Exclusive: CBO predicts Social Security cash deficits in 2010-11; Update: Too much sunny optimism at CBO?
posted at 8:48 am on September 22, 2009 by Ed Morrissey
Four years ago, George W. Bush attempted to reform the entitlement program Social Security, warning that the system was accelerating into collapse and would soon run deficits. Democrats scoffed and claimed the Social Security system was solid and wouldn’t have problems for at least 50 years, as Harry Reid told PBS’ Jim Lehrer in June 2005. Just last year, the CBO — under the direction of Peter Orszag, now budget director in the Obama administration — claimed that the first cash deficits in Social Security would not come until 2019.
Now, however, the CBO has determined that Social Security will run cash deficits next year and in 2011, and by 2016 will be more or less in permanent deficit mode. Hot Air has exclusively obtained the summer 2009 CBO report sent to legislators on Capitol Hill but not yet made public, which shows that outgo will exceed income for the first time since the 1983 fix on an annual basis in 2010:
The numbers need explaining. The number to watch is the “Primary Surplus” number, which watches actual income and expenditures without the interest payments from the general fund. The interest payments mask the fact that costs have begun to outstrip income on an annual basis (individual months have gone into deficit in the past). One way to look at this, according to my sources, is to think of this as a mortgage, and in 2010-11, the income can’t make the payments, so the general fund has to cover them. Since the interest obligation compounds, the debt grows.
As we can see, this trend reverses itself temporarily from 2012-15, but the surpluses are minimal. By 2016, the deficits return, and begin to accelerate again. By 2019, the primary surplus runs $63 billion in the red, almost triple the deficit in 2017, showing the rapid decline of the Social Security system.
This demonstrates nothing better than the poor and politically calculated analyses that came out of the CBO during Peter Orszag’s tenure at the Congressional agency. Democrats wanted analyses that allowed them to ignore the problems in Social Security, and Orszag was happy to supply them. Douglas Elmendorf has had to right the ship at CBO while Orszag continues to blow his predictions at OMB, most notably in overall deficit projections, which Orszag had to admit were off by more than 40% and $2.2 trillion over the next ten years.
Of course, they were helped along by a complacent media unwilling to do math, and a host of apologists for the Left. Chuck Blahous at the Hudson Institute has a good rundown of those he calls the “mythmakers”. It’s worth reading in its entirety, as is Robert Reich’s “All is well!” blogpost from four months ago, apparently working off of the Orszag numbers from last year.
The situation at Social Security is much worse than this administration and Democrats in Congress want to admit. They want to continue busting the deficit and creating new entitlements while the existing ones careen towards collapse. The new data shows that time has almost run out for reform. Seniors will still get their checks, but those will increasingly rely on injections from the general fund and not revenues from Social Security payments. At this point, one has to wonder when SSA becomes a flat-out Ponzi scheme, and who the suckers will be when it blows up.
Update: Fixed a couple of typos, and also recalled (thanks to a Hot Air reader) that SocSec briefly ran an annual cash deficit before the 1983 fix.
Update II: Steve at No Runny Eggs, who has been keeping a very close eye on SSA, says that the CBO numbers project some eye-popping payroll-revenue growth numbers to get back to surpluses (briefly) by 2012. According to the numbers, CBO projects a 6.19% growth rate in 2012, and 5.69% in 2013, then dropping to 4.59% in 2014 and declining afterwards. Assuming that they only peak at the 4.59% number for all three years — still a rather optimistic projection — Social Security never actually comes out of its deficits at all:
Be sure to read Steve’s post to get the full explanation of his projections.
Breaking on Hot Air