CBO: Social Security to begin running permanent deficits this year, not 2016

posted at 6:45 pm on January 26, 2011 by Allahpundit

Not unexpected.

The Congressional Budget Office said Wednesday that Social Security will pay out $45 billion more in benefits this year than it will collect in payroll taxes, further straining the nation’s finances. The deficits will continue until the Social Security trust funds are eventually drained, in about 2037.

Previously, CBO said Social Security would start running permanent deficits in 2016. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.

Remember the payroll tax cut for employees that was part of last month’s tax cuts deal? Democrats warned at the time that that would play into the GOP’s hands on entitlement reform by establishing a new lower baseline rate that’s insufficient to fund the program. (The current rate is temporary, but as we’ve learned, temporary tax rates are hard to raise.) The result: An accelerated, expanded shortfall in Social Security that will inevitably intensify cries that the program is unsustainable and needs to be reformed. Which, of course, it does: As noted above, assuming The One wins a second term, Social Security would have begun running deficits before the end of his presidency anyway. As it is, two graphs for you from today’s new CBO report. First, the Baby Boomer effect on expenses over the next 10 years:

And second, the offsetting receipts, with the Medicare line self-explanatory:

This isn’t the only horrible news in the report by a longshot, either. CBO’s projected deficit for this year is a cool $1.5 trillion or 9.8 percent of GDP, which is just two-tenths of one percent less than last year’s all-time budget-buster. And there’s not much revenue relief coming from new jobs: CBO expects that unemployment will remain above eight percent through 2012 and won’t get back to a historic norm of 5-6 percent or so until 2016. This ship has already started to sink, in other words, and yet Captain Hope chose to use his annual megaphone last night to talk about stuff like high-speed rail. As Megan McArdle says, terrifying.


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Bush
(1.2/1.9)/8= 7.9% average annual increase in federal budget

Obama
(.7/3.1)/2= 11.3% average annual increase in federal budget

Chuck Schick on January 27, 2011 at 1:30 PM

Both are very bad. Some of Obama’s spending has been designed to prevent negative economic growth, as opposed to new federal mandates, and should disappear from future budgets. But there’s still no denying the inability of politicians to control spending. Even on the GOP controlled first 6 years of Bush, the annual fed budget increased by a whopping 40%, and that didn’t even include war spending that was funded through completely separate spending bills.

bayam on January 27, 2011 at 3:38 PM

We have to cut REGULATIONS and FEES to stimulate economic growth. Taxes are fine where they are, except it should be a flat rate

Bush cut regulations, yet our trade deficit started mushrooming during that time, while manufacturing jobs started vanishing at an alarming rate. Don’t get me wrong, I’m all for less regulation. But do you really believe that a few less regulations and fees will give American companies the ability to outcompete offshore companies paying $1.50 hourly wages in China or $1 in other parts of Asia?

It’s hard to see how you’ll really make an impact in a globalized economy. It’s like taking a fly swatter to a gun flight.

bayam on January 27, 2011 at 3:47 PM

Republicans won’t accept higher taxes. It’s clear that both are required to balance the budget. Many in the Tea Party continue to believe that lower taxes are the answer. It doesn’t look good.

bayam on January 26, 2011 at 7:08 PM

We’re already past the Laffer curve. Increasing taxes will actually DECREASE revenue due to the business-killing effects. Since when are decreased revenues what government needs to pay higher expenses? I believe we’re already there. We need to lower taxes, which will increase business activity (fueling job growth), and with more jobs comes more revenue from taxes.

dominigan on January 27, 2011 at 4:15 PM

Bush cut regulations, yet our trade deficit started mushrooming during that time

bayam on January 27, 2011 at 3:47 PM

First of all, you need to focus on the correct cause. Congress controls the budget and spending. The President only signs off on it. Now you can blame Bush for not pushing back more on the Democratic Congress (like I do), but at least be honest about it. The budget deficit was actually decreasing until the Democrats took over Congress, at which point it turned around and headed up over Bush’s last two years. With a Democratic Congress and Democratic President, the rate of increase has skyrocketed. This Democratic storm has increased the budget deficit at THREE TIMES the rate of “Bush”.

dominigan on January 27, 2011 at 4:20 PM

Both are very bad. Some of Obama’s spending has been designed to prevent negative economic growth, as opposed to new federal mandates, and should disappear from future budgets. But there’s still no denying the inability of politicians to control spending. Even on the GOP controlled first 6 years of Bush, the annual fed budget increased by a whopping 40%, and that didn’t even include war spending that was funded through completely separate spending bills.

bayam on January 27, 2011 at 3:38 PM

You used to say Bush increased spending more. Do you admit you were wrong?

Chuck Schick on January 27, 2011 at 4:42 PM

Bush cut regulations, yet our trade deficit started mushrooming during that time, while manufacturing jobs started vanishing at an alarming rate. Don’t get me wrong, I’m all for less regulation. But do you really believe that a few less regulations and fees will give American companies the ability to outcompete offshore companies paying $1.50 hourly wages in China or $1 in other parts of Asia?

It’s hard to see how you’ll really make an impact in a globalized economy. It’s like taking a fly swatter to a gun flight.

bayam on January 27, 2011 at 3:47 PM

If we couldn’t compete with China before, why did Obama make it far more expensive to do business here between ObamaCare, financial regulations and sucking capital out the market with massive deficits?

American companies are sitting on a record $2 trillion of cash, yet they’re not hiring. In 2010, American companies hired almost TWICE as many people outside the US than inside. Do you really think that is a coincidence?

Chuck Schick on January 27, 2011 at 4:47 PM

The baby boomer generation is the one that has funded SS more than any other. Pay out what everyone has earned through a lifetime of taxes and cut the program off. Let the newer gens keep their money and invest as they see fit.

Big John on January 27, 2011 at 10:31 PM

First of all, you need to focus on the correct cause. Congress controls the budget and spending. The President only signs off on it. Now you can blame Bush for not pushing back more on the Democratic Congress (like I do), but at least be honest about it. The budget deficit was actually decreasing until the Democrats took over Congress, at which point it turned around and headed up over Bush’s last two years…

The numbers I posted were from the CBO and are completely honest. The budget rose by 40% when the GOP ran the entire system, not even including war spending authorizations passed separately from the budget. Tax revenues are dependent on economic activity and in 2006 when the housing and asset bubbles were at their peak, yes tax revenues were strong. But those years were aberrations based on a bubble, not real economic prosperity. You can spin it anyway you want, but to blame one party is just pointless and deceptive.

bayam on January 28, 2011 at 12:18 AM

You used to say Bush increased spending more. Do you admit you were wrong?

Chuck Schick on January 27, 2011 at 4:42 PM

You know that the answer depends on how you slice the numbers so that’s not even an honest question. The jury is still out on what Obama plans to do once the economy recovers. But I’m not going to defend Obama’s spending. Hopefully this will enable you to feel even happier about Bush.

bayam on January 28, 2011 at 12:22 AM

American companies are sitting on a record $2 trillion of cash, yet they’re not hiring. In 2010, American companies hired almost TWICE as many people outside the US than inside. Do you really think that is a coincidence?

Yea I agree, increasing globalization and the aftermath of a near meltdown of the US economy are taking a major toll on consumer spending and business investment.

If only we could go back to the good old days of asset bubble heaven when over 30% of corporate profits were derived from ‘financial services’. Playing games with money to generate economic growth is the way to go.

bayam on January 28, 2011 at 1:19 AM

You know that the answer depends on how you slice the numbers so that’s not even an honest question. The jury is still out on what Obama plans to do once the economy recovers. But I’m not going to defend Obama’s spending. Hopefully this will enable you to feel even happier about Bush.

bayam on January 28, 2011 at 12:22 AM

And you don’t think “Obama’s plans” are hindering recovery?

Chuck Schick on January 28, 2011 at 2:28 PM

If only we could go back to the good old days of asset bubble heaven when over 30% of corporate profits were derived from ‘financial services’. Playing games with money to generate economic growth is the way to go.

bayam on January 28, 2011 at 1:19 AM

So how come 2010 was the biggest year of bonuses on Wall Street in history?

Chuck Schick on January 28, 2011 at 2:31 PM

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