The men at MPC have a great thread on the rapidly approaching problems with Social Security. I was aware that the SS depletion date had been moved up, but I believed it was 2035. That is too optimistic. The CBO projected date is 2029 and SS internal projected date is 2033. The CBO projection is more sanguine than the SS projection in its assumptions. CBO seems to have a better grasp for the anemic recovery we have experienced.
Anemic, but the stock market is super high and unemployment is super low???? The bubble has fed the market. The unemployment rate is low due to government counting tricks. Even the job gains have been mostly a function of the fabled "birth/death adjustment". If you want proof of the anemic recovery, Social Security is a guide. Just look at the annual SS receipts.
Looking at old decades, you can see solid, steady growth above 5% and in some years much higher. Once you get to 2000, growth hits a steady 5-6% clip. The stagnation hits with the start of the Great Recession or Depression 2.0. In 2008, growth in receipts is 2.5%, then in sequence, 0%, -3.3%, 3%, 4%, 1.7%, 3.3% and 4%. There was the temporary SS payroll tax holiday that dropped the employee portion of SS payroll taxes by a couple percent, but this is troublesome and confirms the anemic growth argument for one unspoken reason.
Pay raises. We have knowledge of what pay raises have been for base salaries for the last few years. In the last four years, the salary increases have been 2.7%, 2.8%, 2.9% and 2.8%. The SS payroll tax increases are either at the base salary increase or a percent higher. This means the payroll tax increase is more a function of salary increases rather than organic job growth. The 2016 numbers might look even worse due to all of the oil industry and supply chain layoffs in the last year. This news blurb on layoffs is from February but relevant. Over 100K jobs lost and oil has not bounced back.
There has been not much of a recovery. As Porter wrote recently, we have not felt the pain that our recession was meant to inflict. Debt has allowed us to float on, keeping all of the plates spinning. Will the government default? Most likely not explicitly. What they will do is pay all of their obligations out in dollars worth far less than what you expected. You might be angry. A retiree might be angry. Even our urban youths might be angry by this. The third world masses arriving on our shores will not. They will not know any better.
And that's the plan.