Ed Sarkies: Hello, my name is Ed Sarkies. I work for the Social Security Administration. I’m a field representative at the local Kingston, New York Social Security office. One of the questions that were frequently asked at Social Security, and you know it’s an issue that’s before the public on an ongoing basis and that is, “Ïs Social Security going to be there for me when I’m ready to retire? I’m 55 years of age now and from what I read in the newspapers, Social Security is in desperate financial straits at the present time or in the near future, it’s possible that maybe there’s no money available for me when I reach age 62 or when I reach age 66? So what’s the story on that topic?”

Well, I can start here and say that Social Security in a historical sense has existed making payments since January of 1940. It was passed into law in 1935. It started payments in January of 1940 and it has not missed any payments since that date to the present time. So it’s a program of long longevity. It’s probably the most successful government program that’s ever been in existence. To make payments from 1940 to the present without missing a payment shows a substantial significant successful program. The government is not going to let Social Security flounder financially.

Changes definitely have to be made with Social Security. In fact, the financial outlook for Social Security if no changes are made in the way Social Security payments are presently being sent out, that is if no legislative changes are made, Social Security is going to not be able to pay all its beneficiaries by the year 2037. At that point, what will happen if no legislative changes are made, if no changes are made in the Social Security System, only 75 percent of the people receiving Social Security benefits will be able to receive their benefits. There is going to be a shortcoming or shortfall of about 25 percent at that time.

So, of course, the system can’t work. It can’t continue to exist if that dire outlook exists. But what’s going to have to happen is there is going to have to be a consensus, a political consensus, to make the important changes in Social Security.

What those changes may be? I don’t know, but it’s going to be basic things like either reduction in the amount of the Social Security benefit payments, changes into who these benefits are payable to, or on the other side of the coin, an increase in the amount of the Social Security taxes. Whatever it may be, Social Security is going to need some changes. It’s going to need some legislative attention soon, and so at that point, when these changes, these necessary changes are made, Social Security, I’m sure, will continue on as it has been since 1940, again, being the most successful government program that’s ever existed.

Mike Kilburn: A much bigger problem than healthcare in this country is the financial stability of our Social Security program. Social Security is the program that needs to change. We need to look at the retirement age. We need to look at how we fund Social Security. You know, you only pay Social Security premiums on the first $100,000. You know, anyone making over $100,000 doesn’t pay any premium on that last end of their salary. So if we would revise that, I’m sure we could put Social Security back on a good footing. But we’ve got to get on top of it or people aren’t going to get those benefits they worked so hard and expected to have when they retire.

What is your experience? Are your costs of living going up? Should COLA be redefined so that it is more consistent with reality?

Mr. Shepard Smith: For many, many years, some would argue when it’s politically expedient to do so, critics on both sides of the aisle have claimed that Social Security was going to go completely bankrupt. I mean, bankrupt, it’s over, unless the entire system is drastically overhauled. We’ve all heard it.

Well, today, there’s a preview of things to come again. For the first time since the 1970s, the Federal government will not be giving seniors a cost of living increase (COLA). The amount on the checks will instead stay the same, but as healthcare costs rise, what this basically amounts to is a smaller Social Security check for seniors. I mean, if you look at it, that’s what it is.

Complicating matters, millions of babyboomers are now preparing to become senior citizens and it’s the babyboomers that we’ve known all about for decades and all of a sudden, it’s a crisis. With us now is financial consultant and money manager, Rodney Anderson. Rodney, it’s great to see you. Thank you.

Mr. Rodney Anderson: Thanks, Shep.

Mr. Shepard Smith: It’s not as if we didn’t know that babyboomers were about to get older, they are. We’ve known it for decades that it was coming. I mean, please don’t tell me this is the end of Social Security because we all know better. Every time they say it, they just find more money for it and make it work. Otherwise, they’d get voted out of office, right?

Mr. Rodney Anderson: Well, the decision to freeze Social Security is like putting a band aid on a compound fracture. We’re seeing where seniors are having their benefits cut and their cost of healthcare go up. We’re seeing them where they’re having their investments, which are the 401ks or IRAs just plummet down but not only that, we’re seeing their investments such as their CDs and their savings rates go down and this is where they lived off of. But many of these seniors through healthcare are having to finance their debt, debt that they’ve never had to finance before and that is being taken on by credit cards and then we have the banks raising everybody’s credit card rates and it’s killing the seniors and that’s why more and more are going into bankruptcy right now.

Mr. Shepard Smith: Well, it’s killing everybody to bankruptcy. And quite frankly it’s killing the seniors, but I don’t know… I don’t know how that leads us to say that this is the beginning of the end of Social Security because I’m not going to listen to it for a long time anyway because I’ve been hearing it for so many decades and it never happens. I mean, why would it happen this time?

Mr. Rodney Anderson: Well, in 2016, we don’t have enough money going into Social Security to fund it. But in the year 2037…

Mr. Shepard Smith: Yeah, well, in the previous administration, it was a different year, then in the administration before that, it was different year. It doesn’t matter if you have an R or a D after your name. They say this every few years, here it comes, and then we fund it. I mean, what’s different? Help me.

Mr. Rodney Anderson: Well, what’s different this time is truly because this healthcare crisis is going out of control that they have two major crises in front of them; one of them is healthcare. We’re hearing about it every day every minute of the day. The next one is Social Security. They keep wanting to print money, but pretty soon, Shep, the money is not going to be printed anymore.

Mr. Shepard Smith: And so because we’re not printing anymore money, Social Security is going to go away?

Mr. Rodney Anderson: No, Social Security will not go away, but what seniors will see is they’ll see no cost of living adjustment and what they’ll see is those paychecks, those monthly checks go down.

Mr. Shepard Smith: So…

Mr. Rodney Anderson: It may not go away, but it’s just going to be like Medicare where the benefits are cut every year.

Mr. Shepard Smith: So are you saying that an overhaul of the healthcare system is urgent and must happen to keep Social Security from falling apart? We’ve got the cost down?

Mr. Rodney Anderson: I think it’s a must happen… yeah, it’s a must happen. We have to get the costs down because seniors are being hurt from every side right now.

Mr. Shepard Smith: Well, it sounds like the President agrees with you on this, right? He’s the one who said we got to get the costs down. We’ve got to overhaul. We’ve got to overhaul the whole healthcare system and we’ve got to have a government option in there, that is what he used to say. Is that your sense that that would help save Social Security?

Mr. Rodney Anderson: Well, yeah, I think it will help Social Security in a lot of ways, Shep. But here’s what’s going to happen. I talked to my mom on my way here and mom knows best and mom says, “People can’t even or buying food right now, instead of buying medicine. It is a problem and right in my own family, because the fact of the matter is none of us or we’re all living older and that’s going to bankrupt Social Security.”

Mr. Shepard Smith: Well, I’m not well. We’ve known this was coming. This is not brand new information. We’ve known babyboomers were going to get older. We’ve known it forever. Now, all of a sudden, it’s a crisis. Well, yeah, it is. Babyboomers, they’re getting older. We got to do something about it. The President says he has a plan and the Republican say it’s a bad plan and we’ll see what happens. Rodney Anderson, let’s hope something happens. It’s good to see you. Thank you.

Even if the SS trust fund runs out of money, the government can always print more money to send out Social Security checks.

The only question is, will the money still be worth something? The more money they put out there, the faster its value goes down. And once other countries (like China) recognize that the dollar is losing its value, they will stop buying the US government’s debt.

But even then Social Security doesn’t have to fail. A Ponzi scheme can last for a very long time if it’s supported by a government that can print new money as it sees fit.

The result might well be hyperinflation. In such a scenario, Social Security checks won’t increase every year, but every month. They just won’t buy a whole lot.

If we are to be angry, who should be the target of our wrath?

Mr. Neil Cavuto: Senior citizens are already upset about the direction of healthcare reform and just when you thought they couldn’t get angry, now millions of elderly face shrinking Social Security checks. Trustees who oversee the programs say that the payments will not rise for the first time in a generation. So do seniors have a right to be riled up? Tom, what do you think?

Tom: Absolutely, Neil. They definitely should be angry. There’s a couple of things to look at here. The cost of living adjustment (COLA) is pegged to inflation, which is negative this year. However, the basket that is used to calculate that adjustment is actually calculating things such as the price of DVDs, movie tickets, BluRay machines. They’re now looking at spending patterns that seniors are actually using and that is… there should be a separate basket that is used to calculate that adjustment. That just not there yet.

Mr. Neil Cavuto: But Jonathan, I mean, many of these little rules are going in, right? This is how we’re going to calculate. Now, the two-year thing might be a new deal, but by and large, we always knew we’re going to keep this attached pretty much to the CPI and with very little variation, it’s been working just fine, so what changes things now?

Jonathan: Well, I don’t know, if it’s been working so fine. I mean, Social Security accounts are 20 percent of federal budget. All the entitlements, Medicare, Medicaid, Social Security account for 75 percent of all federal spending. I think what’s….

Mr. Neil Cavuto: No, really, my point is that we knew this math was there and now when it turns up that it’s not generous enough, we want to change it.

Jonathan: Right, well, what it does is it pits one generation against the next, right? So those who paid into the system, of course, feel that they’re entitled to get what they deserve out of it. So we have this multi-generational Ponzi schemes essentially that have no end and if you’re frustrated about your Social Security being cut, just wait until the government gets ahold of your healthcare.

Mr. Neil Cavuto: Liz.

Liz: Yeah, I agree. Jonathan is absolutely right. You know, I feel like that people who really should be riled up are the babyboomers. Boomers should be having their own town halls. They’re not going to see this Social Security benefits like the seniors are getting and you know, Social Security, when it was built in the 30s, the life expectancy was 65, and that meant you’re like, you know, you wouldn’t get any pension benefit from Social Security. Now, you know, babyboomers are expected to work until they drop dead and they’ll take a load off of Social Security and won’t get their benefits and you know, what the seniors are expecting, I get it.

But Medicare too was built in the 60s when we didn’t have MRIs, PET scans, CAT scans, all sorts of cancer treatments. Now, the taxpayer is paying for all sorts of those kinds of treatments and also all sorts of advances in stem cell research and neurology and the like. I think the reality check has bounced a long time ago with this.

Mr. Neil Cavuto: Mike, what do you think?

Mike: You know, I bet Jonathan is one of those people that wanted to give Social Security to Wall Street geniuses, so they can lose 50 percent of the money within two years as soon as they got it. I can just hear it. Government doesn’t have a place, but here’s the point, all of this is about, it’s about the fact that the drug…

Mr. Neil Cavuto: By the way… by the way, Mike, you might be surprised to learn that Jonathan was against all the bailouts in the last administration’s rescue.

Mike: Well…

Mr. Neil Cavuto: He wouldn’t rescue his own grandmother. So I’m telling you. I’m telling you he’s been very consistent on this.

Mike: I’m not saying this…

Mr. Neil Cavuto: So that’s an unfair shot, but continue.

Mike: All right. All right. Well, the AAR people better be pleased that government is still in control of Social Security. Here’s the problem. Here’s what happened. The drug industry can charge people whatever they want and because of that, you have something called the Medicare Prescription Drug program. That’s the only thing that has been affected here because the drug industry is able to charge…

Liz: Mike, Mike. Let me ask you. Before…

Mike: Is able to charge the elderly $50 for two…

Liz: Yeah.

Mike: Wait, let me finish what I’m saying. They were able to charge the elderly $50 for a $2 pill and what that does is raise his premiums.

Liz: Right.

Mr. Neil Cavuto: It’s okay. Jonathan, let me ask you.

Jonathan: Right. Right, well, I mean, you want to blend the drug industry and this industry in this business.

Mike: Give it to Wall Street. Orchestrate it. Give it to Wall Street.

Jonathan: And give it to Wall Street. But let me ask you, Mike.

Mike: Yeah.

Jonathan: Are there any of these big entitlement programs that you love so much that aren’t broke? I mean, this isn’t me. This is CBL. This is an estimate all of those that or eat Medicare. Are there any that are not broke?

Mike: Yeah, I would say. What do you think of the VA? What do you think of the VA? What do you think… what do you think of VA? Do you think VA works?

Jonathan: Social Security, Medicare, Mediaid.

Liz: Mike, you know, Mike…

Mike: You know, maybe Social Security is broke is because your GOP took $1.6 trillion out of Social Security while you were saying give the program to Wall Street. Let the elderly invest the money with Wall Street.

Mr. Neil Cavuto: Right, okay.

Jonathan: I’m saying… all I’m saying is…

Liz: You know, Mike, you know, again, the history lesson, the Democrats let the Congress to get their needs on Social Security for the first time in the 60s.

Mr. Neil Cavuto: All right. All right. All right. I wish we have more time. Thank you for talking over one another. Let’s save a hell of a lot of time; otherwise, we’ll have moments of proverbial break.

Dr. Peter Holmes: And good morning and welcome. I’m Dr. Peter Holmes, an orthopedic surgeon and host of your program, Ask the Doctor. My guest this morning is Dr. Byron Limmer. Dr. Limmer is a dermatologist. If you have any question for Byron in the future and my other guest, two ways to reach us, it’s through the foundation and it’s www.kneedfoundation.org or fax, 696-9012.

I’d like to talk about pyramid schemes and your health. Recently, we heard on the news is a gentleman named Madoff who made the news because he bilked some $50 billion off of investors and he did it through what they call a pyramid scheme.

Now, folks, what a pyramid scheme is it’s just that, it’s shaped like a pyramid. You get one person to put money in and he gets notice that his portfolio is worth something and then you get other people to put money in later and you pass some of their money off to the first investor, but for the most part, you spend everybody’s money.

So the person on top is getting a little bit of money, but the key is you have to keep bringing in more and more investors and the pyramid gets wider and wider at the bottom, that’s why it’s called a pyramid.

The money is all gone; it’s just on paper. So the net result is this: you now have this vast fortune of zero. In other words, there’s no money. It’s worth nothing, yet everybody thinks it’s worth something. Any money again going to the top is strictly transferred from new money coming in the bottom.

It sounds pretty ludicrous, doesn’t it? Well, guess what? We have a pyramid scheme in this country and most of you are part of it. It’s called Social Security and Medicare. There is absolutely no difference. You pay your Social Security and Medicare taxes in. That money is being spent in the general budget. It is then put down in the ledger, much like Mr. Madoff, that says “I owe you” (IOU). In other words, the trust fund is owed money by future taxpayers.

So what we have here basically is the money is spent. We have the people retiring now, on Medicare now, and new people coming in the bottom paying to the top. In other words, it is a generation to generation direct transfer of tax revenue. There are zero funds in this trust fund. It’s zero, same as Mr. Madoff’s, nothing.

All we have in the Social Security and Medicare trust funds are IOUs. Now, the problem with this pyramid scheme is that it’s really not a pyramid. What’s happening with the ageing babyboomers as we get older and there are fewer workers below, the pyramid is beginning to look more like a diamond, which is unsupportable in any sort of pyramid scheme.

Your healthcare and your Social Security depends now on a pyramid scheme and they’re both going to collapse. These are my opinions. If you have any comments, two ways to reach me, go to the foundation at www.kneedfoundation.org or fax 696-9012 to Ask the Doctor.

Barack Obama: “I think we’re in a position to be able to, either at the end of this year or early next year, start laying out a broader picture about how we are going to handle entitlements in a serious way. It may start with Social Security because that’s, frankly, the easier one.”

Lady Narrator: On the next Destination Casa Blanca, a large number of Latinos admit not to know anything about retirement saving plans and most of them expect to retire solely on the Social Security funds. But will this money be enough?

Male Speaker: Social Security from the very beginning was not meant to be your retirement plan.

Steve Guss: Exactly. Social Security was intended to provide sometimes referred to as fore-protection upon which people were expected to be building.

Michael Tanner: Every dollar that the government consumes is a dollar that’s not available in the private sector to increase economic growth, to hire people, to make businesses grow, for people to save and invest on their own. There is a cost to doing that.

Lady Narrator: What’s more? Will it even exist?

Male Speaker 2: There is not a long-term Social Security crisis, but there very much is a long-term healthcare crisis.

Michael Tanner: Cutting Social Security benefits angers seniors who are the most powerful voting block there is. Raising taxes on top of all the tax increases we’ve got coming is not good for the economy.

Lady Narrator: Join us for this new edition of Destination Casa Blanca, Thursday, July 2nd, 9 PM, Eastern Time and 6 PM, Pacific Time with an encore at 12 midnight Eastern Time, Pacific Time. Only on HITN educates and entertain.

Lady Narrator: While the economy worsens, the future of Social Security remains uncertain. As many baby boomers approach retirement age, the funds are shrinking and expected to vanish. At the Covello Senior Center, many retirees share their concerns about this problem.

Milagros Ruiz: You know, we need that check. What are we going to live for? I will be in the street because how would I afford gas, electricity and other bills. How else would I be if not for that? Maybe I will have to live in a shelter.

Lady Narrator: Some economists say the future problems Social Security faces are due to the spending and lending of the $1.5 billion in surplus it had into the less people paying taxes after all baby boomers retire. Those who depend on that monthly check talk about what it would be like without it.

Maria Rivera: It will be very difficult for me to survive without those benefits because it helps you, you know. It’s part of all the years in the labor force. It’s money that we have worked for and the help we receive here is very important and very essential because without it, life would be even more difficult for us.

Lady Narrator: Keeping in mind the not too positive future the next generations will face when they retire, some of these seniors made a recommendations based on their own experiences.

Jorge Rivera: I wish I would have had a better job when it was time to retire. If I had known, I would have prepared to have a better job and to save money, so that I would have had something set aside for my golden years.

Milagros Ruiz: There are many people who didn’t think and spent all their money instead of saving it for their retirement. They just spent it all, but you should save. That’s why people no longer went to retirement early because they don’t have enough money and they would get less benefits, so they rather work until the last days, but the sad thing is, that those who work the longest, usually die the soonest.

Lady Narrator: By the year 2016, Social Security will spend more than it collects in taxes. This gloomy forecast has many wondering if they will get any money once they retire. Although Andres Vido is only a few years away from retiring, he shares this concern.

Andres Vido: In this situation, I would have to continue working. One comes to this country to work and progress to find a better way of life. We hope this new president will take care of this. God help him, so he could be able to defend us. If not him, who will?

Lady Narrator: He is among the 78 million baby boomers eligible for early retirement benefits at the age of 62. Although he still has three years left, he is afraid to lose his job before then.

Andres Vido: In my job, they have let go of 80 percent of the workers. They have been laid off and right now, we are only working four days.

Lady Narrator: The good news, he says, is that he has done enough not to depend solely on pension benefits.

Andres Vido: I have been working my way up to save money, here and there, with the goal that I don’t face any problems in the future.

Lady Narrator: And thinking about the future is what he says he has done since he came to this country from the Dominican Republic.

Andres Vido: Since I came to this country 15 years ago, I had bought one of my lots 9 months after I got here. I bought a house through the bank and the other ones I had to work so hard for to build them.

Lady Narrator: But not every future retiree is as prepared as Vido, that’s why there was a push for a reform and the options being weighed into saving Social Security include raising the full retirement age from 65 to 67 and raising the cap on wages, so the higher-earning workers pay more. Even though experts say baby boomers have their money secure, only time will tell if Social Security benefits will last for generations to come.

David John: The problem is that while I agree that these are “full faith and credits” securities and we haven’t defaulted since sometime in the 1770s or so and we have no plans to do so now, what is actually there is paper and it is a first call on tax revenues. Now, those are tax revenues that are going to come in from income taxes and various other things and, yes, it will all go to the Social Security system.

But at the same time, we still have a problem with healthcare and healthcare is running massive deficits as Mike mentioned, and we have problems with the economic measures we’ve taken in the last six months or so that deal with the economy and unfortunately, we have a lot more demand coming for that tax money than we’re going to have tax money coming in.

Ray Suarez: So when you say “first call on tax money,” after those two trends pass each other and we’re paying out more than we’re taking in.

David John: Right. Right.

Ray Suarez: The Social Security recipients in the 2020s of which I hope to be one, I think.

David John: Me, too.

Ray Suarez: As I hope to be… I mean, in that number, too.

David John: Right.

Ray Suarez: We will also be taking money, not only from people paying Social Security tax or working, but from the general tax revenues of the United States.

David John: Absolutely. And the fact is that we keep taxes to the same level historically, about 18 percent of the economy, the three programs that Mike mentioned, Medicare, Medicaid, and Social Security, are going to suck up every single dollar of that tax revenue starting around 2050 or so and unfortunately, if we could put healthcare issues off to the side and say, “We’ll deal with you later,” Social Security probably would be fairly a simple problem to fix, but we can’t. It’s all coming in together.

Ray Suarez: Well, the same people who are going to want that Social Security check are also going to want the healthcare.

David John: Exactly.

Ray Suarez: Again, all of us getting old and sitting around this table this morning.

David John: Right.

Ray Suarez: So what’s the solution in simple terms? I mean, obviously, you either got to increase the money you collect or say to the people who are hoping to get Social Security checks, “You’re going to get less.”

David John: That’s it.

Ray Suarez: Those are you choices, right?

David John: That’s the bottom line with it when it comes down to it. You can try to make your money work harder by increasing private savings and things like that and the Obama administration is working on that in increasing opportunities for retirement savings and that’s a very crucial element of this whole thing.

We really can’t look at Social Security separately from overall retirement income. But as far as Social Security goes, either we raise taxes and there are costs to that because it makes hiring somebody more expensive and that’s especially true with younger people and lower-skilled workers, or we’re going to have to go through, which is what I think is going to happen is to change benefits. We’re probably going to have raise the retirement age, probably up to 68, 69, something like that, and we’re going to have to focus the money that we got coming in to Social Security even more than we do now on those who need it most.

Interviewer: Now, what do you think about the proposal of Barack Obama about national health care?

Chris Simcox: It is just another opportunity for Obama to nationalize private industry in this country. Federal government has no business getting involved in health care beyond what they already have done and again, we’d go back to… just make Medicare and Medicaid work. Let’s make the state programs work. Let’s keep Obama out of it.

The private sector will deal with health care. Whatever we do, we keep the government out of it and we provide incentives for people to save for their own health care and their savings cannot be taxed and to provide perhaps incentives for business, which they already have as private enterprise. It’s their choice whether they want to provide health care to their employees or not.

Interviewer: What is, in your opinion, Barack Obama’s national health care plan?

Chris Simcox: The wrong idea. Obama or Congress has no business nationalizing again private industry. We need them out of it. We need them to focus on fixing Medicare and Medicaid and getting those bureaucracies cleaned up with waste, fraud and mismanagement. That’s where Obama should be focusing his attention right now. Let’s fix what we already have and the incentive will come from businesses and from the private sector or the Federal government saying, “We’re not going to tax your private health care savings plans.” I think that’s the best way to go.

But more than anything, we must stop nationalization of our free enterprise system in this country. It will kill the industry and it will ensure that we have less than the best health care that we can provide Americans and everyone in the world. We have the best system now. Nationalizing it will only make it worse.

A good health care system will include access by everyone to health care. We have that now; emergency rooms, you cannot be denied health care. So we have access for everyone. Affordability, the cost is something that the free market will bear, and the more people that get into health care, the more profitable it will be for businesses and thus that will drive down costs, okay? So we need incentives.

The quality also is what matters to most people and I’m very satisfied with the health care, the quality of health care that our doctors and nurses and professionals provide. By far, there’s no debate. We have the best quality health care that we provide to our citizens and also to others who are attracted to our shores to enjoy the benefits of that health care.

Nationalizing our health care system will ensure that the government controls competition, which will destroy the quality. It will destroy the affordability and it will destroy the free enterprise system of health care that we have in our nation.

Interviewer: The only real issue is the affordability issue.

Chris Simcox: Well, the affordability, in the sense that when the government nationalizes it and there’s only X amount of dollars going in to provide that, sooner or later in the fourth quarter of every budget cycle, the government is going to say, “Sorry, we’re out of money. If you need a heart transplant, we can’t afford it.” And so we get into rationing health care and perhaps discriminating against a 50-year-old man versus a 30-year-old man who may need a heart transplant. The 50-year-old just may already have been used up and just not considered a worthwhile investment for a government national health care program.

Interviewer: Okay, so let’s talk about Social Security and Medicare. We have an ageing population in the United States. How are we going to pay for Social Security in the future?

Chris Simcox: Well, first, I think we need to create a whole new paradigm. Let’s get the government out of it. Let’s get personal responsibility back into it. From the time you’re 16 and you take your first job, your first paycheck; you’re investing in your personal retirement plan that will reap benefits over the long term as we’ve all seen. What we have now is a Ponzi scheme where basically the government is taking money that’s supposed to be there to help our ageing population, but they’ve spent it on other programs.

This way we can ensure that those savings are there and will be directed for one thing and one thing only, that’s to take care of me when I retire, not the government. It’s about personal responsibility and it’s about planning your life from the first day that you start getting your paycheck. Instead of the government taking it out, let’s have private individuals invest in their own retirement savings accounts and I think they can manage their money much better than the Federal government has managed our Social Security System to this day.

Let me add on, though, where I think our government should be responsible for Social Security and health care and that would be with our veterans. Every veteran who has served this country should have lifetime health care and a lifetime Social Security guarantee. We’re shortchanging our veterans and they are the ones that are at the bottom of the barrel, so if we have Social Security or a national health care plan, yeah, let’s build that around those who served this country and preserved our freedom.

Tom Lewis: So, the issue I want to discuss tonight is Social Security. I just started a new job in addition to my current job. So I’m a 1099 employee at my second job with a private contractor in real estate. I’m not making a lot of money but I’m doing well. So I just thought about paying off some debt and what not. But, before I went through this money I wanted to figure out how much I should set aside for taxes, what am I going to be hit with when next April comes. Everything I looked at pointed to about 25% or maybe some more. 25% is a lot, especially let’s say you take $1000 that’s $250 taken off, that’s a lot. That means basically 25% of the time you’re working for the government, but that’s not what I looked into there.

What I did look into and saw was 6.2% of that 25% was going to Social Security and 11% is going to Medicare. I don’t really care about that right now, that’s another issue for another day. But, then I said, ‘Okay, if start working at the age of 22 and worked up to the age of 65, how much will I pay into Social Security over that time period?’ And I figured the math that I did raised over a year and the final number came to $180,000 which would be paid out. And, by the way, if you want to see this chart email me, I’d be happy to share my data with you.

So, $181,000… let’s just say that over the year I had $181,000 in my savings account or a high interest yielding account, which got me 3%. That would be another ridiculous sum of money that I could add on top of that $180,000, it would be like $300,000 if my math was correct. That would be the total amount between my savings account and the initial investment of the money I pay into Social Security. That’s $300,000 that when I am 65 I can get that with no questions asked. That is a lot of money. Inflation is probably not going to be as much by the time I turn 65 as it is now.

So it got me thinking that the average sees about a $1000 a month in Social Security checks when they reach the age of 65. I’ll maybe see more than that, but when I see everything that I’ve put in… probably not. Let’s say I die by the time I’m 70, I won’t see any of the money that I invested. I would not enjoy the fruits of my labor and I’ll tell you I’m really working hard. I mean, putting in almost 12 hour days and weekends, I’m not complaining, I love it. But I want to see some return on my investment. I want to see a return on that sweat that I am putting in. And, you know, I’m exercising responsibility and my reward is my paycheck. So, the bottom line is why can’t I decide where that 6.2% goes, I’ll deduct the other taxes later. That 6.2%… why can’t it be my decision to decide to maybe allocate it to an investment fund. And maybe the way to go about this…and I’ll propose a solution too… is when kids are in high school let’s start with educating them there about stocks and bonds and savings accounts and funds and so on and so forth, 401Ks and what they mean. And maybe when they hit the age of 18 or 17 when they are working a job, they can start managing that stuff they can start to invest that 6.2%, you know. Hey, as opposed to putting in Social Security here is your other choice. Maybe we can give them reedom of choice. This country is all about freedoms and I think they’re depriving us of our freedom to earn money by taking this money away from us. And the government is taking away personal responsibility, and I thought we were supposed to be all about personal responsibility. Yet, the government is going to handle it for us with our Social Security. So why not say, ‘Hey, as opposed to putting that 6.2% into Social Security here’s your other choice; put it into an investment fund’.

What happens when every 18 year old and 30 year old and 25 year old … every person in this country… invests in some kind of portfolio, invests in a stock, invests in a fund. What happens? It means there is lot more money out there to work with. And yes, some funds are going to bomb; absolutely. But that’s why you have a diversified program, that’s why you need to understand what they are doing before you get into this. That begins with education and I believe we can spend some tax dollars on that and accomplish something much greater, and that’s investing in our own country. That’s as opposed to just giving money to the government, letting them take it off their hands for 25, 30 years. You start working with that money now and making it grow so that in that 25 or 30 years it’s even more than what the government could have given back to you. And you can buy a boat, you can buy whatever you want. If you are responsible and if you tracked it for those 35 years, the sky is the limit. And that’s why we need to stat realizing that through personal responsibility and through education we can be a greater society than we are today.

The American work ethic is just lost. People are more and more looking for handouts and assistance. And instead of teaching a man to fish so he eats for a lifetime, our government keeps handing us the fish. The next thing you know is free healthcare and this and that and other things. And it’s all government managed. What do we have to worry about other than going to work and coming home and going on our vacations? But I want an elaborate vacation, as does the guy whose, you know, working at the lowest paying job. Everyone wants that. And it’s the dream of having that that drives me every day. That dream of one day retiring and living the great life is what gives me my drive. That makes me sacrifice time with my girlfriend, and that makes me sacrifice time with my friends right now. Because I know that working hard now pays off far greater in the future if I’m wise and if I invest wise.

And that’s been a life lesson too, not just from the classroom. So, everyone starts investing the 6.2% into the country and the next thing you know, maybe some science groups are benefiting and we have greater products out there and greater ingenuities. You start thinking about what 6.2% spread over millions of people can do. I mean, it could grow our economy substantially, and I think that’s worth its weight in gold, I think that’s better than any Social Security payment that we do right now and I hope that people start to realize that. If you don’t know what taxes you’re paying, or you know the percentage, really look at the salary you’re supposed to have.

You’re supposed to have a $60,000 salary. Figure out how much is really being taken out as taxes each year. That % of the time you’re working for the government. Sure, sometimes you see roads fixed and other things, but the way you look at things anymore, I mean is government really effectively operating with our money? We’re running up a deficit that is just astronomical. So, they want us to continue to give them 6.2% when they demonstrated to us that they can’t manage it by running up this astronomical bill. And it’s not just Republicans and it’s not just Democrats, it’s Americans that are not caring anymore. We’re not engaging our government. We’re just handing over responsibilities and that’s the call to action. Start being more responsible.

Take an interest in your finances, taking interests in your job. If you don’t like your job then go look for another one. The economy is bad but there’s always work to be had. You may not get the salary you want, but if you work hard and if you believe in your work, I promise you it will pay off. I love my two jobs. The one job I have I think it got it by a lot of hard work and it was recognized and that’s why I’m here today. And I’m continuing to work hard, and I love my other job in real estate and I show up to work and the hours are awful, but I love it and I love the idea that I am making money, I love the idea that I am investing in my future, paying off my debts and I’m getting to enjoy some luxuries that I wouldn’t get to enjoy if I didn’t work this hard.

But, I would also like to enjoy that money that I am making as opposed to paying approximately 25% of it to the government and never really seeing that 25% in action. Politicians will stand up and say, ‘Well, I created three jobs here on this transportation project in some obscure town in Alaska’. Well, okay that means what to me? Let’s starting asking accountability from out politicians and from our finances.

Thank you and have a good night.

Good afternoon, friends. I want to talk to you a little bit about Social Security today. The White House under Obama has announced that Social Security is going to become insolvent in 2037. While the Obama administration promises total transparency, which has not been fully realized to say the least, but even that tradition I call upon the Obama White House to ask the OMB, the Congressional Office of Budgetary Management, to count up all the money and all the times that the Congress has raided the surplus of Social Security since at least the 1960s or 1970s.

Add it all up, get a total on it and the Congress and Senate need to come up with a plan on how they’re going to pay all that money back to the Social Security fund between now and 2037. If they would just give us back the money they have stolen to balance the budget or to spend it on projects that they wanted, then we wouldn’t be in such bad shape.

Of course, you know when the New Deal stated there were 7 people supporting each one recipient, but now it’s more like 2 or 3 and it may slip down to 2 very shortly because of the baby boomers.

But anyway, I say let’s come up with a plan on how to pay back all this money to the Social Security trust fund by 2037 so we’ll be whole, and then to come with a plan on how to keep it going from there. It’s certainly going to take some tough decisions. It’s going to be very unpopular, but honestly Social Security is going to have to turn into something that only pays the people who really need money and the rich, you know, they don’t need to be drawing Social Security now. There has to be some concessions made to the rich for this, and maybe a window of time where the rich in between getting money and not getting money, maybe the rich can get paid back what they put in. There should be a window there so that people do not get ripped off and their whole lives changed and if they’re like 60 right now they’re fixing to retire 62 or 65 and they want to draw on Social Security, to have it stolen from them without any warning of this kind is not in the interest of the United States and not something that we would want to do because that was called the New Deal, and it was a promise to Americans.

But, at the same time, an order to save the fund we’re really going to have to make a situation where instead of keeping on upping the limit, of what you got to pay in, maybe people whose asses are over the limit… I’m not talking about their homes, I’m talking about liquid assets like cash, businesses and that sort of things… their home and their car or a couple of cars could be excluded. But if their net worth is over $91,000 or if their income is say a certain percentage, maybe what the amount of their check would be or something that they wouldn’t receive.

You kind of get one to saying, I don’t really know how to work it out, whether or not if their income is over $91,000 or if their income or assets is over $91,000, and then as they have to spend on their own medical needs and different things and give to their children as their assets fall below $91,000 then they would be able to receive benefits.

But, first things first. You’ve ripped us off, the Congress and the Presidents past, and please count it up and let’s go over the program to pay it back by 2037, we’ve got like 28 years. And let’s see what the outlook would be then and then export these other measures that I am talking about.

I thank you very much.

Mandatory spending on entitlements, specifically Social Security, Medicare, and Medicaid will explode as baby boomers retire and healthcare costs rise. In less than two generations, the amount the government currently spends on entitlements will double, claiming all federal tax revenues by 2052. These spending tsunami will in leave no room in the federal budget for other priorities like defense or low taxes. Left on autopilot, these entitlement-driven deficits will reach 24.5 percent of GDP over the long term.

Bill Scher: “Hi, this is Bill Scher with LiberalOasis.com. When will Social Security run out of money? The answer is never, so you can be quite confident that your Social Security will be there for you when you reach 65. Some people say that is the case because the Social Security Trust Fund is scheduled to run out of money in the year 2049, but that does not mean that people will not access Social Security benefits. The trust fund is established to handle demographic shifts over time.

The very worst-case scenario, if no changes remain with the Social Security program by the year 2049, instead of having 100 percent of scheduled benefits, you would get 78 percent. But even that would actually be a larger amount of benefits than you would get if you accessed Social Security today because those benefits are expected to climb over time.

So there is no crisis in Social Security and to make sure that 100 percent of benefits are available by the year 2049, only very minor changes are needed to the program. For example, if we raise what’s known as the payroll tax cap. Right now, there is a cap on the level of income that is subject to Social Security taxes. It’s actually a flat progressive tax that allows higher-income Americans to pay a lower percentage of Social Security taxes. If we rectify that, that in and of itself would solve this very minor problem in Social Security.”

Social Security is a “pay-as-you-go” system. This means that when you work, the government takes your money and gives it to Social Security recipients. In order to get workers to accept this system, the government promises to take other people’s money and give it to you when you retire. Think of it as an exponentially larger version of Bernie Madoff’s Ponzi scheme.

As long as a lot of people die before collecting any benefits, or die without collecting many benefits, the system is financially sound. In 1950, the worker-to-beneficiary ratio was 16.5-to-1. With people living longer, the worker to beneficiary ratio has fallen to 3.1-to-1 and within 20 years it’s expected to drop to 2.1-to-1. Due to this falling ratio, over the years the feds have raised tax rates and now must consider further adjustments.

Let’s look at the revenue side of things. Each worker’s income below about $106,800 is taxed at a 12.4 percent rate. There are no deductions for this tax. All income is taxable income. Even those in the lowest income brackets have roughly one-eighth of their income taken from them to fund the Social Security system.

Few workers, however, understand the tax burden of the Social Security system. On their paychecks, they see that 6.2 percent of their gross pay goes to pay for Social Security. What they don’t see is that employers match this tax payment with an equal 6.2 percent payment. It may seem that employers are paying half of the Social Security taxes, but that’s not the case. Even though the employers are legally liable for one-half of the tax, they shift the tax onto workers in the form of lower gross wages. Therefore, the Social Security tax burden, 12.4 percent of each worker’s gross pay, falls on workers. Half of this burden is hidden from the workers.

Currently, the Social Security Administration is running a budget surplus. For 2008, Social Security revenues totaled $805 billion and benefit payments and administrative costs were $625 billion, resulting in a surplus of $180 billion. Over the years, the system has run up an overall surplus totaling $2.4 trillion.

What has happened to this surplus? The SSA took in $180 billion more than it spent in 2008. However, the federal government spent this $180 billion on other programs. Since the funds were spent on something other than Social Security, the government declares that it loaned itself the $180 billion, calling such “lending” intragovernmental debt. For all Social Security revenues that are spent on non-Social Security programs, the Treasury department issues bonds to the SSA and those bonds are held in the Trust Fund. Surely we can have confidence in anything called a Trust Fund.

Think of this type of lending for a moment. The federal government is in debt to itself. Compare this to debt in the private sector. No business declares that it’s deep in debt because it loaned itself money. It’s the same with families. Parents don’t lay awake at night trying to figure out how to repay the money they loaned themselves. The government, however, thinks that it makes perfect sense to collect $100 of tax revenue, spend the $100, and then declare that it now owes itself $100. This scheme is not limited to Social Security. Currently, federal intragovernment debt for all programs totals $4.3 trillion.

How should we think about this intragovernment debt? The Treasury department collects $100 in Social Security taxes, the SSA spends $70 on Social Security benefits, and the other $30 goes to, let’s say, military spending. Since $30 was collected for Social Security, but spent on the military, the Trust Fund now has $30 of bonds. The bonds are simply promises of future taxes. The feds collected the money for Social Security and now they are going to collect taxes again for Social Security spending. The $2.4 trillion of bonds in the Trust fund represent Social Security revenues that need to be collected a second time, since the tax revenues did not go towards Social Security spending when they were initially collected. In fact, all of the intragovernmental debt represents future higher taxes.

The interest on the bonds in the Trust Fund is another issue. In 2008, the SSA racked up $116 billion of interest payments on its $2.4 trillion of bonds, interest payments that were made in the form of more Treasury bonds for the Trust Fund. The government loans itself money and then issues bonds (read, higher taxes) to pay itself interest on that lending. This is not an insignificant amount. In the last ten years, the SSA has collected $754 billion of interest on its share of the intragovernmental debt.

Though the SSA is currently running a budget surplus, its financial position is rapidly deteriorating. With the glut of upcoming retirements, the worker-to-beneficiary ratio is falling and Social Security spending is rising much fast than its revenue source. A year ago, the SSA estimated that the system would be solvent until 2017. Falling revenues due to the recession have resulted in a new estimate of 2016. At that point, the system will need additional tax revenues to be able to pay the promised benefits.

The Trustees Report declares that, starting in 2016, the “deficits will be made up by redeeming trust fund assets until reserves are exhausted in 2037.” This is sleight of hand. The actual day of reckoning is 2016, not 2037. By 2037, the Trust Fund will be depleted. But the Trust Fund is irrelevant. Regardless of the status of the Trust Fund, if the current estimates are correct, beginning in 2016, the system will need significant additional tax revenues.

The shortfall starts in 2016, but increases rapidly. According to the report, Social Security–tax income will only be able to finance 76 percent of scheduled annual benefits in 2037.

The report calls for “an immediate 16 percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two” to bring the system into actuarial balance.

Making the system sustainable will require higher taxes or benefits reductions. These reductions could be achieved by either reducing the benefits per recipient or reducing the number of beneficiaries — say, by raising the minimum age requirements. The solution is to give workers a negative rate of return on the money that is taken from them. It would also help if some workers collected no benefits at all. Workers who are taxed and then die before collecting any benefits are a boon to the system. Maybe the federal government should rethink its war on tobacco.

This system is a massive income-redistribution scheme, taking one-eighth of most workers’ incomes. The total tax burden is hidden from the workers. The tax revenues have been used to cover the deficits in the rest of the government’s budgets, and the only way to make the system sustainable is to give the participants a negative rate of return on their money.

The Social Security system has run its course. It’s unfair and it’s economically destructive. It’s time for the program to be abolished.

Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute.

Nicole Livas: 10 On Your Side wants to help you plan for a comfortable retirement. So we headed to Langley Federal Credit Union to sort out part of a Social Security mystery.

Tom Schaad: It’s a financial forms set up to explain the current status of Social Security and what it may hold for your future. 10 On Your Side Eric Harryman joins us now with more on what you can do now to prepare.

Eric Harryman: Tom, Nicole, it comes down to realistic expectations and staying informed long before retirement age. Don’t get me wrong though. The daunting question of “Will there be any money left when I retire?” remains. But the experts say, “Worry less, plan more”.

Commentator: With the US economy in crisis mode, many believe Social Security could disappear.

Marsha Kilburn: Are there going to be funds there when we are ready to retire?

Commentator: Kevin and Marsha Kilburn had some very valid questions about Social Security, so they came here for answers.

Kevin Kilburn: Is there any money left?

Commentator: It’s a question many believe has no guaranteed answer. But at 52 and 54 years old, the Kilburns say, “It’s very scary for our children”.

Commentator: They’re nervous, and maybe they should be. Modern Social Security benefits began in 1942 with 5 workers for every 1 retiree. In 2008 the ratio hit 3 workers for 1 retiree. The estimate for 2030 is 2 workers for 1 retiree.

Earl Johnson: You’re going to need some pensions or some saving or something else besides Social Security, you’re going to need some other income.

Commentator: Earl Johnson works for Social Security as a public affairs specialist. He says that benefits will stick around, but don’t overestimate how much you will get.

Earl Johnson: Just like you and I, Social Security is going to change, but we’ll be there for you to provide you with the security that you need with regard to retirement.

Commentator: Or at least part of it. Financial planners claim maintaining a retirement income level equal to 70% of normal wages should leave most people comfortable. Johnson, however, warns that you should only rely on Social Security to provide 60% of that total. The other 40% needs to come from another source.

Earl Johnson: You’re going to got to have some kind of savings or pension.

Commentator: Tracking your progress, no matter how far away from retirement, is simple online. We asked Kevin, a 28 year old producer to try it out. At SocialSecurity.gov, choose “estimate your retirement benefits”. After you confirm your identity and current income levels click “create estimate”.

If Kevin maintains his current income level, at age 62 he’s get about a $1000 dollars a month in Social Security benefits. At full retirement age of 67 he’ll get about $1,502 and if he works until age 70 that amount jumps to almost $1,900.

You can also chose “create additional scenarios” to figure out just how much you’d have coming in at any age.

For the Kilburns it’s a tool that can make the retirement planning process easier and a worry less.

Kevin Kilburn: It’s almost like you’re ready to go through it. You don’t really know all this stuff.

Eric Harryman: And you need to, that’s for sure. Johnson says the year to watch is 2017 because that’s the year the amount withdrawn from Social Security will overtake the amount being deposited into it. Between now and then, Johnson says, expect some big changes at the federal level to prevent that from happening and, of course, you can go to WAVY.com to find more direct links about everything that we just talked about. But wouldn’t it be great to have a crystal ball?

Nicole Livas: Yes, it would.

Eric Harryman: You could at least figure out maybe what the result is going to be.

Nicole Livas: Lot of worries there, that’s for sure.

Tom Schaad: This issue has been going on for a long time. We haven’t heard the end of it.

Nicole Livas: Thanks, Eric.

Devvy Kidd: Welcome to “One for the Road” and I’m Devvy Kidd, your commentator. “One for the Road” was developed and created to help the busy commuter and Americans who don’t have access to the Internet find out what Congress and the media won’t tell you.

Social Security, of course, is the sacred cow of politics. We mustn’t talk about Social Security. Social Security is a ponzi scheme. Social Security can be funded by constitutionally generated revenues for the government. It must be funded out for the people who need it. But the American people have been lied to about this system and how it actually works and that has to come to a stop.

Social Security is a ponzi scheme that is so mathematically flawed that it can’t be saved and it certainly can’t be fixed. However, there is a fair and equitable solution to this monstrous problem that has become nothing more than every politician’s favorite campaign issue election after election with never a solution in sight. It is truly reprehensible how politicians over the past six decades have used Social Security to scare old people for a vote.

Please remember that Social Security is a tax. It’s a tax that goes into the general fund of the treasury and is not earmarked for any specific spending purpose. There is no such thing as a Social Security trust fund, or lock box or anything else. Social Security is a tax. That tax goes into the general fund and is spent for things like a million dollar contract for prophylactics for the people of Pakistan.

The way the system is set up, even if you chose your right not to ever obtain this insidious Social Security number that has been the biggest contributor to identity theft, you still are forced to pay a Social Security tax for a system that you will never be a participant in. This is the clearest, most gross example of indentured servitude that I have ever seen in my life.

Truly, the American people are made slaves to pay for somebody else’s retirement. Let me go into a little bit more here. No one is required to obtain a Social Security number. If you wish to ask someone from the government about this fact, let me demonstrate how you will be lied to by the same person.

This is the letter from Social Security to a Mr. Scott McDonald dated March 18th 1998 from Charles Mullen, who was the associate commissioner, Office of Public Inquires, Social Security Administration: “The Social Security Act does not require a person to have a Social Security number to live and work in the United States. Nor does it require an SSN simply for the purpose of having one. However, if someone works without an SSN we cannot properly credit the earnings for the work performed”.

Now, it would appear from even a basic understanding of the English language, that what Mr. Mullen said is this: “No one is required to have a Social Security Number to either live or work in the United States. If that person does not have this number but does work, no Social Security taxes would be taken out of their paycheck and there would be no credit ledger entry made in their name for taxes paid”. One would think this is quite plane and clear.

However, let’s look at another letter from the same Charles Mullen about one month earlier on February 24th 1999, addressed to me: “People cannot voluntarily end their participation in the Social Security program. The payment of Social Security taxes is mandatory regardless of the citizenship or place of residence of either the employer or employee. Unless specifically exempted by law, everyone working in the United States is required to pay Social Security taxes”.

Now I ask you: If obtaining a Social Security Number is voluntary, how is it then that this tax becomes mandatory? Since when is it legal to force any American to join a voluntary, phony insurance plan that is in reality nothing but another tax, especially when an individual must apply for the number that puts him into this taxing system? An even bigger question is: Am I even eligible to obtain this number?

This is a very important legal question that seldom is raised about title 42, the so called Federal Old Age Survivors and Disability Insurance Benefit Program. After thorough review of section 405 it would appear there are only certain classifications of individuals who are legally eligible to apply. To be specific, you can see 42 United States code section 405, C2B.

And I don’t want to get tangled up in this, but once you read these sections it becomes very, very apparent that I, as a 16 year old, when I was lied to to get the Social Security number, was never even legally eligible to apply for the Social Security Number, and that’s exactly what happened. Before I could get a part time job during the summer time at age 16, I was told by the retail store where I applied that I must have this number or I was not allowed to work in the United States. Of course, that is a lie.

But, on the other hand it doesn’t matter if you choose not to apply for a Social Security Number for your child and keep them out of this insidious system. They will still be forced to pay Social Security taxes because the whole ponzi scheme is bankrupt. It will always be bankrupt mathematically. It’s flawed. It can never ever work and this is why Congress is extending Social Security benefits to illegal aliens because there isn’t a big enough tax base after 47 million babies have been murdered through abortion. They need to build that tax base up. That’s what this amnesty program is all about amongst other things. They need to keep feeding this system.

I tell you that I absolutely resent the fact that I’m being forced to fund Mr. Smith’s retirement out in Rhode Island. We’re a self reliant, independent people. It has always been our responsibility to take care of our own retirement. The American people were sold a slick bill of goods and they’re still being sold a slick bill of goods.

Today parents all across this country are being forced at hospitals to fill out documentation to obtain a Social Security Number for their baby before they’re allowed to even take their new born home. What an outrage! Every American has the right to be fully informed of the law and the consequences of entering into any agreement that binds them to a government program.

Forcing a newborn, incapable of understand anything other than life giving functions such as food and a clean diaper, or a teenager to enter into a supposedly lifetime voluntary taxing program for which they have no understanding, is reprehensible and flies in the face of all the principles of freedom and free choice that this nation was founded upon. And yet every day parents across this country are told by ignorant hospital employees that they must fill out this form and apply for a Social Security number for their newborn.

You can go to the Social Security Administration’s website www.ssa.gov and on that website is the section that tells parents that they are not required to obtain this number for their new born. But even if they don’t, your child when they become of working age and you don’t stop this monumental slavery, will be forced to pay this tax to keep this dead system up and running.

And like I said, constitutional revenues can fund our Social Security. I can tell you my daughter is a genXer, she’s 31 years old. These young people coming up and growing into adulthood, they don’t want Social Security, and I don’t blame them. I didn’t want it either. I never wanted it. But, Congress has lied to you repeatedly about how this system works and as I said earlier, you will be forced to pay a Social Security tax even if you never participate in the program and that’s how they roped you in.

Because people say, “Well, Gosh. They’ve been taking out hundreds of dollars every year from me so I might as well go ahead and apply for it”. And here you have the continuation of a mathematically flawed system that is, along with Medicare and several other issues, going to financially bankrupt this country in the next couple of years. Congress needs to come clean with the American people. Of course, they won’t because they don’t want you to know the truth.

So think about that today while you’re at work.

By Devvy Kidd

Barack Obama: “We can extend the promise of Social Security without shifting the burden on seniors. I think that’s why the best way forward is to first look to adjust the cap on the payroll tax, so that people like me, because I am earning more than $102,000, pay a little bit more and people in need are protected.

And by the way, I think that we should exempt anyone making under $250,000 from this increase. So it will not burden the middle class. 97% of Americans will see absolutely no change in their taxes under my proposal. 97%. What it does allow us to do is to extend the life of Social Security without cutting benefits or raising the retirement age.

Even if we keep Social Security strong for future generations, it’s not enough to help seniors who are struggling with the cost of everything from gas to groceries, because we know that rising costs are hardest for folks on fixed incomes. That’s why I want to make retirement more secure by eliminating the income tax for retirees who are making less than $50,000 a year. This would completely eliminate income taxes for 7 million seniors.

If a company goes bankrupt workers should be a top priority and not just an afterthought. So as President, I’ll limit the circumstances when retirement benefits can be cut and increase the wages and benefits that workers can claim in bankruptcy court. We’ll require companies to disclose their pension fund investments. We’ll put an end to the outrage of executives getting bonuses while workers watch pensions disappear, and we’ll make sure that no American goes bankrupt just because they get sick.

75 million working Americans today don’t have the employer-based retirement plans that the previous generation counted on. And that’s why I’ve proposed an automatic workplace pension. There’s going to be no red tape or complicated forms. Employers will provide a direct deposit of a small percentage of each paycheck into your account. You can add to it or you can opt out of it at any time.

Medicare is not allowed to negotiate. That makes no sense, that’s why some people are getting hit with this doughnut hole where after a certain amount of medication they suddenly have to pay out of their pocket. That’s not fair to seniors, it’s made a lot of profits for drug companies. We’re going to change it when I am President of the United States.”

Rusty: What up, world? Today is May 17th. I just want to talk to you a little bit about Social Security. Save yourselves!!! I have discovered in some little pond something rather interesting that you might want to know. I was doing some taxes with a buddy of mine just for fun. I wanted to correctly identify his tax withholdings. I am not a tax professional. I do it for the fun. But all the information does exists out there; through the IRS, the financial calculators from different websites, you can go and calculate your own withholdings through the Internet. Technology is awesome.

Let me just tell you it took me 2 hours. Shouldn’t be that hard to calculate and project what your taxes for the year are going to be. Gross income, you’ve got tax deductions, tax credits, mileage rates, Medicare, Medicaid, gift tax and household indexing, individual retirement accounts, non-cash distributions, non-cash contributions, asset loss rules, Social Security taxes. You got traditional IRAs, Roth IRAs, 401k IRAs, retirement deferrals, tax deferrals. If you’re a self employee you got your own little tax. It’s ridiculous.

Add all these different deductions… if you’re an employee you get like 3 or 4. Certified self-employed, you’re a business… there are a million other deductions. But yet we still, for whatever reason, want to use this system. Are we masochists? All the Obama voters out there raise your hands, together now. YES WE CAN!!! YES WE CAN!!! YES WE CAN!!! But we shouldn’t. Bad Obama voter, bad bad, no. No.

For the purpose of this discussion I am going to be using Dave Ramsis’ personal financial software. You can go check him out at DaveRamsey.com. He has this thing called FPU, Financial Peace University, from which you can learn all kinds of cool stuff, everything you need to know about money.

Now, after I’m done plugging him lets go through and do this calculation here. There is no present balance in the Social Security argument. You’re not going to have any principle, so let’s put a zero there. Now, the annual interest rate that you’re going to be incurring is 12%. 12% is what the stock market has incurred since its inception. It’s easy to obtain that in a growth stock mutual funds. So put that in.

Years: my buddy was 25 years old when we were calculating his current taxes. He’s going to retire at 65, so that’s 40 years of contributions and incurred interest, so put 40 there.

Monthly Payments. His salary – I did get his permission to use these numbers – is $45,400. So we’re going to multiply that by 12.4%, which is what we contribute to Social Security. 6.2% is contributed by your personal paycheck deducted through withholding. 6.2% more is paid by your employer, also referred to as the payroll tax. That is $5,518 per year, when you divide that by 12 months, you get a contribution of $459.83 per month, so plug that in here, which is going to the government per month for retirement. Now this is not magic, you can get these formulas, these calculators online at different financial investment sites, so don’t think this is something that is magic. Because when I hit this button you’re going to be blown away.

5.4 million dollars. By contributing to Social Security instead of essentially a growth stock mutual fund at a private firm, you are losing out on 5.4 millions. Excuse me, not you but my friend is losing out 5.4 million dollars. You’re losing something else, that’s dependent upon what your salary is.

But when he hits 64 at year 2039 and retires at year 2040 at the age of 65, that difference is almost $600,000 per year in growth. It’s powerful, this is compound interest. That’s how it works. The total contributions when you add up $459.83 over 40 years, you have only added 220,000 dollars. But the interest is 5.2, 5.1 million dollars. This is compound interest. This is why our government sucks. This is why Social Security needs to be ended.

5.4 million dollars. 5.4 million dollars. You understand what just happened here? We are not going to see Social Security. We’re contributing to it as workers at our age. I’m 26 years old, I have been putting money in since I was 14 and started working. I’m never going to see this money. So, you have this scenario: forced government deductions called Social Security stealing 12.4% out of your paychecks. Then you have a choice of privatized investing into a retirement account: Roth, IRAs, 401Ks, whatever. You want to put it in growth stock mutual funds.

With Social Security you get nothing, with privatized investment you get 5.4 million. Hello! No brainer. Nothing with the government, 5.4 million. What if I’m half wrong. Nothing with the government, 2.7 million. Do you realize that most people at the age of 65 at their retirement can’t even cut a $600 check? These same people are on Social Security. Nothing with the government, millionaire. I want to be a millionaire.

Okay, here’s the deal. I’m not that type of guy who just wants to tell you all this information and not give you information to do something about it, to change your life. Well, go to DaveRamsey.com, he has a three hour radio show which you can listen to on the site. You can find out when local radio stations in your area are playing his show. He talks about everything financial, he’s awesome. He also has a course called FPU, highly recommended, which stands for Financial Peace University. It’s like 13, 14 weeks it covers everything about money.

But with that said, I have a gift for you guys. The first people to comment [on Youtube] and request gets a choice of either his book, “My Total Money Makeover” or his software. This software is the exact same software that you saw me use in the blog, the video podcast which I used to calculate Brian’s (my friend’s) opportunity cost for not being able to invest in a growth stock mutual fund.

You get your choice. First person to comment [on Youtube], can get either the software or book. Can’t go wrong with either. Peace out guys.

Tim Rosen: Today, the US News and World Report came out with their findings that Social Security is broke, and to most of you that is no surprise. They’ve actually updated the numbers that, as of last year, they reported that Social Security is good through 2017, referring to the trust fund for Social Security. They’ve now changed that and updated it to 2016.

What I strive to do here at TimRosen.tv and Conservative Money Talk is to take the news and interpret it and to share it with you in a way that you can either benefit from it or protect yourself from it. So what do we do with this news that most of you knew anyway; that Social Security is broke? What do we do with that?

Well, one: if you’re already retired you have priority here as far as your Social Security benefits. If you’re already drawing then you’re pretty much safe. For those of you that are still working and are hoping to get Social Security at some point, well, you’ve got a challenge there. Expect to see them increase the amount of Social Security that you pay into as a percentage of every paycheck. Right now it’s 7.5%. You could expect that to go 8.5% so they can make up for this deficit. You should also expect to see them draw out and extend the age that you qualify for Social Security benefits.

Bottom line, what does it all mean: don’t count on Social Security for your retirement. When it first came out it was designed to keep you from being destitute, from being hungry and if you’re lucky enough to get some, maybe that’s what it will do.

But, my encouragement to you about what does it all mean: pay yourself, build up your wealth. You can pay yourself monthly and nowadays with online banking, ING Direct, Capital One, maybe your credit union has a savings account that you can add to automatically every month. Out of sight, out of mind. You can make it happen. You can also invest in the market. There are great opportunities if you have time to be in the free markets right now and benefit over time to keep ahead of inflation and to have some resources from which to draw from to create your retirement income.

That’s today’s news.

Senator John Cornyn: “While we know we’ve been spending in Congress at an unprecedented pace and have a deficit of $1.8 trillion, as bad as that is, that’s not the whole story. What we’ve heard from the trustees of Medicare and Social Security is that Medicare will basically be out of cash by year 2017 and we know that there are $67 trillion in unfunded liabilities. That’s why I believe we need to roll up our sleeves and get to work and reform Medicare and Social Security, so we can keep the promise we made to seniors that it would be there and be financially viable when they retire.”

News Anchor: Joining us now with her reaction is Barbara Kennelly, the President and CEO of the National Committee to Preserve Social Security and Medicare. She is a former Congresswoman from Connecticut who is a ranking member of the Social Security sub-committee and a former counselor to the Social Security Administration.

Miss Kennelly, welcome to Bloomberg news, and Lindsey’s report painting a very dire picture. The trustees saying that Social Security fund would be depleted by 2037.

Barbara Kennelly: Well Earl, first of all, all this reporting on Social Security is dire. The fact of the matter is that last year the trustees said that Social Security could pay full benefits to 2041. Now they’re saying 2037. Would you notice that that’s three decades away? The whole program has been planned for the long term to have these kind of economic cycles going up and down. In the 1990s Social Security could only pay up to 2000 say. But no, Social Security is not going bankrupt. Social Security has a surplus. It can pay full funding till 2037, that’s what the trustees are going to tell you. And then after that…

News Anchor: Where is the disconnect between what you’re saying and some of the things that Lindsey was telling us over in that report?

Barbara Kennelly: Well, Lindsey is reporting as people report and say, “Hey, the number went from 2041 down to 2037″. And yeah, that is a drop and are we surprised? No, we have a recession. Are we surprised that tens of thousands people have been laid off and are not paying into the payroll tax. But the Social Security program has been designed specifically to have these economic going up and going down. I was on the committee in 1983 the last time we reformed it. We raised the payroll tax, we raised the age because we knew the baby boomers were coming.

So no, Social Security is not going bankrupt. Do we have a problem right now? We have a fiscal problem. We’ve got a deficit problem. We don’t have a Social Security problem because we have that surplus. Think of the good years we had in 2005, 2006, 2007, 2008. So much more money was coming in to Social Security from payroll taxes than was going out. That built up the surplus. So that’s the base we have right now. That’s why we can go up to 2037 and say Social Security can still pay its benefits.

News Anchor: Are you saying that Social Security is not in need of reform?

Barbara Kennelly: Oh no, I’m not. And you said that at the beginning of the program, no. When you said that Social Security can only pay full benefits till 2037, of course we can address those out years. But don’t forget hundreds of thousands of people are working, paying in. People act like everything stops. No, there’s all sorts of ways that you can take a little here, a little there and you should do it now rather than later so people can plan out for their futures. No, I think Social Security should be reformed, but I don’t think is Social Security should be used as a scapegoat; that now we have all these problems in the economy, “okay, let’s cut benefits, let’s raise the age”. That’s not the right way to go.

News Anchor: Well, the same question I guess applies to Medicare. What type of reforms might be needed for Medicare?

Barbara Kennelly: Oh, let me tell you something. You’re not going to get me to defend Medicare the way I am defending Social Security. Medicare has serious problems because there are serious problems in our healthcare system and if Barack Obama reforms the health care system, Medicare will do good…

News Anchor: Miss Kennelly, I’m sorry to cut you off, but treasury secretary Tim Geitner is speaking right now from Washington, let’s go to that live here on Bloomberg television.

Tim Geithner: … of the chief actuaries, Steven Godson, Richard Foster and the whole hard work of their staffs. Through generations, tens of millions of Americans have been able to count on Social Security and Medicare as guarantees that they will be able to live out their senior years in economic dignity and with health security. This year’s trustee reports once again remind us that the longer we wait to address the long term solvency in Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be. The sooner we come together to make the difficult but achievable changes needed to strengthen the solvency in Medicare and Social Security, the more time we will give the American people to plan and to adjust and the sooner we’ll be able to ensure that these vital programs will be as important for generations to come as they are today.

That’s why even as this President has focused on pulling our nation out of recession, he has made clear his commitment to work in a bipartisan way to address the long term health of Medicare and Social Security. Reestablishing fiscal sustainability, fiscal responsibility, as well as the strength of these two vital programs is essential to the economic and health security of our country. The Medicare trustees report makes clear today that there is no more important long term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health care services more efficiently. These savings can only be achieved in the context of a larger effort to control healthcare costs and improve quality more generally. The most effective entitlement reform measure would be a major health reform that helps bring down the growth rate of national health care spending.

This administration is committed to working with the Congress to find ways to control runaway growth in both public and private healthcare expenditures while helping ensure that all Americans receive the high quality, affordable health care that they deserve. The recent commitment of major health stakeholder to help lower the annual growth rate and costs by 1.5% points represents a crucial step in that direction.

Now the trustees’ reports come to the following conclusion. Let me just summarize these briefly:

First: The Medicare program’s financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing healthcare cost and the short term outlook has been hurt by the recession. Medicare’s annual cost is 3.2% in GDP in 2008, or nearly 3 quarters of Social Security’s, but they’re projected to surpass Social Security expenditures in 2028 and to reach 11.4% of GDP in 2083 compared with only 5.9% for Social Security.

Medicare’s hospital insurance trust fund is projected to become exhausted in 2017, two years earlier than projected in last year’s report. The cost of Medicare supplemental medical insurance to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3% of GDP in 2008 to over 4.7% GDP in 2083 with continuing increases beyond those 75 years.

Now, this year’s Social Security report projects that the trust fund is going to be exhausted in 2037, four years earlier than the trustees projected last year. This change is primarily due to the economic recession, recent data that prompted a small downward adjustment to the projected level of real GDP, and the fact that our citizens on average are projected to live longer lives.

Nevertheless, Social Security can continue to pay full benefits for nearly 30 years and cover approximately 75% of scheduled benefits thereafter. Now to ensure that these critical programs are there for future generations, the President and this administration are taking the following steps.

First: we’re intently focused on bringing the current economic and financial crisis to an end and getting on with recovery. The return of robust growth will help solve some but my no means all of the financial problems of Social Security and Medicare.

Second: we’re reforming the health care system via cost control and improve quality which will help strengthen the Medicare program and improve the long term fiscal position of the United States.

Just yesterday, as I said, the President working with major healthcare providers helped secure a commitment to reduce future growth in costs of care by more than 2 trillion dollars. These voluntary efforts will complement the President’s efforts to enact comprehensive reform to assure quality and a affordable health care for every American. And the administration is committed to working with Congress to find ways to control runaway growth in both public and private healthcare expenditures while as I said ensuring that all Americans receive the high quality affordable care that they deserve.

And finally, after we have passed healthcare reform that puts our nation on a path of lower growth in healthcare costs and more expanded and more affordable coverage, this President will work to build a bipartisan consensus to assure the long term solvency of Social Security.

The President doesn’t believe that Social Security is untouchable politically. He believes there is an opportunity now for a new consensus on Social Security reform. The steps the administration is taking towards comprehensive healthcare reform, towards economic recovery and towards deficit reduction over the medium term will all help preserve Social Security and Medicare for future generations and it will help produce a more balanced and more sustainable growth that improves the lives of all Americans, both working Americans and retirees.

News Anchor: We’re now back for final thoughts on the issue of Social Security and Medicare with Barbara Kennelly, the President and CEO of the National Committee to Preserve Social Security and Medicare. Miss Kennelly, again of course our apologies for cutting in on your final answer but we had to go to Secretary Geitner. You were listening in, I was wondering if we might get your thoughts.

Barbara Kennelly: Oh, I thought his statement was excellent. I am thrilled that the President keeps saying he is going to do healthcare reform, and then after he does healthcare reforms he is going to look at the long term problem of the out years of Social Security and let me tell you something: my four million members and supporters want to work with him. We don’t only care about Social Security for ourselves, we care about it for our children and our grandchildren. I thought that the statement was excellent. I thought the attitude was excellent, and I want to once again say that they did say that Social Security can pay full benefits for the next 30 years.

News Anchor: What would your organization be pushing for when this debate is finally joined?

Barbara Kennelly: Well, what we’re really worried about is when you hear about entitlement reform. Entitlement reform, to a lot of people, means cuts. And what I don’t want to see is… Social Security benefits are very moderate, about $13,500 a year. And so when you talk about cutting benefits I get very nervous. You talk about raising the age, yeah, we have to look at that but right now it’s up to 67 and I’ll tell you a lot of people who are 65, 66 and 67, there’s no jobs out there for them, so there’s a lot of work to be done. But I thought that the treasury secretary’s remarks were excellent and I look forward to working with this administration.

News Anchor: How do counter those who have been calling for the privatization of Social Security.

Barbara Kennelly: I gave my life to it for about five years. Aren’t we glad now that we didn’t put some of the Social Security trust fund’s money into Wall Street? Already peoples’ 401Ks are down, the worth of their house is down. I’ll tell you something: privatization is over. That thought we don’t even get. It’s looking at the entitlement reform and what some people really want to do is get rid of the entitlements. So there is always a fight. Ever since Heckler and Roosevelt there have been enemies of Social Security, they’re going to look at what the surplus is just a year or so in the future, not long term surplus. And that has gone down because of the recession. People aren’t working.

News Anchor: Miss Kennelly, we have about a minute left. I was wondering what kind of benefits for Social Security and Medicare are you and your organization willing to give up to help reform the two systems?

Barbara Kennelly: I was there in 1983. I was on the Raise & Means committee doing the reform. And it was a combination of many, many changes in the Social Security system. The Social Security system is very complicated. Everybody’s Social Security is different, it is computed differently. And so yeah, you have to look at what’s coming in and what’s going out. We have what’s called the [...] where you do a certain amounts to become benefits. There are ways you can do it. Are they going to have to raise the age? I don’t know. Maybe, maybe not. But there are all sorts of things that can happen. It goes into a package and that package can be a pass. What I don’t want to see is just benefit cuts and raise the age and not looking at the whole program.

News Anchor: Barbara Kennelly, President and CEO of the National Committee to Preserve Social Security and Medicare joining us from Washington, thanks.

News Anchor: We come back with our panel Jerry Seib from the Wall Street journal, David Certner from AARP, and now we have Al Lewis with us from Denver, Colorado.

So Al, you know, they say and we have had a successful commission looking into Social Security at least once. Usually frankly, I don’t give much credence to commissions or committees. You know, the definition of a camel is a horse put together by a committee. Usually that happens, but there was in 1981, as Jerry reminds us, a successful one on Social Security. You think there is a chance to do that now?

Al Lewis: Well, obviously they have to do something. Nothing here is all that surprising, David. I mean we knew Social Security and Medicare were in trouble, they’ve been in trouble all of our adult lives and now all of a sudden there is a recession, there is rising unemployment and some numbers have gotten pushed down a little bit lower. That’s all. And actually that was to be expected too. When growth kicks back in, these numbers will rise back up. But you know, obviously these things are somewhat of a ponzi scheme and at some point they have to be addressed. Whether or not this will be the moment in time when these things get fixed remains to be seen. So far what I am hearing from Geithner here sounds like a lot of rhetoric capitalizing on the moment of this report.

News Anchor: David, is it an absolute that one way that we have to start approaching this is by raising the retirement age as people live longer than they used to?

David Certner: I don’t think raising the retirement age for Medicare is something that is going to make sense because people are having enough trouble getting health insurance right now. One of the biggest problem areas we have in this country is getting adequate insurance for people who have yet to reach Medicare eligibility age. So I don’t think raising the age is going to make sense for Medicare.

On Social Security issue the age is already going up and that maybe an issue that’s on the table as we look at long term solvency, whether or not we should look at that and increase it more. I think that is a fair issue to look and as we get into a bigger solvency debate that will be one of the issues on the table.

But for Medicare at this point of time I don’t think that makes sense. What we really do need to look at is holding down costs in the healthcare system because that’s really the big killer in the healthcare side of the equation right now, is that healthcare costs are outrunning inflation every year by several percentage points.

News Anchor: Well Jerry, how do you do that without price controls, and we know the problems you get when you get into price control?

Jerry Seib: Well, that’s going to be the great debate; not just about Medicare but about the healthcare system overall. You know, the industry worries about price controls, it worries about rationing. The reverse argument is that if you get actual universal coverage you pull people into a more efficient system, costs are down for everybody if everybody is covered and they’re not getting into the back door to the emergency rooms and that sort of thing.

I don’t think anybody knows the answer to the question though honestly. And what these numbers tell you is that while there is cost pressure on both Social Security and Medicare, it is obviously much worse on Medicare than Social Security. The political irony is that it will probably be easier to fix Social Security… a few tweaks on taxes and maybe raise the retirement age a little bit more and some benefit curbs… you can get there on Social Security. Medicare politically is a much harder nut to crack.

News Anchor: David, are you for price controls on medicines and other forms of health care?

David Certner: I don’t think we need price controls, what we need is to make the system much more efficient and do things in healthcare that change the way we deliver healthcare in the country. We need to rely more on health information technology. We need to rely more on preventive medicine. We need to do a better job dealing with the chronic care cases in this country that really cost the greatest amounts of money. We need to do better with follow up care for people who are transitioning from the hospital back to their home. All of these things could help save money.

News Anchor: But how David? How do you do it? I mean, presumably the people involved in health care in the private sector what their cost to be as low as possible so their profit could be as high as possible. Why aren’t they doing it now?

David Certner: Well, there was an interesting announcement yesterday, as you may have reported on, that many in the industry have reported that they think that they can hold down healthcare costs by 1.5 percentage points which can save hundreds of billions if not trillions of dollars. Now, there are no details about how they would do that and I think obviously we need them, but I think it was a really good sign, a good symbol that the industry players were saying, “We think that this can be done. We think there are savings in healthcare that we can achieve without reducing quality”.

And I think that’s going to be the key debate in the next couple of months: just how you put the details in place to reduce healthcare costs across the board. That will help not just employers and individuals, but the Medicare programs as well.

News Anchor: Al, let me just say something totally out of the box here, because it hasn’t always been like this. I grew up with my grandfather, he lived to be 92 years old even though he smoked and drank and did all the bad things he wasn’t supposed to do, but we grew up with him. It was a wonderful experience for the whole family. A lot of families, millions and millions of Americans used to do that. Now, it’s assumed that the government has to take care of all these problems. Is part of the problem that we’re experiencing now not economic but social? That is that individuals aren’t responsible for their parents and grandparents like they used to be?

Al Lewis: Well, certainly that’s part of the problem. I mean, nobody wants their mother-in-law moving in with them at age 80 anymore.

News Anchor: My wife doesn’t mind if my mother moves in. So there are some exceptions to that.

Al Lewis: You have a sweet wife, Dave. You have a sweet wife. I don’t know whether my wife would approve. But you know what, there’s a lot of waste in healthcare. First of all, if you have healthcare, you go to the doctor more often. I mean, there is no economic disincentive except for maybe a co-pay to go to a doctor. And so, you know people over-utilize the system when they are ensured. The second thing is there is a tremendous amount of waste on the administrative side of healthcare. I don’t think that these private insurance companies are any better at running a bureaucracy than the federal government. And a lot of the waste is on the administrative side. I do think there is a way to attack this and you’re right there is a generational change. We don’t have extended families, we don’t have our grandparents living with us anymore, and anyhow that’s part of the cost that we’re asking society at large to bear.

News Anchor: Well, Jerry, again I don’t want to be caught in the weeds of what to do right now, because frankly we’re not going to figure it out in the next couple of minutes. But what about that overall question: Does any politician have the gumption, the nerve to say, “Hey look Americans, we got to get back to taking care of our own”.

Al Lewis: Well, maybe so and let me suggest an alternative way of looking at this which I dealt with in a column I wrote last week which, which is you look at trillion dollar deficit this year overall and you look at some unattractive Medicare and Social Security numbers you have here. And that’s all a problem but maybe it’s also an opportunity. Because David, as you know, Washington doesn’t tend to deal with any problems except in a crisis. And maybe if you got a sense of fiscal crisis that compels the system to deal with it finally. If it’s not a crisis everybody will keep putting this whole issue of healthcare costs and Medicare and Social Security off for years to come. So maybe this is an opportunity.

News Anchor: You put off waterproofing until after the flood. It happens every time. Thank you very much Al Lewis, David Certner, Jerry Seib.

TV Interviewer: Are you worried about your Social Security and Medicare?

Man1: Not particularly, because the risk of insolvency may seem a bit closer today than yesterday, but I have faith that the government can enact reforms to force through all that.

Woman 1: Absolutely.

TV Interviewer: How so?

Lady1: I don’t think it’s going to be there by the time I retire.

Man 2: A little, I won’t say a lot because I am sure that there will be some resolution to it.

Man 3: I wouldn’t say worried, I’m just not confident I am going to receive it. I am making other plans, that’s why I am not worried.

TV Interviewer: Would you prefer to see an increase in taxes or reduction in benefits to help solve this problem?

Man 4: Realistically I think it is going to have to be a combination of both. That the Americans that can most afford it need to have their benefits reduced, and perhaps the tax rates and some of the income levels that… like hedge fund managers that get theirs at a reduced rate of taxation… maybe should pay the full rate of taxation and Social Security.

Man 5: The reduction in benefits is probably going to be more feasible. I don’t know which, they’re both not a very good solution but, you know, of those two that’s the one I would prefer.

Woman 2: I think unfortunately an increase in taxes is the only answer.

Man 6: Probably a combination of both. Some decrease in benefits and some increase in taxes to pay for it. That’s seems to me like a reasonable solution.

TV Interviewer: Do you think we should revisit the idea of privatizing Social Security?

Lady 3: Ha, ha, ha. I don’t think we should revisit the idea of privatizing anything. The era of privatizing, of taking the responsibilities of government and farming them out to the lowest bidder who winds then jacking up the prices on the private citizen is just outrageous.

Man 7: Yes, I do think that despite the fact that the Bush plan was based on the assumption that stock markets would always rise, which turns out not to be the case, a system more based on individuals makes more sense.

Lady 4: Look what we’ve done on Wall Street and look at the mess we are in now. I don’t think giving it to individuals will help the situation any better.

Man 8: It hasn’t worked so well with the government so maybe we should give privatization a try.

What about our readers? Do YOU worry about your Social Security and Medicare? Post your comments below.

Labor Secretary Hilda L. Solis pointed out that more than 5 million jobs were lost due to the recession thus leading to less funds collected from payroll taxes which is an essential source of money for Social Security and Medicare.

Treasury Secretary Timothy F. Geithner, argued that the only way to maintain Medicare’s solvency is to control both public and private health care spending. Geithner said President Obama intends to come up with a plan that will guarantee all Americans have access to health insurance.

The trustees believe that a resumption of the economic growth is not likely to end financing problems for Medicare and Social Security. The coming years will bring major increases in spending and and drops in workers’ earnings, and trustees predict Social Security recipients won’t receive an increase in their benefits until 2012. Hopefully, 2012 will bring a ‘cost of living’ adjustment (COLA) of 1.4 percent to all Social Security recipients.

Timothy Geithner: “The Social Security and Medicare Boards of Trustees met this afternoon to complete their annual financial review of the programs and to transmit their Reports to Congress. I welcome my fellow Trustees. I also want to acknowledge the hard work and dedication of the chief actuaries, Stephen Goss and Richard Foster.

For generations, tens and tens of millions of Americans have been able to count on Social Security and Medicare as guarantees that they will be able to live out their senior years in economic dignity and with health security.

This year’s Trustees Reports once again reminds us that the longer we wait to address the long-term solvency of Medicare and Social Security the sooner those challenges will be upon us and the harder the options will be. The earlier we as a nation commit to working together to make the difficult but achievable changes needed to strengthen the solvency of Medicare and Social Security, the more we give the American people time to plan and adjust and the sooner we will be able to ensure that these vital programs will be as important for generations to come as they are now.

That is why even as this President has focused on pulling our nation out of economic recession, he has made clear his commitment to working in a bipartisan way to address the long-term health of Medicare and Social Security. The President deeply understands that re-establishing fiscal responsibility as well as the strength of these two vital programs is essential to the economic and health security in our nation and to our generational responsibility to invest in our children and not simply pass on our debts.

The Medicare Trustees Report makes clear today there is no more important long-term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health care services more efficiently. These savings can only be achieved in the context of a larger effort to control health care costs and improve quality more generally. The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending. The Administration is committed to working with Congress to find ways to control runaway growth in both public and private health care expenditures while helping to ensure that all Americans receive the high quality, affordable health care they deserve. The recent commitment of major health stakeholders to help lower the annual growth rate in costs by 1.5% represents a crucial step in that direction.

The Trustees Reports come to the following conclusions.

• The Medicare program’s financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing health care costs and the short-term outlook has been hurt by the recession. Medicare’s annual costs were 3.2 percent of GDP in 2008, or nearly three-quarters of Social Security’s, but are projected to surpass Social Security expenditures in 2028 and to reach 11.4 percent of GDP in 2083, compared with 5.9 percent for Social Security.
• Medicare’s Hospital Insurance Trust Fund is projected to become insolvent in 2017, two years earlier than projected in last year’s Report.
• The cost of Medicare’s Supplementary Medical Insurance (SMI) to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3 percent of GDP in 2008 to over 4.7 percent in 2083, with continued increases beyond 75 years.
• This year’s Social Security Report projects that the Trust Fund will be exhausted in 2037, four years earlier than the Trustees projected last year. This change is primarily due to the economic recession, recent data that prompted a small downward adjustment to the projected level of real GDP after the economy recovers and the fact that our citizens are on average projected to live longer lives. Nevertheless, Social Security can continue to pay full benefits for nearly 30 years, and cover approximately 75 percent of scheduled benefits thereafter.

Despite projections that Social Security can continue to pay full benefits for nearly 30 years, the sooner action is taken the more options for reform will be available and the fairer reforms will be to our children and grandchildren.

To ensure that these critical programs are there for future generations, the President and his Administration are taking the following steps.

First, we are intently focused on bringing the current economic and financial crisis to an end and getting on with recovery. The return of robust growth will help solve some–but by no means all–of the financial problems of Social Security and Medicare.

Second, we are reforming the health care system to get costs under control and improve quality, which will strengthen the Medicare program and improve the long-term fiscal position of the U.S. government. Just yesterday, the President worked with major health care providers to secure a commitment to reduce costs of care by more than $2 trillion dollars. These voluntary efforts will complement the President’s efforts to enact comprehensive reform to assure quality and affordable health care for every American. The Administration is committed to working with Congress to find ways to control runaway growth in both public and private health care expenditures while ensuring that all Americans receive the high quality, affordable health care they deserve.

Finally, after we have passed health care reform that puts our nation on a path to lower growth in health care costs and expanded affordable coverage, this President will work to build a bipartisan consensus to ensure the long-term solvency of Social Security. The President explicitly rejects the notion that Social Security is an untouchable politically and instead believes there is opportunity for a new consensus on Social Security reform.

The steps that the Administration is taking towards comprehensive health care reform, toward economy recovery and toward deficit reduction will all help preserve Social Security and Medicare for future generations. And they will help produce a more balanced and sustainable growth that improves the lives of all Americans, both working and retired.”

In the 2009 Annual Report to Congress, the Trustees announced:

• The projected point at which tax revenues will fall below program costs comes in 2016 — one year sooner than the estimate in last year’s report.

• The projected point at which the Trust Funds will be exhausted comes in 2037 — four years sooner than the estimate in last year’s report.

• The projected actuarial deficit over the 75-year long-range period is 2.00 percent of taxable payroll — up from 1.70 percent in last year’s report.

• Over the 75-year period, the Trust Funds would require additional revenue equivalent to $5.3 trillion in today’s dollars to pay all scheduled benefits.

“Today’s Trustees Report contains some disappointing, but not unexpected, news about the financial condition of the Trust Funds,” Commissioner Astrue said.  “We should be neither casual nor hysterical about the revised insolvency dates.  As with the economy as a whole, the Social Security system will weather this recession.  However, the sooner we get on with the task of reforming the system, the easier it will be to make the tough choices that we all know we need to make.”

Other highlights of the Trustees Report include:

• Income including interest to the combined Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $805 billion ($672 billion in net contributions, $17 billion from taxation of benefits and $116 billion in interest) in 2008.

• Total expenditures from the combined OASDI Trust Funds amounted to $625 billion in 2008.

• The assets of the combined OASDI Trust Funds increased by about $180 billion in 2008 to a total of $2.4 trillion.

• During 2008, an estimated 162 million people had earnings covered by Social Security and paid payroll taxes.

• Social Security paid benefits of $615 billion in calendar year 2008.  There were almost 51 million beneficiaries at the end of the calendar year.

• The cost of $5.7 billion to administer the program in 2008 was a very low 0.9 percent of total expenditures.

• The combined Trust Fund assets earned interest at an effective annual rate of 5.1 percent in 2008.

The Board of Trustees is comprised of six members.  Four serve by virtue of their positions with the federal government: Timothy F. Geithner, Secretary of the Treasury and Managing Trustee; Michael J. Astrue, Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and Human Services; and Hilda L. Solis, Secretary of Labor.  The two public trustee positions are currently vacant.

The 2009 Trustees Report is available as a PDF file here.

Charles Blahous: “I’m Chuck Blahous with the Hudson Institute. The Congressional budget office recently handed some disturbing information to Congressional staff about the Social Security program. Turns out that the Social Security surplus, which was projected recently to be 85 to 90 billion dollars both this year and next, is basically gone. The Congressional budget office informed Congressional staff two months ago that the surplus in 2010 will be a thin 3 billion dollars. Now, in a 700 billion dollars program, 3 billion dollars is basically a rounding error. With the slightest downward nudge to the economy next year, Social Security could face operating deficits as early as 2010.

Now what happened to the Social Security surplus? Basically it’s a combination of several factors; some of them are predictable, some less so. The predictable factor is that retirement benefit claims are surging with the baby boomers entering their retirement years. Less predictable has been the poor performance of our economy. Payroll tax revenues are sagging far behind previous projections. This accounts for about 85% to 90% of the disappearance of the surpluses that we expected last year.

At the same time, disability benefit claims have risen. In a bad economy, if you are considering whether to file for disability benefits, you’re much more likely to do so than if the economy is booming. And finally, we are having record COLA [Cost-of-Living Adjustments] payments, the highest Social Security COLA since 1982. You may remember that last year we had an unexpected increase of fuel prices in the middle of the year and we also had an increase in the food prices that lasted a good portion of the year. Those cost increases are working their way through Social Security benefit payments now.

Now, with the disappearance of the Social Security surplus there is an interesting political side-effect as well. There has been a myth arising in recent years on the left end of the American political spectrum. And this myth basically was that we didn’t have a Social Security problem at all. It was a manufactured problem, a phony problem, exaggerated by conservatives, and based on overly conservative projections of the Social Security trustees.

There were basically three claims at the core of this myth. One was that the trustees were using overly conservative economic assumptions going forward. The second claim was that if those overly conservatives assumptions were not used, the Social Security shortfall would basically disappear. And the third central element of the myth was that the trustees had a historic track record of being far too conservative in their projections.

Well, none of these things are actually true. In fact, all three of them are false. The trustees historically do not have an overly conservative projection track record. In fact, they tend to be very, very accurate and generally more optimistic than they should have been. Secondly, it’s never been the case that if the economic growth projections are made a little bit more optimistic that the Social Security shortfall would go away. So, even before our recent backtracking in Social Security’s financial health, this myth never should have gained any traction.

The bottom line is that Social Security shortfalls are now rushing at us much more quickly than previously anticipated. And at the same time that the Social Security surplus is disappearing, so too are lot of myths about the Social Security system.”

News Anchor: Government spending of a different kind, the kind that many in America are probably happy to see. Today recipients of Social Security will begin to see a little more in their mail boxes or in their bank accounts if it’s an electronic transfer. It is the day that the SSA begins mailing out the first of over 52 million Economic Recovery Act payments. Joining us on a Fox Business exclusive is Michael Astrue. He is the commissioner of the Social Security Administration, Michael welcome.

Michael Astrue: Thank you.

News Anchor: 250 bucks?

Michael Astrue: 250 bucks.

News Anchor: To everybody on Social Security?

Michael Astrue: 52 million Americans.

News Anchor: One-time payment or every month?

Michael Astrue: One-time payment.

News Anchor: Okay, now I guess you guys have done a survey on what people may spend. What are they doing to do?

Michael Astrue: Well, survey would be too scientific, but we’ve had 4,100 Americans go on our website and explain what they were going to do with the check. And it goes from the very mundane like, “I’m going to buy tires, I’m going to buy furniture” to very moving story by a woman who is dying of lung cancer buying things for her children. Most of them indicated they’re going to spend it. Only about 2% said they were going to save it, 98% so far said they were going to be spending it.

News Anchor: So it will go back into the economy?

Michael Astrue: Right, it fits with what Congress was trying to achieve in having it go right back in the economy.

News Anchor: The money is coming from the stimulus plan?

Michael Astrue: It’s coming from the stimulus plan. And the important thing for people to remember is that about half the money is going out today. If you have direct deposit you will get it today. If you’re not in that half, paper checks take a little longer. Money will be going out over the next 3 weeks. So if you don’t have it today, don’t panic. Wait until June 1st, June 4th and then call us if there is a problem. But we’ve done this before, usually we’re pretty good about getting the checks the right place.

News Anchor: I know $250 to a lot of people might seem to be a lot of money, but as a whole, you wonder if the economic impact is going to be great enough to justify the long term cost.

Michael Astrue: Right. I think what they’re trying to do now is to get money quickly into the economy. And you look at an average sized state, you’re getting a quarter billion dollars all of a sudden into the local economy. And the economic thinking is that we need to do at least as much as we’ve done to try to give a little bit of the stimulus… get local economies back faster than they would otherwise do. So the thinking is that it’s not really a long term investment, it’s to get people spending, it’s to get some of those businesses and the people on the margin spending and staying on their feet.

News Anchor: I’m 37.

Michael Astrue: You’re a lot younger than I am.

News Anchor: Is Social Security going to be available for me?

Micheal: Absolutely.

News Anchor: Can you please tell it’s going to be available, because every month I’m putting money into it.

Michael Astrue: No, it’s going to be there. We need…

News Anchor: But I got to tell you, to be honest with you, I’m planning like it won’t be around. I hope it’s there, but as I create as my own family financial plan, I assume it will not be there.

Michael Astrue: I don’t want to be too critical of that because as a nation we went to a negative savings rate briefly right before this recession hit and hopefully this will be a learning moment for the country, and as the economy gets better we will remember that we brought some of this on ourselves by getting away from some of our traditional values of thrift and savings.

But, the trustees’ report is next week, the funds as of last year were fully solvent through 2041. And even after that date if Congress did nothing, people would be getting 78% of their benefits. That’s not perfect, but I think as the President has said and I think as the senator said yesterday in the Washington Post, it’s a math problem. It’s pretty obvious what needs to be done. We have relatively limited number of choices, some political pain. I think it’s going to get done if not next year, within the next couple of years.

News Anchor: Do you foresee a possibility that the age… we’re living longer. The average age of an Americans female is now about 81. Men are living about 3 years less, unfortunately, that we might have to raise that age cap a little bit.

Michael Astrue: It’s one of the topics that’s entered discussion.

News Anchor: We have already.

Michael Astrue: At some point there are only two ways to do it: you increase revenues or you decrease benefits in some way. The last time Congress did this they did raise the normal retirement age. That’s already being debated and discussed. But I don’t think anything is set yet, it is not clear what Congress will do when Congress really starts focus on that.

News Anchor: It’s an interesting process done by people much smarter at math than I am. Okay, we got to go to the President. We’re going to leave it there Michael Astrue, commissioner of the Social Security Administration, welcome you back anytime.

Michael Astrue: I’d love to come back any day.

Kerby Anderson: Although politicians talk about the Social Security Trust Fund, the reality is that it is neither. There is no trust and there really is no fund. Each Congress has spent the surpluses that were supposed to be set aside for when the baby boom generation began to retire. Economist Kevin Hassett found something else. The surpluses that once fed into this imaginary trust fund are now gone. Due to the current recession the funds are now negative. Payroll receipts are down because fewer people are working. Essentially, the trust fund has gone into the red about 10 years ahead of schedule.

The latest government numbers confirm this. This year it is estimated that Social Security will take in $654 billion dollars in payroll taxes and pay out $662 billion in benefits and expenses. That is a shortfall of $8 billion dollars. Now the response from the Social Security Administration is even though there is a shortfall, Social Security is not running a deficit. It turns out that the interest the government owes itself for borrowing and spending the surpluses will provide an additional revenue stream. So even though there is a shortfall, Social Security isn’t running a deficit, yet.

While all of this is true, some members of Congress are starting to object to this accounting slide of hand, and all this really does is postpone the inevitable. By the next decade the bulk of baby boomers will have begun their retirements. The only way to have been able to fund the millions of boomer retirees will be to have a real trust fund, not a fictitious one. Each year Congress spent the money in the trust fund, and now recession has removed any last pretense of their being money for future retirees.

I don’t think most Americans really care whether the Social Security Trust Fund is technically broke. They just want to know if their Social Security will be there for them. The reality is that each year more retirees will be drawing on funds that aren’t there. For some reason, no one in the administration will tell you the truth. I just did.

I’m Kerby Anderson and that’s my point of view.

Mr. Bob O’Brien: Hi, welcome to myWealth.com. I’m Bob O’Brien. I’m one of the senior instructors with the courses. Welcome to the blog for the day, “Why is it time to privatize Social Security?”

And this has always been a very controversial topic, privatize Social Security, leave it as it is and so forth, and one thing no one can argue about is the Social Security System is in very bad shape and it is in grave danger and these problems that it has have been magnified by the current economic crisis.

Now, if you’re a Social Security recipient, I don’t want you to worry or lose any sleep over it. You know, you’re going to continue to get your payments, but there are projected deficits in the future, and these deficits are getting worse and worse.

So it’s really important that you understand this topic and if you’re in the younger generation, make sure you take our investing course, make sure you take our course, so you’ll know what to do in terms of managing your own money, but also to have an opinion on this subject as well.

Voiceover: Be sure to check out the written blog at www.mywealth.com/blog.

Okay, the current economic crisis has further punished the Social Security System. The Social Security System was not in very good shape prior to 2008, but the economic crisis has made it even worse, simply because the Social Security System is funded through payroll tax, but unemployment as is well know has been on the rise and payrolls are being cut, and therefore, there is less revenue generated via the payroll tax.

Now, Social Security has projected deficits in 10 years, but these deficits have been moved up because of the current economic crisis and the reduced payroll tax money that’s coming in due to lesser payrolls.

So let’s take a look at what the current system currently looks like. Can you pay a payroll tax in order to provide retirement benefits to current retirees with the promise that you will receive your benefits when you’re retired? The government then invests any surpluses into Treasuries, which is used to finance other government spending and so forth, in which the Fed then prints money to buy these Treasuries.

So you can see this is a very fragile system and I posed the question, “Which is more irresponsible, continuing to just print money in order to finance Social Security or taking any surpluses or perhaps in the case of printing money creating any surpluses and investing them in the stock market?”

Now, the government has already become one of the world’s largest hedge funds and has taken major positions in the banks, in the automotive industry, and another problem that is on the horizon for Social Security System in inflation. The current increases that recipients receive each year is based upon inflation, and with inflation being projected to go to the roof, this is just going to increase to the overall expenditures of the system.

So make sure that you have your own financial house in order and that’s what we’re here to do, so don’t wait, get one of our courses, get educated, get to www.mywealth.com.

Mr. Bob O’Brien: One other thing that the government could do is to increase the payroll tax. But, on April 15th, there was a big tax protest, tax tea parties and so forth, and this is something that would be very difficult because the people that you would be increasing those payroll taxes for are the people that are not projected… basically receive anything from the Social Security System. So I think in light of that and in line of what we see in terms of some of the tax tea parties and so forth, the taxes tea parties on April 15th, that would be magnified, that type of protest, so it would be very difficult to increase those taxes on that, an people generally don’t want to pay taxes anyway.

So I’m not certain if I’m in favor of a complete privatization, but I do feel strongly that some of this money, assuming that there is investible money without interfering with government bonds and so it should be invested in stocks and it is just pruded to have a portion of any portfolio should have a portion invested in stocks. As long as that is disciplined and it is re-balanced appropriately, the risks certainly in the case of Social Security, a 25 to 50 percent portion in stocks, re-balanced appropriately, even for the last 20 or 30 years in light of the current crisis, it would be much better off than the system currently is if it was done properly with proper risk management and so forth.

So one thing to keep in mind, don’t trust your company pension. If you work for the state, you’ll be given the state pension and so forth and of course, Social Security, make sure that you have a plan, some type of plan, where you’re protecting yourself and that you have your own retirement plan.

Take advantage of anything that’s given you by your company, by your state, by Social Security and so forth, but nevertheless, don’t rely on those systems completely. You need to make certain that you’re saving and investing on your own, and that’s where we are here for, to help you deal with it. The personal finance course will help you design your retirement plan.

The investing course will help you manage the money and the currency course as well where you’ll have a better and broader understanding of the global economy. So make sure you check out these courses. They are incredibly affordable, $25 with the investing course. The currency course is $19.99. I’m Bob O’Brien. I’m one of the senior instructors. I look forward to seeing you in the course and have a great day.

Raymond Clum: “Hello, my name is Raymond Clum and I approve this message. I’ll spend some time since we’ve been talking about Social Security reform. It’s a pretty dry topic. I hope this will be informative. I hope it will make you think.

Right now the Social Security system has been forecast to start running a deficit in the year 2017. Right now it’s now April 9th, 2009, so we’re talking eight years at which point of time Social Security will start spending more money than it takes in in payroll taxes.

Now, in the 2008 election cycle in the Democratic primaries, Senators John Edwards and Barack Obama both supported eliminating the cap or lifting the cap on payroll taxes, which right now running at about 6.5% of the first $97,500. Beyond that it’s not increased. Now, sulking the rich may be a popular thing to do, but when you raise the cap it just doesn’t hit the super rich. It’s going to hit doctors, it’s going to hit managers in manufacturing companies. It’s going to hit high overtime union workers, it’s going to hit engineers, it’s going to hit attorneys. Well, that wouldn’t be a bad thing.

Anyway, I digress. 16% of the workforce involves sales and office occupations. Some of these are going to be teachers, smart businesses are going to be hammered. It’s estimated that $136 billion in economic growth will be lost if the cap is raised or eliminated over the next 10 years. And as many as 1.1 million jobs gone. Now, for all of the pain that that’s going to cause, it’s only going to extend the life of Social Security from 2017 to 2025, another 8 years.

In addition, if you were to die right now, Social Security will pay your beneficiaries a onetime lump sum of $255. That’s it, no more. Now, your dependent minor children may get a survivor benefit, but my plan for Social Security would not affect that, nor would it affect disability payments. It’s only looking at the retirement benefits of Social Security. My proposal would be to develop, for lack of a better term, a 401S program. The S meaning Social Security, similar to a 401K. People of age 30 or under would automatically be enrolled. People of ages 30 to 40 will have optional enrollment. 41 and above would not be eligible.

As part of enrollment in this program you have several options, in movement of your payroll taxes to your 401S account that you would then be able to manage in ways very similar to your 401K, where you are probably limiting your investment options to very safe funds, funds that would have slightly more risks than the Social Security purchases of treasury bills, but will give you a higher return.

If you were to opt in for a 5% reduction in your Social Security benefit, 2% of your payroll taxes would go into this fund. The money would be yours, 100% invested. All the profits from that would be tax free. In addition, similar to a 401K, if you were to die, that money in that fund would go to your beneficiaries, and I’d be willing to bet it’s going to be more than 255 bucks.

But anyway, you take a 5% reduction in your benefit, 2% get kicked in. You take a 10% in your benefit, 5% will get kicked in. 20% for 10%. 50% reduction in your benefits, 25% goes in. If you want to totally opt out of the Social Security retirement program, 50% of your payroll tax will go into your 401S account. That does not mean that the money being withheld from your paycheck is going to change. We would still be pulling out the 6.5% of up to $97,500. What that will permit is a time period where there would be a side deficit where increased benefits would still have to be paid to those that are 41 and up. But we will have the ability then to start paying back that debt, and further pay down additional debt with the additional funds that the lowered Social Security benefit would receive.

The other option which is not nearly as friendly is to extend the retirement age, again. I’m 37 years old, I cannot retire until age 70. My plan for the 401S will be very similar to the 401K. If you too chose to retire, you can access those funds at age 59 and a half without penalty. Not only that, but you will be able to borrow against those funds for the purchase of a home, for emergency medical bills. It would in every way, shape and form act like the 401K.

Now granted, I’m proposing this in 2009, not the greatest year for the stock market. But if you look at every ten year period of the stock market, it’s had a positive growth. Every 10 year period. And if I am not mistaken, I have checked online to get the exact number, but I recall on Dave Ramsey talking about a 5 year period… somewhere in the range of 90% of all 5 year periods have had a positive growth that outpaced inflation, outpaced yields on savings accounts, outpaced yields on treasury bills.

The stock market is a safe investment if you look at 30 years down the road. That’s the main reason this part of my plan I am not looking to involve those of age 41 and older. They’re looking at a closer retirement and I would not want market volatility to affect their ability to retire. That’s why ages 31 to 40 get a little bit longer to retirement. I would give them the option. Personally, I would really strongly for myself take a look at the 20% reduction in benefits for the 10% going in to the market.

But that’s just me. I know what I am comfortable with as a 37 year old. Granted, if I’m elected in 2012 I will not be eligible for my own program because I will be 41 at that time.

It’s a way for younger workers to not only plan for their own retirement better, to build up savings even outside of their company 401K or pension plan or the minimal benefit of a Social Security program, but it provides real tangible assets for survivors as well. It’s not a panacea, it’s not going to be without pain. But it is a start, it’s a discussion point, it’s a beginning. We have to do something or Social Security is going to bankrupt our country. May God bless you and may God bless the United States of America.”

President Obama: The problem with our deficit and debt is not new. It has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs. This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as Baby Boomers age, and will in fact lead us down an unsustainable path. But let’s not kid ourselves and suggest that we can do it by trimming a few earmarks or cutting the budget for the National Endowment for the Arts. Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year. So if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform.

Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid. Make no mistake: health care reform is entitlement reform. That’s not just my opinion – that was the conclusion of a wide range of participants at the Fiscal Responsibility Summit we held at the White House in February, and that’s one of the reasons why I firmly believe we need to get health care reform done this year.

Once we tackle rising health care costs, we must also work to put Social Security on firmer footing. It is time for both parties to come together and find a way to keep the promise of a sound retirement for future generations. And we should restore a sense of fairness and balance to our tax code by shutting down corporate loopholes and ensuring that everyone pays what they owe.

All of these efforts will require tough choices and compromises. But the difficulties can’t serve as an excuse for inaction. Not anymore.

Now, in comparison, you’re money-ahead to start with, but what happens if you outlive your retirement? You know, when you take it early and many times the breakeven point is only like 14 years into the future. Well, we were kind of comfortable with that comparison until, looking back, we realized that people are living longer. So what happens on the end of the comparison where somebody gets to be 80 and it would have been a better decision for them to have left their money in the program and not taken it out as early and their benefit would be higher for the rest of their life.

Well, what kind of economic comparison can you make between being money-ahead or outliving your retirement so that you are going into poverty levels, in some cases, by starting your retirement too early? So we’re really kind of pulling back and saying, “It’s up to the client. Let the client make their decision”. If they feel they want to take their benefit at age 64 because their brother took it at 64 and he seems to be doing okay with that decision. If a client wants to take it at 62 and they think they have thought ahead enough, we’re not going to try to give them a lot of comparisons as to, well, what’s your breakeven point.

There is no breakeven point in life, you know, and in your finances. If a stock broker would have told me what my breakeven point was a few years ago, I would have put my money in a sock under my mattress. So, you can’t always just look at the economics, sometimes you have to realize that there is no set answer into the future and we’re not really going to give people comparisons, because we’re comparing apples to oranges, and that’s not correct.

So we’re going to pretty much leave it with the client. And we have a sheet that talks a little bit about what the client should be looking at: longevity (how long they expect they live), finances (what other money they have), how they are planning on making ends meet into the future. That review, that factsheet is called “when to start receiving retirement benefits”, and the best way to get that sheet is to go to our website www.socialsecurity.gov and in the search feature just type in “when to start receiving benefits” and it will refer you to our fact sheet, and you can print it right off your computer. Of give us a call 1-800-722-1213 and we’ll send one to you.

Interviewer: Lot of unknowns there, there’s always an element of chance.

Hess: Well, and you’re one of the best people to talk to because you’ve got a lot of background in finance, in taxes and you don’t know until the dust has settled how things are going to turn out, and you can’t always be looking at the rosiest outcome because the rosiest outcome is to put your feet up, settle back in your hammock and hope that everything turns out and that you’ll have a lot of good years in retirement by taking retirement early.

But, you get to be 80 and you’ve outlived your income and bills have kept rising, your income is not staying at that same level. You have to cut back on driving, you have to cut back on living in your own home, you have to cut back on medical insurance. Well, there are a lot of things that are hard to cut back. Like this winter, cut back on heating your house just because you’ve outlived how much you needed to survive on? That’s a tough one.

So, I don’t want to be the person to advice people to take benefits early just because they’ll have more time on their hands and they’ll have money to start with when, you know, at the end they might not be living as they could be had they waited and taken retirement later.

Interview: One person said “I’ve got enough money for the rest of my life: if I die at 4 o’clock tomorrow afternoon.”

Hess: I don’t want to see people really come away from a comparison saying, “Well, I’ve got enough money to live until 79″. Well, that’s not a good decision to make because people are living longer than that. And that’s not a good decision to make. Try to maximize your income until your late 70s, because a lot of people live much longer than that.

These changes in Social Security’s budget will have probably no real short-time effect as there are additional funds of $116 billion from interest income and over $2 trillion worth of Treasury securities in the Social Security Trust Fund.

Those $2 trillion are currently loaned to the government and spent on several ongoing programs. So, as there is less money predicted to be collected by the Social Security, the government will have less money to borrow. There will be around $83 billion less to borrow from Social Security in 2010, but that’s only a small factor in government’s plan to borrow around $1 trillion next year.

However, the predictions regarding Social Security’s shrinkage of surplus funds lead to serious concerns for the future of the retirement program. Furthermore, as post World War II Baby Boomers reach the retirement age, Social Security will face serious problems.

Optimistically, Alicia Munnell, Professor of Management Sciences at the Carroll School of Management at Boston College and Director of the Center for Retirement Research, said that Social Security will face no problems in the short term. She also said that the crisis will affect Social Security “in a temporary way”.

REPORTER: Well, as President Obama works to pass his budget, his job will be complicated by a big change in the government’s math. Based on numbers from the President’s budget and the Congressional Budget Office, it appears that the era of large Social Security surpluses is over. Darren Gersh examined the numbers and found that Social Security’s finances are facing the same headwinds hitting the overall economy.

DARREN GERSH: The Great Recession has brought great changes to Social Security with unemployment rising. Analysts say there are fewer workers paying into the system, pushing Social Security payroll tax revenues down.

In tough economic times, disability claims also tend to rise and more workers retire early, driving up benefit costs. And remember those high-energy prices of last year? They raised energy and food costs, boosting payments to beneficiaries in a 5.8 percent cost of living increase. That’s the largest in 25 years.

Chuck Blahous was executive director of President Bush’s Social Security Reform Commission. He says the tend is clear.

CHUCK BLAHOUS: You see, with the higher COLA payments, the higher disability benefit claims, the higher retirement benefit claims, in combination with the lower payroll tax revenue, then most of your surplus is gone.

DARREN GERSH: Last April, the Social Security surplus was projected to be $83 billion this year and almost $90 billion next year. Using figures from the President’s budget and the Social Security Actuary, Nightly Business Report calculates this year’s surplus is now likely to fall to $30 billion and $27 billion next year.

But the Congressional Budget Office is more pessimistic. It expects the surplus will be $16 billion this year, but only $3 billion next year. All together, the recession has shaved more than $150 billion off the Social Security surplus over the next three years.

Mark Warshawsky, a member of the Social Security Advisory Board, thinks the news could be even worse. He says the economy is now weaker than the program expected, and its likely benefits will exceed tax revenues this year for the first time in a quarter century.

MARK WARSHAWSKY: The margins are so small that even small changes in the economy, small changes in the way the program is operated, could easily put it in the deficit situation.

DARREN GERSH: The Social Security Actuary tells Nightly Business Report that is unlikely, putting the odds of a cash deficit this year at well under 50 percent. But the outlook has clearly worsened.

Last year, the program’s trustees estimated Social Security would go cash flow negative in 2017. Blahous thinks that date will now change.

CHUCK BLAHOUS: It’s clear that that’s going to come nearer. We don’t know how much, maybe 2016, 2015. It’s hard to say. But clearly the surplus is going to be much smaller going forward than it has been in the past.

DARREN GERSH: A negative cash flow does not mean Social Security is in crisis. The program has built up an enormous trust fund over two decades.

Barbara Kennelly is president of the Committee to Preserve Social Security and Medicare. She says the trust fund is more than enough to cover any short-term financial hit.

BARBARA KENNELLY: The trustees look at it every single year. The report is going to come out at the end of this month and you are going to still see that we can still pay those benefits until way out, if it’s not, let’s say, 2041, it’s 2040 or 2039, but we have that money. There is $2.5 trillion in the trust fund for Social Security.

DARREN GERSH: The bigger problem may be the rest of the budget. A former member of Congress, Kennelly says Social Security’s smaller cash surpluses will raise the fiscal pressure on Capitol Hill.

BARBARA KENNELLY: What that does is, guess what, members of Congress? Your deficit is even bigger than you’re wanting anybody to know.

DARREN GERSH: Were Social Security’s cash flow to turn negative, the impact on the federal budget would be immediate.

CHUCK BLAHOUS: If the tax revenues fall short of the cost of paying benefits, the federal government has to find additional money to redeem the bonds in the trust fund and it has a cost. It will add to the deficit and given where we are in the budget with enormous deficits across the board, that’s a great concern.

DARREN GERSH: For now, members of Congress have been in no hurry to add another reform effort to an overflowing agenda, but some supporters believe that dramatic decline in the Social Security surplus is a clear call to address the future of a vital program.

Darren Gersh, Nightly Business Report, Washington.

According to a newly released Sun Life Financial research report, it appears that about half of working people would opt out of paying Social Security taxes even if this means they will receive no Social Security benefits. Not only workers in their 30s and 40s said they would prefer to stop paying into Social Security, but even workers that are only a couple of years away from obtaining Social Security benefits.

Philip Moeller states that though overall pessimism in times of financial crisis is understandable, Americans’ attitude towards the Social Security system is surprising. As Social Security was always reliable and as the benefits it offers are indexed according to the inflation, this is a convenient lifetime rent. If you would consider buying a corresponding product from a private insurer, you would have to pay a very large amount of money up-front.

Moeller argues that, though Social Security faces serious financial difficulties, there are no reasons to attack it. Social Security needs only some minor adjustments to be a balanced and secure program. These minor adjustments involve to the retirement age, which should be increased a few years, the raising of taxes forced on Social Security participants, and some readjustments on Social Security’s inflation policy.

Moeller considers these changes to be a sure way to give satisfactory benefits to contributors. Restoring America’s confidence in Social Security by offering a stable program for the next 75 years is a priority. Both retirees and the general public should be educated about financial responsibility and the importance of Social Security for the success of a retirement scheme.

The primary focus of the Social Security Haters is on the need to cut Social Security and Medicare as they consider that both programs produce injustice for future generations. The cost of these two programs is to be paid by future generations, they say, and thus it brings about a tremendous generation inequity. But it is evident that these concerns are more likely based on the enormous cost of maintaining an almost bankrupt health care system rather than on retirement programs.

The United States should urgently focus on fixing its health care system. If health care programs were meeting requirements, even the most horrifying nightmares of the Social Security Haters would dissolve into thin air. Sadly, it is clear that the real agenda of the Social Security Haters is not fixing the health care system, as that would imply confronting other interest groups such as the pharmaceutical industry, the insurance lobby and the doctors’ lobby. The real agenda of the Social Security Haters is to cut Social Security and Medicare.

Though there are many aspects to discuss about the Social Security Haters’ goals, a single example is enough to understand their true intentions. As the housing bubble recently collapsed we could see that one of the results was a dramatic stock market plunge. This financial disaster brought with it a $15 trillion loss of wealth for retirees and old workers. Now everyone can see this as an obvious transfer of wealth from seniors to younger people. The young generation is going to buy houses and corporate capital at a very low price. A few years ago they would have expected to pay far higher prices for the same stocks and houses.

But the Social Security Haters don’t seem to notice this and many other aspects of the social reality. They just continue their war against Social Security and Medicare. As they ignore the wealth transfer to the young, and fail to notice other issues as well, we should be aware that the Social Security Haters’ real concern is not the so called generational inequity but cutting Medicare and Social Security.