The Tax Attic — June 10, 2010

Social Security benefits to dwindle

Since The Rockford Squire doesn’t have a writer covering Major League Baseball—and I love baseball—I’m obligated to comment on the Detroit Tigers’ Armando Galarraga’s brush with fame. Galarraga could have had a permanent piece of fame had Umpire Jim Joyce gone to that last eye doctor appointment. But alas and alack, Joyce missed the appointment and he also missed the obvious out call at first base that relegated Galarraga to a one-hitter instead of the 21st perfect game in all of major league baseball history. Oh, by the way, no Detroit pitcher in the 100-plus years of Tigers baseball has ever pitched a perfect game. Talk about a rare occurrence. All Galarraga got was his 21st regular career victory, and it’s doubtful he will get anywhere close to that perfect game for the rest of his career. Maybe in his next life, he won’t have Joyce umpiring first base when he gets to two out in the ninth and that umpire makes the right call.

Jerry Coon, Enrolled Agent

Current baseball rules just do not allow anyone, even Commissioner Selig, to change a call once the umpire says “play ball” and throws the next ball into play. The only one who could have made a difference in this whole sad state of affairs was Tigers Manager Jim Leyland. He knew or should have known that once he left the field and the home plate umpire directed Galarraga to “play ball,” the perfect game was dead. Forever. Leyland could have not left the field of play until he demanded that Joyce ask the other umpires if one of them, particularly the second base umpire, had a good look at the play. Joyce then either had the choice of throwing Leyland out of the game or asking the other umpires for help.

I’m thinking that at some point with 18,000 fans booing him, with the Tigers’ normally quiet Miguel Cabrera chewing on him, and Galarraga smiling at him, Joyce would have gotten the message that something was wrong and he would have consulted with the other umpires and ultimately the call would have been reversed. Then Galarraga’s 21st victory would have been the 21st perfect game thrown in baseball history thus assuring him of his rightful place in history. Then Joyce would continue to be known for the rest of his career as a solid, veteran umpire instead of being known forever as the blindest, worst umpire in all of baseball. All for the want of a manager who left the field after about five seconds of arguing. Shame on him.

This week, let’s continue to discuss the future of Social Security. Presently, the system has approximately a two trillion dollar surplus. Sounds like a lot of money until you look at the total amount of money due to beneficiaries over their lifetimes. The actuaries calculate that the present value of all benefits payable is 13.6 trillion dollars. Now that’s a lot of money.

In approximately seven years, in 2017 or 2018, more money will begin to flow out of the Social Security system than is going in. This year, there are 51 million recipients drawing approximately 650 billion dollars annually. There are 3.1 people paying into the system for each of the 51 million people drawing. For comparison purposes, in 1950, there were 16 people paying in for each beneficiary. Even after paying out 650 billion dollars, there is still a surplus this year of approximately 100 billion dollars.

In the next few short years, that annual surplus is gone. By around 2022 or 2023, the system will be running a 100 billion dollar deficit. There will be only two people paying into the system for each person drawing. By around 2037, 100% of the accumulated surplus of two trillion dollars is gone. If nothing is done to correct that progression, the moment the money runs out, benefits for each and every recipient will have to be cut by 25%.

We all know the federal government is good at printing money, but even it won’t be able to print that much money. Benefits will be cut by at least 25%. After the initial cut, over the next 25 years, it is projected they would potentially be further decreased by another five percent.

But there are some actions that can be taken now that will delay the 25% cut in benefits. None of them are extremely painful, and next to a 25% cut, they don’t look all that bad. Next week, I will go over those actions that can delay the cuts. This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent. He owns Action Tax Service on Northland Drive in Rockford. Contact him at www.actiontaxservice.com.

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