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Sunday, August 12, 2012

About Ryan's Candidacy

When the Trustees released their report this year, they advanced the OASDI fund exhaustion date to 2033. Once it is exhausted, under current law benefits would be cut. They also projected DI exhaustion in 2016.

The exhaustion date for SS assumes that funds will once more be shifted from SS to DI so that currently disabled individuals will continue to receive benefits. 

Any way you look at it, the Social Security issue is on the table now. Since the trust funds are mythical entities, failure to redress at least some of our huge budget deficit problem will mean that the US will run out of borrowing power far earlier than 2033 and be forced to cut these payments. My best guess is that this will happen by 2024. Our deficit is rising too rapidly to let us continue on this path.

However, if you want to ignore that, 2033 is just 21 years away. If you are 55, your full retirement age is 67. By the time you are 77 you can expect to lose a hunk of your Social Security check. 

Any realistic attempt to forefend disaster and maintain at least the core of these benefit programs has to rely on expanding growth, which is contingent upon cheap energy, and cutting overall spending, which is contingent upon cutting social spending. 

If you or a family member are currently on Disability, you can expect to lose a portion of it within the next decade.

Thus, the Democratic rhetoric on this issue is completely idiotic. Failure to deal with our situation will only shortchange retirees. They are already in a pickle, and throwing them to the wolves is not a realistic option. Thus we must start working now to figure out a way to cover the basics.

A Democratic party that doesn't take this situation seriously is not the Democratic party of the past. The name may be the same, but the party is not. 

Just curious... how do you figure 2024?
What TJ said. The only way I get 2024 is if we suddenly run current-account surpluses like Japan, and I don't see that happening. Short of that, I expect our bonds to head north in a big way as soon as the European mess shakes out and the survivors get their houses in order, say 2018 or so. It's one thing to borrow $15 trillion at 1% and another thing entirely to borrow $20 trillion at 4%.
The axe will fall on spending long before that.

There is a surprising amount that could be cut pretty easily. After that it gets hard.

But realistically, our ability to stave off an OMG moment really comes down to 2015 to 2017. After that we lose control.
For one thing, I am assuming that we do change our energy policy, and that it does a lot for the trade imbalance.

I am also assuming that we raise taxes before then.
We'll have to not only raise taxes, but change them. The current code favors established economic interests over emerging ones, and we'll have to change that, not merely tinker with rates, if we are going to get the kind of sustained economic rebound we need in spite of a heavier overall burden. That seems really improbable, especially if the current administration manages an ugly win.
The axe will fall on spending long before that.

Doubtful. Now that GDP is mostly G any cuts will feel like arms & legs, and neither party will suffer that pain. I fully expect they'll continue trillion dollar deficits... until they can't. The resolution of the "fiscal cliff" will be telling.

My sense of macroeconomic timing sucks, but I really can't see it going past 2016 (although I expect it "sooner rather than later").
TJ - that is why I think we will make policy changes before then.

The longer term balance will be a bitter, ugly fight. In the shorter term, there's some stuff we can do.

The current energy revolution is helping the economy far more than anyone realizes.
I think you also have to assume that you will continue to have more and more folks go onto disability because they can't find jobs. My boyfriend is on disability (hip replacements-one side replaced twice) and is 61. So we really need a few more years of it before he can transition over.
Paul Ryan does not want to tax interest, investments and inheritence. I paid cash for a new addition. My bank called and offered a cd backed loan. I joked that they should call back if Ryan is VP so they can daisy chain an intrest free cd on one side and a interest business deduction on the other side.
that is why I think we will make policy changes before then

The triumph of hope over experience? :-)

The current energy revolution...

... is a bit overblown from people talking their book. After one prominent resource guy promoted it as the "second coming" I did my own research and I was not impressed. It certainly helps, but it is not a savior.

The fracking and oil shale boom buys us some time, and that's precisely what is needed. It doesn't matter that it's not a permanent solution.

TJ, fracking is not so big in oil, but it is HUGE in natural gas. In just the few years that fracking has been in use, proven US natural gas reserves have gone from 7 years of supply to over 100 years of supply.
Yes, it buys us time, and yes there's lots of it.

However... we don't yet have the means to use it as an effective alternative, and we also lack facilities to export it. Consequently we're already mired in an oversupply that's hampering further development.

Believe me, it's all good, but it's not good enough.
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