“Exhaustion” doesn’t mean “broke”

The Washington Post, justifying their claim that Social Security is “going broke,” writes:

Is “going broke” too strong? Well, let’s ask the experts — the trustees of the Social Security Trust Fund, who include President Obama’s Treasury, labor, and health and human services secretaries. In their annual report in April — delivered, as it happens, to Mr. Biden, in his capacity as Senate president — the trustees noted that the disability portion of the trust fund “becomes exhausted in 2016, so legislative action is needed as soon as possible.” The overall fund, combining retirement and disability, will “become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033.”

It’s a shame the Post didn’t actually listen to the experts. From Reuters, back in April:

It’s rare to see a federal official publicly beg reporters to get a story right, but the commissioner of the Social Security Administration seemed ready to get down on his hands and knees at a Monday press briefing. Michael Astrue was cautioning journalists not to scare the public about the meaning of the word “exhaustion.”

“Please, please remember that exhaustion is an actuarial term of art and it does not mean there will be no money left to pay any benefits” he warned in issuing the trustees’ annual report on the financial health of the Social Security program.

“After 2033, even if Congress does nothing, there will still be sufficient assets (from payroll taxes) to pay about 75 percent of benefits. That’s not acceptable, but it’s still a fact that there will still be substantial assets there,” Astrue insisted.

Good job, Washington Post.

(Via).

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One Response to “Exhaustion” doesn’t mean “broke”

  1. 1
    RonF says:

    The Washington Post says:

    The overall fund, combining retirement and disability, will “become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033.”

    The SS spokesman says:

    After 2033, even if Congress does nothing, there will still be sufficient assets (from payroll taxes) to pay about 75 percent of benefits. That’s not acceptable, but it’s still a fact that there will still be substantial assets there,” Astrue insisted.

    I don’t see what the problem with the Post story is. The SS commissioner’s statement confirms the news story. “… unable to pay scheduled benefits in full on a timely basis ” and “… pay about 75% of scheduled benefits” seem perfectly compatible statements to me.

    BTW, the use of the word “assets” by the commissioner seems odd to me. I’m not an accountant, so maybe I’ve got this wrong. But my understanding of the word “asset” is something that already exists, like cash on hand or property. Money that you have not yet received – and whose receipt is not based on a contract but can be cancelled out by the stroke of a pen (laws regarding how much money is taken out of one’s pay for SS can be changed at the whim of the government) – don’t seem to qualify as assets to me. If someone can give me a professional understanding of how the word “asset” is used in this context I’d be glad to hear it.

    “Broke”, OTOH, is by no means a professional financial term I should think. If someone owes me $100 and comes to me when it’s due and says “I don’t have enough money, I’m going to give you $75 instead”, I can see where someone would think the debtor was “broke”. Obviously not completely out of money, they can give you the $75, after all. I guess it all depends on whether you define “broke” as “completely out of money” or as “owe more than I can pay”.