Friday, May 4, 2012

The Next Pension Funding Battle: Retired Americans Versus The US Military

America has two classes of debt: Debt Owed to the Public (DP) and Intergovernmental Debt (IG).

The IG accounts consist of the Trust Funds (TF). The three largest funds are Social Security (SS), the Federal Employee Retirement Fund (FERS) and the Military Retirement Fund (MRF). 

The Congressional Budget Office (CBO) provided projections for these retirement programs in its January 31, 2012 report, "The Budget and Economic Outlook" (Link). The numbers that CBO uses are consistent with the projections provided by SS, FERS and MRF individually in their annual reports. The following discussion relies on the CBO's numbers.

The basic TF arithmetic is as follows:

The sum of (a) Tax receipts (cash in) plus (b) Interest (non cash), minus (c) Benefit Payments (cash out), minus (d) Overhead (cash out) equals Net Surplus/Benefit. 

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