Latest news with #insolvency
Yahoo
13 hours ago
- Business
- Yahoo
Contributor: Social Security is headed for a cliff. When will voters care?
Considering recent news, you may have missed that the 2025 trustees reports for Social Security and Medicare are out. Once again, they confirm what we've known for decades: Both programs are barreling straight toward insolvency. The Social Security retirement trust fund and Medicare Hospital Insurance trust fund are each on pace to run dry by 2033. When that happens, seniors will face an automatic 23% cut in their Social Security benefits. Medicare will reduce payments to hospitals by 11%. These cuts are not theoretical. They're baked into the law. If nothing changes, they will be made. I have nothing against cuts of this size. In fact, if it were up to me, I would cut deeper. Medicare is a terrible source of distortions for our convoluted healthcare market and needs to be reined in. Social Security was created back when being too old to work meant being poor. That's no longer the case for as many people. Thanks to decades of compound investment growth, widespread homeownership and rising asset values, seniors are no longer the systematically vulnerable group they once were. The top income quintile includes a growing number of retirees who draw substantial incomes from pensions and investment portfolios with Social Security benefits layered on top. These programs have become a transfer of wealth from the relatively poor to the relatively wealthy and old. Of course, America still has some poor seniors, so cutting across the board is bad. This is why the cuts should be targeted, not the automatic effects in 2033. And Congress should get started now. The size of the problem is staggering. Social Security's shortfall now equals 3.82% of taxable payroll or roughly 22% of scheduled benefit obligations. Avoiding insolvency eight years from now would require an immediate 27% benefit cut, according to former Social Security and Medicare trustee Charles Blahous. Alternatively, legislators could raise the payroll tax from 12.4% to 16.05%. That's a 29.4% increase. Or they could restructure Social Security so that only people who need the money would receive payments. But because facing this problem in an honest way is politically toxic, legislators are ignoring it. Blame does not rest solely with Congress. The American public has made it abundantly clear that they don't want reforms. They don't want benefit cuts or tax increases, and they certainly don't want higher retirement ages. So politicians pretend everything is fine. Congress does deserve fresh criticism for making things worse. Last year, legislators passed the misnamed 'Social Security Fairness Act,' giving windfall benefits to government workers who didn't pay into the system — which enlarges the shortfall. This year, the House proposed expanded tax breaks for seniors in the 'One Big Beautiful Bill Act,' which would further worsen the problem. The cost of political giveaways is steep. Social Security's 75-year unfunded obligation has now reached $28 trillion, up from $25 trillion just a year ago. Medicare is no better. Its costs are projected to rise from 3.8% of gross domestic product today to 6.7% by the end of the century (8.8% under more realistic assumptions). Most of the additional spending will be financed through general revenue, meaning more borrowing and more pressure on the federal budget. As Romina Boccia of the Cato Institute has documented, other countries have taken meaningful steps to address similar challenges. Sweden and Germany implemented automatic stabilizers that slow benefit growth or raise taxes when their systems become unsustainable. New Zealand and Canada have moved toward more modest, poverty-focused pension systems that offer basic support without bankrupting the state. A few weeks ago, Denmark increased the retirement age to 70. These are serious reforms. The U.S. has done nothing. Options exist. Policymakers could gradually raise the retirement age to reflect modern, healthier, longer lives. They could cap benefits at $2,050 monthly, preserving income for the bottom 50% of beneficiaries while progressively reducing benefits for the top half. They could reform the tax treatment of retirement income to encourage private savings, as Canada has done with its tax-free savings accounts. Any combination of these reforms would help. But that would require admitting that the current path is unsustainable. It would require telling voters the truth. It would require courage. So far, these admirable traits have been sorely lacking in our politicians. The programs' trustees have made the stakes clear: The only alternatives to reform will be drastic benefit cuts or massive tax hikes. Waiting until the trust funds are empty will leave no room for gradual, targeted solutions. It will force crisis-mode slashing that will hurt the most vulnerable. The ultimate blame is with voters who continue to reward politicians for promising the impossible. A functioning democracy cannot survive if the electorate insists on voting benefits for themselves to the point of insolvency. At some point, reality asserts itself. That moment is rapidly approaching. Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate. If it's in the news right now, the L.A. Times' Opinion section covers it. Sign up for our weekly opinion newsletter. This story originally appeared in Los Angeles Times.
Bloomberg
a day ago
- Business
- Bloomberg
Five Years From Wirecard, Europe's Shorts Are Still Unloved
Short selling ought to have gotten easier in Europe since Wirecard AG filed for insolvency five years ago this week. The collapse spectacularly vindicated the Financial Times, which nailed the accounting scandal, and the hedge funds that had bet against the stock. But regulation continues to foster a bad environment for short sellers. Europe should beware of letting their craft die. The supervision of short selling gets more stringent as you move east from the US. One major issue is the disclosure of short positions. The US favors aggregating these for public consumption. The UK is moving toward the same model. But in the European Union, individual positions of 0.5% or more must be revealed.
Washington Post
2 days ago
- Business
- Washington Post
Here's how to bolster Social Security
The June 19 news article 'Social Security could be insolvent by 2033' added to the fearmongering that's unfortunately ever-present in the Social Security conversation. Today, Social Security's trust funds have a combined reserve of $2.7 trillion, and spending has exceeded revenue since 2021. Yes, if nothing changes, in 2033, Social Security benefits will automatically be slashed by 23 percent. Though that is a meaningful reduction, it represents neither bankruptcy nor insolvency.
Bloomberg
3 days ago
- Business
- Bloomberg
Small City in Washington State Files Rare Bankruptcy Over Developer Dispute
A small city in Washington State filed a rare municipal bankruptcy after failing to reach an agreement with a developer over a $26 million court judgment. Cle Elum, a city of 2,200 about 80 miles east of Seattle, said it couldn't afford to pay the debt to developer City Heights Holdings LLC, and was insolvent.
Irish Times
4 days ago
- Business
- Irish Times
Joint provisional liquidators appointed to ‘Polo Stores' eastern European food shops
The High Court has appointed joint provisional liquidators to two companies behind the 'Polo Stores' franchise which imports and retails central and eastern European food supplies. The court heard that due to a serious conflict between the two 50 per cent shareholders and directors, Alexandr Vakiy and Max Bulgakov, the companies were sliding into insolvency and there was a concern that the situation could affect the goodwill of suppliers. Maxela Ltd and EastDeli Ltd were set up by Ukrainian citizens, Mr Vakiy and Mr Bulgakov who came to Ireland in the late 1990s and opened a number of grocery stores. There are now 15 Polo Stores operated by Maxela across the country. EastDeli operates a store in rented premises in Clondalkin, Dublin. READ MORE On Tuesday, Cian McGoldrick BL, instructed by Darragh O'Donovan of Orpen Franks Solicitors, told Mr Justice Brian Cregan the winding up petition was brought on behalf of Mr Vakiy in order to safeguard the goodwill of the companies and because of material concern that the relationship with suppliers was being undermined, In the petition, it is claimed the relationship between the two men previously broke down resulting in Mr Vakiy bringing shareholder oppression proceedings. Mr Bulgakov alleged Mr Vakiy was party to an extensive €18 million fraud, a claim strongly denied by Mr Vakiy who said no evidence emerged supporting any fraud on the companies in this amount. The oppression proceedings were withdrawn earlier this month but the issues they had raised 'continue to seriously affect the management of the companies'. Mr McGoldrick told the court Mr Bulgakov had unilaterally blocked access to online banking facilities which meant staff and suppliers could not be paid. The firms have between €700,000 and €900,000 in working capital but supplier costs alone are €450,000 a week which means they could 'slide into insolvency' in a matter of two weeks, he said. The petition states the companies are 'effectively paralysed due to an irreconcilable breakdown in the relationship of trust and collaboration between the two shareholders and directors'. It is also claimed there has been a recent credible offer of interest from a third party operating in the same industry in acquiring the whole the business as going concern, or its core assets. Mr Justice Cregan said he was satisfied to appoint Brendan O'Reilly and Mark Degnan of Interpath Advisory (Ireland) as joint provisional liquidators. He was satisfied the companies are insolvent and unable to pay debts as they fall due and that there is a good prima facie case that it is likely the winding up order will be obtained. This was on the basis that the relationship between the two shareholders is hopelessly deadlocked and there is a serious conflict between them, he said. He granted orders giving certain powers to control the company to the provisional liquidators and said the petition to appoint full liquidators can be heard next month.
