Social Security: The Red Ink Starts Next Year

Just in case there was any doubt that Social Security won't be able to keep the promises it is making to anyone younger than, say, 55, the Congressional Budget Office now projects that Social Security will start operating at a deficit next year. Neither the CBO nor Social Security itself had expected the red ink to start flowing before 2016, but the recessionary surge in unemployment and early retirements changed the outlook. The CBO's updated forecast, reported by the Associated Press, now sees costs pushing above tax revenues by $10 billion in 2010 and $9 billion in 2011, before the system goes temporarily back into the black again until 2016.

As a practical matter, you won't notice. Because of the trust fund, the system will be able to pay all its checks on time.

But that doesn't mean it doesn't matter. For the first time Social Security will start to add to the deficit rather than subtracting from it. And while adding $19 billion over two years to the federal debt doesn't sound like much in this era of $787 bailouts, it's just the first trickle of a red ink flash flood that starts in earnest in 2016. This is a big deal.

Remember, the trust fund isn't like a pile of money in a bank vault that Social Security can just open when it needs cash. It's actually just a stack of IOUs from Uncle Sam. It means, in essence, that Social Security has the authority to order the Treasury to pay beneficiaries. Where the Treasury gets the money -- by raising taxes, cutting benefits elsewhere in government or borrowing more from the Chinese -- is up to Congress.

After a while, we're going to get tired of this. Social Security's authority to boss the Treasury around doesn't run out until the trust fund is exhausted decades from now. Way before then we will have to face the fact that Social Security's costs are unsustainable. Some combination of tax hikes or benefit cuts are going to have to be put in place. And the longer we wait to face reality on Social Security, the more painful those measures will be. Obama has said that fixing Social Security is on his agenda for next year. Let's hope so.

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Comments

[dadw5boys]

No one ever mentions the Multi-Millions of Americans who died and never got to retirement. All their money paid into Social Security transfered to Military Contractors for profits. Robbery at it's finest.

[vippy]

I demand an audit. We, the people, were robbed. Government took money out for all kind of reasons
and then has the audacity to say we are broke! Oh no. But then again, we did not have the money for the wars but most people wanted it, so there! Unbelievable.

[EminemsRevenge]

Social Security won't actually go broke until 2044, or thereabout­s...but it looks like our real salvation is if the Mayan calendar is right...th­ree years and almost a couple months left

[The Meek]

The Mayans didn't have room on the rock to go any further.

[Ozarks]

The IOU's amount to $2.5 Trillion largely from the Government's "borrowing" and accounting tricks over the last 8 to 30 years of Reagan style "government.

[americaforme]

Stop the Broadcast of Red Ink!!!! Pay back all the money syphoned off by the congress starting with Reagon, pay it back with the same interest we were dished out from Banks 30%. After that, when the bailed out Banks pay back their Billions, put it imediatly in the social security system where it belongs. Talk about unamerican activitys, fostering this hype of fear on seniors, in this desperate time, is unforgiveable. Besides the fact they have no nest egg, from their ripped off homes due to mail box credit cards.

[vippy]

No! Think about it. We let the politicians do whatever and we are so happy with them that we keep voting the same ones in office over and over. Then we want to blame them when it is
us who agree to everthing they are doing. Time to vote all of the incumbents out and send a strong message. If we don't get it right this time then I can only feel pity for us!

[Artemis34]

Republicans have been looting social security and they are now down under 30% of the electorate and falling.

Independents and Democrats are over 70% and growing.

And we have voted for change. We're just turning the corner now.

Rightly, Pres. Obama says continuing private health care as we are will bankrupt the system and he wants to change that. One step in the right direction if the blue dogs and DINOs will get in line.

[Artemis34]

Right.

http://www.truthout.org/032009R

"Reagan: The Great American Socialist [for the rich]

The retirement system was looted from the first day the Social Security surplus came into being, because the legislation itself gave the president [Reagan] a free hand to spend the surplus in any way he liked.

Thus began a massive transfer of wealth from the poor and the middle class, especially the self-employed small businessman, to the wealthy.

The self-employment tax jumped as much as 66 percent."

[Kassandra]

Al Gore wanted to put it in a "lock box" prolly that's why he was punked in 2000.

Call Bush/Cheney/Paulson et al and make 'em put it back... Reagan was the worst culprit.
But, of course, we'll prolly be treated to some generational anger/angst about this even tho Regan raised the FICA tax to double on the Boomers.

You know, Union pension fund mamgaer have gone to prison for a long time after doing stuff leik this

[Artemis34]

"Gore State of the Union
In a parallel universe, President Al Gore delivers the State of the Union address

http://www.nbc.com/saturday-night-live/video/clips/gore-state-of-the-union/229115/

Very funny and also a bit sad to see how things might have been if the Supreme Court hadn't chosen to select G W B as president.

[Swampy]

There has to be some hides nailed to the wall on this one: Google "raiding social security" to see the recent history of what's been done to the fund. And then as the Disney monkey king said, "Get mad baby!"

[0turtle]

No more IOU. No more spending of excess money from social security.
This is one of the most serious bad behaviors by congress. That is our money
and congress has been spending it for years including 2009. Now I wonder
why the cola for 2010 is 0000%. Thanks

[vippy]

No more - then vote accordingly! But I see little hope for us.

[Artemis34]

The COLA for 2010 is 0% because conservatives wanted to drive prices up without have the official measure of inflation go up, so things you do have to buy like gas are not included.

Read more on NIXON and COLA at:

http://www.politifact.com/truth-o-meter/statements/2009/sep/28/chain-email/e-mail-claims-democratic-congress-blame-no-cola-in/

[Artemis34]

Speaking of IOUs, you may want to view the non-partisan IOUSA the movie

http://www.IOUSAthemovie.com/

[111]

I don't know if you are correct in saying that Social Security will start operating at a deficit next year but I think Social Security was set up as a Ponzi scheme back when. When Social Security was created it began issuing checks immediately to people who had never paid into it. The idea was it would be self-perpetuating with each succeeding generation paying into Social Security for the generation before it.

Then corporations began slashing head count and global business agreements sent American jobs overseas. Hundreds of millions of jobs have been lost in the last few years. No job = no money paid into Social Security. The end.

[olephart]

When social security was initiated the average life expectancy was less than the start of payments. There were 43 working age Americans for each Social Security recipient. Also, as for private retirement investments, half of the S&P 500 companies had gone bankrupt. The stock market had lost 90% of its value. Thousands of banks had gone under with no FDIC thus taking people’s deposits with them. Think what would have happened if Bush had privatized Social Security and put it all in “safe” mortgage backed securities.

As to “then corporations began slashing headcount”. That began 50 years later under Reagan. As to hundreds of millions of jobs lost, we never had more than 135 million jobs at any one time and the working age demographic is about 200 million.

[WorkingClass]

Remember, the trust fund isn't like a pile of money in a bank vault that Social Security can just open when it needs cash. It's actually just a stack of IOUs from Uncle Sam.

Which means that the money you have paid into social security all your life has been stolen by your government. They stole your money to pay for wars about nothing, bail outs for crooked banksters and tax cuts for rich people. So now you are old and tired and you discover that the pension you counted on has been stolen from you. How does that make you feel?

[Aaror]

If we eliminated the regressive part of social security (no taxes on income over $100Kish-it is indexed to inflation so the cap changes every year), we could buy ourselves another year. Of course the rich that rule this nation wouldn't allow that, huh?
Barring that, we could just set the SS tax rate to match proposed expenditures. It doesn't have to be 6.4% forever. It could be 6.7% or 7% without too much harm to the economy...

[Artemis34]

Probably could get to doubling the cap or up to $250K per year indexed on real cost of living inflation.

[olephart]

For years working Americans have been paying in more than was coming out. This was the Social Security surplus. Also during those years the Government has been borrowing this surplus to hide the real deficit. You can argue Democratic spending or Republican spending was the culprit but in essence it was Republican tax cuts for the wealthy that shares most of the blame. Monies were received from the lower incomes and rebated to the upper incomes. This was the Robin Hood in reverse tax plan.

There is an easy an equitable method to fix this. The employee share of Social Security and Medicare should be levied on unearned incomes. An exemption for the first $5,000 single or $10,000 joint incomes would help middle income earners. Also, the cut off for all incomes should be changed to a bracket of say $100,000 to $250,000 to accommodate those who are well to do but not wealthy. Everything over $250,000 would continue to be taxed. This way all those CEOs making 500 times that of their workers could kick in enough to pay 500 Social Security recipients.

[Artemis34]

I like extending social security tax to unearned income.

[usna73]

Are we all just fools? The only way to "fix" these things is via a higher marginal tax rate on those who have stolen the wealth over the past 30 years. They were given all the opportunity to prove that the pie could be expanded for all via tax breaks and so-called supply side economics. It failed.

Now the time has come to reverse the process.

Case closed.

[WASanford]

Agreed with and fanned!

[dadw5boys]

They are cashing out. Look at even Uruguay where large communities of Wealthy are moving. They will set back until the crazyness is over then bring their gold back and rule.

[vippy]

I thought Bush is moving to Paraguay!

[AnotherMcIntosh]

Your recommendation is the most sensible way.

FDR would have done that. Truman would have done that. So would JFK and LBJ.

Just watch Obama, however. He will use this as an excuse to push for another "one time" amnesty.

[Artemis34]

Actually just raising the cap on social security tax would fix the problem. Currently once your earned income exceeds $106K, you stop paying into social security. So raise it to $250K or remove the cap.

The government could also repay what conservatives looted out of the "trust fund."

Since, for the most part current workers support current retires, increase the number of current workers in the US, by engaging in fair trade (get jobs), not free trade and reforming immigration (get people).

There are so many ways to solve this. Just takes political will or a big pitch fork.