2023-06-24 03:04:10
In full strategy to try to win the battle of the management, the President of the Government, Pedro Sánchez, with the Minister of Social Security, José Luis Escrivá, as the first accomplice of his “self-interviews”, raised a graphic last Wednesday in the who boasted that, thanks to his reforms, the Social Security Reserve Fund will be filled with more than 120,000 million in barely two decades. “From emptying the pension piggy bank to recovering it,” he boasted on his Twitter profile. But the sleight of hand trick showed threads everywhere.
To begin with, because if the main hypothesis is fulfilled, the entire piggy bank would not even be able to pay for pension spending, not just for 2043, but for this 2023 (some 190,687 million), with a growing deficit since 2026 despite the reforms estimated at “A maximum of 8.1% of GDP in 2055, to be subsequently reduced to 7% in 2070,” according to the latest report from the Tax Authority (Airef).
A hole generated by increased spending, which will accelerate from 2035 reaching a maximum of 14.8% of GDP in 2049 (from the current 11.7%) for Social Security system pensions and 16.3% including pensions non-contributory and passive classes.
Thus, the supposed 5,000 million euros that will be generated a year for the next decade by the mechanism devised by Escrivá to fill the piggy bank are not even a patch before an expense that will increase by 2.4 points of GDP (some 33,000 million euros at current prices), compared to income that will grow by 1.1 points (15,000 million), according to Airef itself.
And it is that the “miracle” of the Sánchez-Escrivá tandem starts from a starting error. The pension piggy bank was born from a reality that has nothing to do with the current one. The law determined the filling of the Fund “charged to the surplus of social contributions that may result from the liquidation of the Social Security Budgets, of each year, in order to meet the future needs of the system.” That is the objective of a piggy bank: save what is left over, not what is missing.
Throughout the boom years, the piggy bank was filled up to endowments of 53,601 million euros with yields of 28,874 million. The problem is that the successive crises made it necessary to pull the fund ahead of time, with provisions of 80,337 million, which shows its insufficiency. Because?
Apart from the growing “tsunami” of retirements, which will raise the number of pensioners by five million in barely two decades, up to 15 million, there is the unequal relationship derived from the high amount of benefits in relation to salaries and the established between the number of contributors who pay pensions and pensioners.
There are currently –according to the latest government data– 20.8 million affiliates to Social Security, for just over 10 million pensions paid, with an expense of almost 12,000 million euros last May (11,974). and 21,000 million in the extraordinary payments of June and November. With these figures, the amount of spending is much higher than forecast income from contributions, a deficit that has made it necessary to derive resources from taxes, with interest-free “loans” to Social Security, contained in the Budgets.
In 2023, the contribution to the Fund for an amount of 2,957 million is recovered in financial operations, but not charged to a system surplus, but rather over a hole.
The nominal deficit forecast for 2023 is 7,199 million euros, covered with a new “loan” from the State. If the contribution linked to the intergenerational equity mechanism, destined to the Reserve Fund, is subtracted from the budgeted income for 2023, the hole in the budget would be around 10,000 million euros.
A deficit that, in real tax terms, would be much higher. Because?
Funcas explains that of the 38,722 million consigned for 2023 in current transfers from the State to Social Security, only 23,244 million respond to the coverage of non-contributory benefits and social and economic policy objectives, while 15,478 million are a transfer intended to cover part of the insufficiencies of the contributions to finance the contributory benefits. If those 15,478 million are added to the nominal deficit of 7,199 million and the 2,793 million contributions that correspond to the MEI are deducted, a contributory deficit of 25,470 million is obtained in 2023, while creates an illusion thanks to loans and debt.
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