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Social Security Insolvency Estimates

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Social Security’s looming $32 trillion shortfall

CNBC: You can look at the financial health of Social Security in many ways.

The official version, found in the Social Security and Medicare Boards of Trustees’ annual report, is this:

Social Security’s total income is projected to exceed its total cost through 2019, as it has since 1982. After 2019, interest income and money taken out of reserves will provide the resources needed to offset Social Security’s annual deficits until 2034.

By then, if Congress does nothing, the federal government will collect enough in payroll taxes to pay about 75 percent of scheduled retirement benefits until 2090.

The Social Security Administration projects that unfunded obligations will reach $11.4 trillion by 2090. That’s up $700 billion from the $10.7 trillion the administration projected for its 2089 shortfall.

Infinite horizon

Despite the huge numbers, there’s even a less generous way of looking at the fiscal shortfall.

A projection, known as the “infinite horizon,” takes into account all the program’s future liabilities, even those beyond the 75-year period that Social Security actuaries typically use in their calculations.

Under the infinite horizon, Social Security will have $32.1 trillion in unfunded liabilities by 2090, $6.3 trillion more than last year’s projection. (See the chart below.)

Social Security 1

The full chart is here. The infinite horizon calculation is the most important part of the trustees’ annual report, said Laurence Kotlikoff, a Boston University economics professor and co-author of “Get What’s Yours,” a best-seller about how to maximize claiming Social Security retirement benefits.

“We’re not broke in 20 years to 30 years, we’re broke now,” Kotlikoff said. “All the bills have been kept off the books by Congress and presidential administrations for six decades.”

The $6.3 trillion increase in the infinite horizon projection shows that Social Security Administration actuaries are more pessimistic about economic and wage growth, Kotlikoff said.

A reduction in the interest rate used to make calculations under the infinite horizon projection from 2.9 percent to 2.7 percent was the main contributor to the rise in the unfunded obligations forecast from last year, according to the trustees’ report.

Related reading: Social Security Trustees Report: Unfunded Liability Increased $1.1 Trillion and Projected Insolvency in 2033

“You can’t hide the numbers under a bunch of malarkey,” said Kotlikoff, who is running for president as a write-in candidate.

Kotlikoff had an influential ally in his quest for better accounting for Social Security and other federal programs. In 2013, Sen. Tim Kaine, the Democratic Party’s vice presidential nominee, co-sponsored bipartisan legislation that would require the federal government to use infinite horizon calculations and so-called fiscal gap accounting, which considers the difference between the government’s projected financial obligations and the present value of all projected future tax and other revenue. The bill, which Kotlikoff championed, did not pass.

Presidential proposals

Presidential candidates from the two major political parties have yet to present detailed plans for how they will address Social Security’s shortfall.

Hillary Clinton said she won’t cut Social Security benefits and will expand the program, especially for widows and people who have left the workforce to take care of children, spouses or relatives.

She plans to ask “the highest-income Americans to pay more, including options to tax some of their income above the current Social Security cap and taxing some of their income not currently taken into account by the Social Security system,” according to her campaign website.

Currently, earnings up to $118,500 are taxed for Social Security benefits. Eliminating the cap this year would mean the trust fund reserves would be depleted in 2055 instead of 2034, according to estimates from Karen Smith, a senior fellow in the Income and Benefits Policy Center at the Urban Institute.

Clinton opposes “any attempts to gamble seniors’ retirement security on the stock market through privatization.” However, investing a portion of Social Security’s trust fund assets in stocks would likely reduce the need for higher payroll taxes without disrupting the capital markets, according to a recent analysis by the Center for Retirement Research at Boston College.

Donald Trump has said he wants to preserve Social Security, saying the key to do so is to have “an economy that is robust and growing.”

Stronger economic growth may delay Social Security’s insolvency, but it would not fix its underlying fiscal problems, according to Smith’s research.

So what would have a big impact on Social Security’s fiscal standing if you don’t cut benefits? Raising payroll taxes. Smith found that increasing payroll taxes by 3 percentage points from 12.4 percent — half paid by employers and half paid by employees — to 15.4 percent would make Social Security reserves last at least 53 years longer, or until 2087.

Few politicians are proposing that fix for future generations.

Germany: Merkel, What the Heck?

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Cant make this up, and it is an attitude and policy that is infectious especially with Barack Obama and Hillary Clinton.

German army wants security checks for recruits after admitting more than 60 Isil suspects in its ranks

German Defence Minister Ursula von der Leyen (CDU) speaking with soldiers 

Telegraph: The German army has said it wants tougher security checks on recruits after admitting that more than 60 Islamists are suspected of infiltrating its ranks.

In a draft amendment seen by German newspaper Welt am Sonntag, senior Bundeswehr officials said all applicants should be screened by the intelligence services for jihadist links before they begin basic training.

And they disclosed that 64 Islamists are already feared to have embedded themselves within the armed forces, along with 268 right-wing extremists and six left-wing extremists.

Terrorists are attracted to the army because they can use the training to plot future terror attacks in Germany, the document added.

“The German army trains all of its members in the handling and usage of weapons of war,” it said, “[terrorists] could use those skills acquired in the army to carry out well-prepared acts of violence at home or abroad.”

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The proposals would lead to a major overhaul of the country’s recruiting policy as under the current system soldiers are only checked for Islamist ties once they have enlisted.

They would  also require an extra 90 military officials to be hired in order to carry out a further 20,000 checks per year.

The reforms, which would cost an estimated 8.2 million euros (£6.9m) per year, are expected to be approved by German commanders next week, Welt am Sonntag reported.

A Defence Ministry spokesman said the government was still in the process of debating the law, which if approved would come into force in July 2017.

Germany is on high alert following a spate of deadly attacks last July, two of which were claimed by the Islamic State in Iraq and the Levant (Isil).

On July 18 an Afghan refugee attacked passengers with an axe on a regional train in southern Germany, injuring four people before he was shot by police.

Officials said they found an Isil flag in the 17-year-old’s room and it later emerged that he had pledged allegiance to the group in a video posted online.

A week later, on July 25th, a Syrian refugee blew himself up in the southern town of Ansbach, killing himself in the blast and wounding 12 others.

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When police raided his flat they found violent videos, bomb making materials and a message on his mobile phone in which he said he carried out the attack on behalf of  Isil leader Abu Bakr al-Baghdadi.

Thomas de Maziere, the German Interior Minister, has already called for tougher security measures which would include a ban on the burka and legal reforms that would make it easier to deport terror suspects.

He is also in favour of a Europe-wide proposal to force the developers of encrypted messaging services such as Telegram to hand over data to the security services.

Telegram has attracted controversy in the past for being popular among Isil fighters, who use the network to trade weapons and plot attacks while remaining anonymous.

Well there is more….Merkel is out of her mind…

Merkel ‘Underestimated’ Migrant Challenge: Vice Chancellor

Newsweek: German Vice Chancellor Sigmar Gabriel said in an interview on Saturday that Chancellor Angela Merkel’s conservatives had “underestimated” the challenge of integrating a record migrant influx.

08_28_germany_01 Immigrants are escorted by German police to a registration center, after crossing the Austrian-German border in Wegscheid near Passau, Germany, October 20, 2015. Reuters

Gabriel is also leader of the Social Democrats (SPD)—the junior coalition partner in Merkel’s government—and his comments come as campaigning gets underway for a federal election next year and for regional elections in Berlin and the eastern state of Mecklenburg-Vorpommern.

Hundreds of thousands of migrants flocked to Germany from the Middle East, Africa and elsewhere last year. Concerns about how to integrate them all into German society and the labor market are now rife and support for the anti-immigrant party Alternative for Germany (AfD) has grown.

“I, we always said that it’s inconceivable for Germany to take in a million people every year,” Gabriel said in extracts of an interview with broadcaster ZDF released on Saturday.

The head of the Federal Office for Migration and Refugees told newspaper Bild am Sonntag that Germany took in less than one million migrants last year and said he expected a maximum of 300,000 refugees to arrive in Germany this year.

At a separate news conference on Sunday, Gabriel said: “There is an upper limit to a country’s integration ability.”

He said Germany had 300,000 new schoolchildren due to the migrant influx and added that the country could not manage to integrate so many into the school system every year because there would not be enough teachers.

In the ZDF interview, Gabriel also criticized Merkel’s catchphrase “Wir schaffen das,” meaning “We can do this,” which she adopted during the migrant crisis last summer and has repeatedly used since.

Merkel used the phrase at a news conference she held in late July after a spate of attacks on civilians in Germany, including two claimed by the Islamic State militant group (ISIS), that have put her open-door migrant policy in the spotlight. Her popularity has slipped since those attacks.

Gabriel said repeating that phrase was not enough and the conservatives needed to create the conditions for Germany to be able to cope, adding that the conservatives had always blocked opportunities to do that.

Merkel’s migrant policy also drew criticism from Markus Soeder, a senior member of the Christian Social Union (CSU), the Bavarian sister party to Merkel’s Christian Democrats (CDU).

“Even with the best will in the world, we won’t manage to integrate so many people from totally different cultures,” Soeder told German magazine Der Spiegel.

Soeder said Germany needed to send several hundred thousand of refugees back in the next three years rather than bring their families here.

The CSU tends to talk tougher on immigration than the CDU and the two allies have often been at odds over how to respond to the migrant influx.

Iran Evaded Sanctions with Venezuela’s Help

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New evidence Iran evaded sanctions, continued nuclear weapons development with Venezuela

ForeignNewsDesk: New evidence suggests Iran received help from Venezuela with its nuclear program despite a decade of U.N.-mandated sanctions aimed at curbing the rouge regime’s controversial nuclear and ballistic missile programs.

iran_venezuela_nuclear

A 2009 document obtained by Brazil’s leading weekly, Veja magazine, shows late dictator President Hugo Chavez signing off on the release of funds to help Iran with its nuclear ambitions.

Specifically, the document states the funds were to be designated for the import of equipment for a gunpowder factory and the development of production plants for nitroglycerin and nitrocellulose, elements used in rocket propulsion for Iran’s government. There is also the suggestion that Chavez may have helped Iran produce rocket motors.

The document provides written proof that Iran successfully continued with its weapons-building program, circumventing what were perceived as ‘watertight’ sanctions.

The revelation comes as Iran’s Foreign Minister Javad Zarif is currently touring South America visiting Bolivia, Chile, Cuba, Ecuador Nicaragua and Venezuela, in what Iranian officials have billed as a “new chapter” in strengthening political and economic ties between Iran and South American countries.

“In my line of work, I can’t believe in coincidences. I can’t believe that $400 million was given to Iran in cash and now Zarif is running through Latin America. The Iranian regime understands that in Latin America corruption can be used to their advantage,” said Joseph M. Humire, executive director of the Center for a Secure Free Society, who points to the long-standing relationship between Venezuela and Hezbollah, Iran’s terror proxy.

Humire is also the co-editor of Iran’s Strategic Penetration of Latin America.

“Latin America is Hezbollah’s biggest cash cow. It would make sense that this is a very strategic visit by Zarif to continue some of Iran’s previous activities which were challenged because of sanctions,” Humire said, adding that Hezbollah has been deeply involved in drug trafficking in Latin America to offset any financial hardship brought about by the sanctions.

As a member state of the United Nations, Venezuela was obliged to cooperate with United Nations Security Council Resolution 1747 that unanimously called for a ban on arm sales to the Islamic republic.

But uncertainties were already high in 2009 when Turkey intercepted a suspicious shipment from Iran to Venezuela containing 22 containers of lab equipment capable of producing explosives but was labelled as “tractor parts.”

Humire, who has long analyzed Iran’s involvement in Latin America has studied twenty different transactions between the two countries in several areas, finding that even those dealings considered legal, were problematic due to the “dual use” that they could present.

“Iran’s secretive military programs go far beyond violating sanctions. It has to do with providing military and industrial support in these countries,” Humire said.

“At the far end of that, you can begin to speculate they are beginning to develop military assets.”

In a 2011 hearing at the U.S. Senate Armed Services Committee, then head of U.S. Southern command General Douglas Fraser told the committee that the U.S. was concerned about weekly flights between Venezuela and Iran dubbed the “Axis of Evil Express,” that could potentially be used to transport terrorists and weapons.

“My concern, as I look at it, is the fact that there are flights between Iran and Venezuela on a weekly basis, and visas are not required for entrance into Venezuela or Bolivia or Nicaragua,” Fraser told the hearing.

Another discrepancy in Iran’s investments in Venezuela, according to Humire, is considering that if the Iranian regime was after economic growth, they would go to “viable countries like Brazil, Colombia, not the ones that are broke, particularly with the heavy instability in Venezuela.”

Congress knows:

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Federal Land Grabbed, Now the Oceans, Stroke of the Pen

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Obama creates largest ocean reserve, takes heat for new federal decrees

FNC: President Obama, with the stroke of a pen, created the world’s largest ocean reserve on Friday off Hawaii, days after designating a massive federal monument in Maine – moves that have angered local lawmakers who accuse the president of disregarding the impact on residents.

A green sea turtle is seen off the coast of Oahu, Hawaii.

A green sea turtle is seen off the coast of Oahu, Hawaii. (Reuters)

Obama used a presidential proclamation to expand the Papahānaumokuākea Marine National Monument off the coast of Hawaii by over 400,000 square miles. The preserve now stretches 582,578 square miles, the world’s largest marine protected area.

“The expansion provides critical protections for more than 7,000 marine species … [and] will allow scientists to monitor and explore the impacts of climate change on these fragile ecosystems,” the White House said in a statement, citing the support of Sen. Brian Schatz and “prominent Native Hawaiian leaders.”

But the decision drew sharp criticism from the fishing industry and even fellow Democrats, as it will drastically expand the area where commercial fishing and drilling is banned.

Former Democratic Gov. George Ariyoshi said at a rally last month that it came down to the question of who actually owned the ocean.

“The ocean belongs to us,” Ariyoshi reportedly said. “We ought to be the ones who decide what kind of use to make of the ocean.”

Representatives from the fishing industry warn the move will increase prices and imports, The Honolulu Star Advertiser reported. All commercial extraction activities will be prohibited within the area, though non-commercial fishing is allowed by permit.

The regional council that manages U.S. waters in the Pacific Islands said the decision “serves a political legacy” rather than a conservation benefit.

“Closing 60 percent of Hawaii’s waters to commercial fishing, when science is telling us that it will not lead to more productive local fisheries, makes no sense,” said Edwin Ebiusi Jr., chairman of the Western Pacific Regional Fishery Management Council. “Today is a sad day in the history of Hawaii’s fisheries and a negative blow to our local food security.”

 The land grab began: On August 25, 1916, President Woodrow Wilson signed a bill that mandated the agency “to conserve the scenery and the natural and historic objects and wildlife therein, and to provide for the enjoyment of the same in such manner and by such means as will leave them unimpaired for the enjoyment of future generations.”[5] Mather became the first director of the newly formed NPS.[6] Wikipedia

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Celebrate National Parks’ 100th birthday by joining Obama on a (virtual) tour of Yosemite

2014: Through legislation, Congress has provided varying authorities for acquiring and disposing of

land to the federal agencies.31 With regard to acquiring land, the BLM has relatively broad

authority, the FWS has various authorities, and the FS authority is mostly limited to lands within

or contiguous to the boundaries of a national forest. DOD also has authority for acquisitions.32 By

contrast, the NPS has no general authority to acquire land to create new park units. Condemnation

for acquiring land is feasible, but rarely is used by any of the agencies and its potential use has

been controversial. The primary funding mechanism for federal land acquisition, for the four

major federal land management agencies, has been appropriations from the Land and Water

Conservation Fund (LWCF).33 For the FWS, the Migratory Bird Conservation Fund (supported

by sales of Duck Stamps and import taxes on arms and ammunition) provides a significant

additional source of mandatory spending for land acquisition. Funding for acquisitions by DOD is

provided in Department of Defense appropriations laws.

With regard to disposal, the NPS and FWS have virtually no authority to dispose of the lands they

administer, and the FS disposal authorities are restricted. The BLM has broader authority under §

203 of FLPMA. DOD lands that are excess to military needs can be disposed of under the surplus

property process administered by the General Services Administration.34 Further, it is not

uncommon for Congress to enact legislation providing for the acquisition or disposal of land

where an agency does not have standing authority to do so or providing particular procedures for

specified land transactions.

Ownership Changes, 1990-2013

Since 1990, total federal lands have generally declined. There have been many disposals of areas

of federal lands. At the same time, the federal government has acquired many new parcels of land

and there have been numerous new federal land designations, including wilderness areas, wild

and scenic rivers, and national park units. Through the numerous individual acquisitions and

disposals since 1990, the total federal land ownership has declined by 23.5 million acres, or 3.6%

of the total of the five agencies, as shown in Table 3. BLM lands declined by 24.8 million acres

(9.1%)35 while DOD lands declined by 6.1 million acres (29.8%). In contrast, the NPS, FWS, and

FS expanded their acreage during the period, with the NPS having the largest increase in both

acreage and percent growth─3.5 million acres (4.6%). In some cases, a decrease in one agency’s

acreage was tied to an increase in acreage owned by another agency.36  Read more here.

 

Cap and Trade DID Not Go Away

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New Principles to Help Accelerate the Growing Global Momentum for Carbon Pricing

2015:

  • New report shows the number of implemented or planned carbon pricing schemes around the world has almost doubled since 2012, with existing schemes now worth about $50 billion.

 

  • About 40 nations and 23 cities, states or regions are using a carbon price. This represents the equivalent of about 7 billion tons of carbon dioxide, or 12 percent of annual global greenhouse gas emissions.
  • And new report lays out six key principles to put a price on carbon – the FASTER principles – for putting a price on carbon based on economic principles and experience of what is already working around the world

The spotlight is on New York now with the upcoming United Nations meeting on the new Sustainable Development Goals, Climate Week New York, and in about two months, global leaders will meet again in Paris for COP 21.  More from the World Bank.

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California’s Cap-And-Trade Program Is Sick And Will Take High-Speed Rail Down With It

Chuck DeVore,  Contributor

Forbes: California concluded its most recent cap-and-trade program auction last week. Out of 44,268,323 metric tons of carbon dioxide credits offered for sale by the state Air Resources Board, only 660,560 were sold, 1.5 percent of the total, raising a paltry $8.4 million out of a hoped-for $620 million. Last May’s auction was almost as bad, raising $10 million out of an anticipated $500 million.

California’s carbon dioxide cap-and-trade auction program was expected to bring in more than $2 billion in the current fiscal year that ends June 30, 2017, a quarter of which is earmarked for the high-speed rail project narrowly approved by voters in a 2008 ballot initiative. As a hedge against uncertainty, a $500 million reserve was built into the cap-and-trade budget. But, with the August auction falling 98.5 percent short, the entire reserve was consumed in the first of four auctions for the fiscal year.

Further complicating matters is a pending lawsuit against the legality of California’s cap-and-trade program. Business groups and fiscal conservatives claim the program amounts to a tax, under a 2010 ballot initiative that better defined what exactly constitutes taxes and fees under California law, thus would requiring a two-thirds majority vote of the legislature.

Further, with the program slated to end in 2020, many businesses that are forced to buy the carbon credits are conflicted by the risk that they may end up buying the California equivalent of Confederate bonds, doomed to be worthless when the state loses its cap-and-trade war.

In the meantime, the High-Speed Rail project, currently promised to cost “only” $68 billion to run from the Bay Area some 400 miles south to Los Angeles may be looking at $50 billion in overruns. To fund the costly train, which was sold to voters as not costing a dime in new taxes, the expected revenue stream from cap-and-trade has been securitized, putting the state on the hook to Wall Street for billions in construction money advanced on the promise of future cap-and-trade revenue.

But the cap-and-trade market is showing dangerous signs of weakness. Not only have auction revenues collapsed in the last two auctions in May and August, but the competitive landscape for the auctions has collapsed as well. The Herfindahl–Hirschman Index (HHI), a commonly-used measure of competitive markets, signaled that last May’s auction was dominated by a sole market player. Last week’s auction improved somewhat, but was still moderately concentrated among a small number of buyers and sellers.

The lack of interest in California’s cap-and-trade carbon credits shows that the Golden State will likely have to come up with a significant amount of General Fund tax revenue, more than $2 billion annually, to build out its government-run rail project—something that isn’t likely to last much beyond the end of Gov. Jerry Brown’s fourth term in office in January 2019.

California's Cap and Trade Auction is Collapsing

California’s Cap and Trade Auction is Collapsing

**** Back in 2014:

In part from Politico: Cap and trade was a key part of the George H.W. Bush administration’s strategy for reducing acid rain in 1990, and it would have been the centerpiece of the climate bill that stalled and died in the Senate in 2010.

Despite the concept’s bipartisan heritage, cap and trade has become politically toxic in some circles — especially among supporters of coal, the carbon-intensive fuel that would face the heaviest costs under any trading system. Republicans derided the climate bill as “cap and tax,” while West Virginia Democrat Joe Manchin famously unloaded a rifle into a copy of the legislation during a Senate campaign commercial.

Still, cap and trade never went away.

With RGGI and California combined, about a quarter of the U.S. population lives in areas covered by trading programs designed to drive down carbon emissions, said Janet Peace, vice president of the Center for Climate and Energy Solutions, at a Senate briefing Thursday.

Other programs exist in Alberta, Canada; Australia; New Zealand; Norway; and South Korea. Next year, cap-and-trade programs are expected to launch in Switzerland, Tokyo, the United Kingdom and South Africa. Others are in development or undergoing pilot tests in Brazil, China, India, Japan, Mexico and even Kazakhstan.

“Eventually, 250 million people will be covered by a carbon price in China,” Peace said. The full article here.

*** The New York Times stays current on Cap and Trade.