fb-51.html section non257
2001 Trustees Summary - Excerpt Expressing Concern About The Drain On General Revenues Required To Redeem The Trust Fund Bonds added 7/2/01 fb-50.html section non256
Correspondence With AARP Regarding Their "Social Security Is Solvent For Decades" Viewpoint added 7/2/01 fb-91.html section non259.
This is a great example of how supporters of the current Social Security system will go to great lengths to deny that the Social Security Trust Fund is a liability on future general taxpayers.
this UPDATES PAGE ADDED ( FB-UPDATES-1.HTML ) 7/2/01 to update the page to the most recent numbers.
(hits since June 4, 1999)
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