Social Security already running red; Update: Going bad faster than trustees admit
posted at 8:44 am on May 13, 2009 by Ed Morrissey
The big story for the day will probably be the new report that Social Security will start running in the red in 2016. The stories will include talk of a “trust fund” as well, as does the Washington Post:
Specifically, the trustees’ report predicts that the trust fund from which Social Security payments are made will be unable to pay retirees full benefits by 2037, four years earlier than forecast a year ago. In particular, the trustees single out the financial weakness of the part of the program that subsidizes disabled Americans, saying that fund will run out of money in 2020.
Only three times in the past 15 years have the trustees predicted that Social Security would run out of money sooner than previously expected. Last year, they forecast no change from the 2007 prediction, and in 2007, they predicted that the fund would last a year longer than they had previously thought.
Yesterday’s report also said the Social Security trust fund will begin to spend more money than it takes in through tax revenue in 2016, one year sooner than predicted a year ago.
There is no trust fund. Social Security surpluses have always been used by the federal government for general-fund allotments, replaced essentially by IOUs. This became an issue in the 2000 presidential election, when Al Gore talked about a “lockbox” to keep Congress out of the surpluses. The “trust fund” consists of bonds, not cash, and they have to be redeemed by the US government, which already runs massive deficits.
For the second piece of bad news, the report is wrong in the timing as well. They claim that outlays will exceed receipts for the first time in 2016. Unfortunately, that’s already the case. In February, as the Treasury’s own website makes clear, we took in $54.5 billion and paid out $55.7 billion, for a deficit of $1.25 billion. In March that recovered to gain a $2.7 billion profit, but the first red ink has already been spilled, and it’s not going to stay black again for very long.
What does that mean for the US? I’ll have more later this morning.
Update: Chuck Blahous has more bad news:
- More than 3/4 of this year’s previously-projected Social Security surplus appears to be gone.
- Annual shortfalls are more likely to arrive still sooner than later — even than the now-worsened Intermediate projection.
- The single-year deterioration in the 2009 report is historic by any standard. Very few previous annual updates have showed a worsening of this magnitude, and those were often a result of changes in methodologies or assumptions. The current worsening is a real one, not a methodological one.
- Policy makers’ options for closing the shortfall are becoming even more tightly constrained.
- Updated data are now wholly discrediting previous claims that the Trustees had been exaggerating the program’s shortfall.
He has much more at the link.