A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.

Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…

… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.

But that didn’t happen.

The story was hardly picked up.

It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.

That’s not hyperbole either– the numbers are very clear.

The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.

In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.

Fat chance.

That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.

Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008.

So this is a pretty big deal.

More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.

In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future.

What will interest rates be in the future?
What will the population growth rate be?
How high (or low) will inflation be?

These variables can dramatically impact the outcome for Social Security.

For example, Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year.

This is an important assumption: the higher US productivity growth, the faster the economy will grow. And this ultimately means more tax revenue (and more income) for the program.

But -actual- US productivity growth is WAY below their assumption.

Over the past ten years productivity growth has been about 25% below their expectations.

And in 2016 US productivity growth was actually NEGATIVE.

Here’s another one: Social Security is hoping for a fertility rate in the US of 2.2 children per woman.

This is important, because a higher population growth means more people entering the work force and paying in to the Social Security system.

But the actual fertility rate is nearly 20% lower than what they project.

And if course, the most important assumption for Social Security is interest rates.

100% of Social Security’s investment income is from their ownership of US government bonds.

So if interest rates are high, the program makes more money. If interest rates are low, the program doesn’t make money.

Where are interest rates now? Very low.

In fact, interest rates are still near the lowest levels they’ve been in US history.

Social Security hopes that ‘real’ interest rates, i.e. inflation-adjusted interest rates, will be at least 3.2%.

This means that they need interest rates to be 3.2% ABOVE the rate of inflation.

This is where their projections are WAY OFF… because real interest rates in the US are actually negative.

The 12-month US government bond currently yields 1.2%. Yet the official inflation rate in the Land of the Free is 1.7%.

In other words, the interest rate is LOWER than inflation, i.e. the ‘real’ interest rate is MINUS 0.5%.

Social Security is depending on +3.2%.

So their assumptions are totally wrong.

And it’s not just Social Security either.

According to the Center for Retirement Research at Boston Collage, US public pension funds at the state and local level are also underfunded by an average of 67.9%.

Additionally, most pension funds target an investment return of between 7.5% to 8% in order to stay solvent.

Yet in 2015 the average pension fund’s investment return was just 3.2%. And last year a pitiful 0.6%.

This is a nationwide problem. Social Security is running out of money. State and local pension funds are running out of money.

And even still their assumptions are wildly optimistic. So the problem is much worse than their already dismal forecasts.

Understandably everyone is preoccupied right now with whether or not World War III breaks out in Guam.

(I would respectfully admit that this is one of those times I am grateful to be living on a farm in the southern hemisphere.)

But long-term, these pension shortfalls are truly going to create an epic financial and social crisis.

It’s a ticking time bomb, and one with so much certainty that we can practically circle a date on a calendar for when it will hit.

There are solutions.

Waiting on politicians to fix the problem is not one of them.

The government does not have a spare $45 trillion lying around to re-fund Social Security.

  • Poptoy1949

    If they Quit Giving it to the Illegals and the Immigrants, who never paid a Dime into it, perhaops we would have enough of it to go around to those that deserve it.

    • Sparkplugfuse

      Yes, every time I read an article about SS, the funding is getting worse and worse. Seems to me, they are thieving from it faster and faster. We need some tar and feather parties, along with some neck tie parties. But, this is the USA, it ain’t going to happen.

  • livefreeordiehard

    Waiting on politicians to fix the problem is not one of them.” No, seeing that social security has been STOLEN from for years and years by politicians and bureaucrats, it is NOT a fix.
    However, when you get to the bottom of the article on the second page, you see that this is actually an AD to sell you something. Cheap shot, Gov’t Slaves, as passing this off as an article.

  • Kim Chul Soo

    What do we have to do to get these douchebag politicians from stealing from the SS fund? Put the damn money in a seperate account like you should have from the beginning. Also, quit giving this money to turd world aholes arriving in our land of milk and honey looking for all the teats they can get into their filthy heathen mouths.

  • NazdaPokmov

    Well evryone can thank Clintoon for raping the Social Security money and making his Presidency look good….hey I left you with a SURPLUS when I left….yeah sure you did Billyboy….you freaking LIED AGAIN.