Social Security Could Be Next To Need A Bailout

Originally Posted At The Washington Post
By Allan Sloan
February 2, 2010

Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.

But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.

To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.

Allan Sloan is Fortune magazine's senior editor at large.

Action Center

	What's New? Get the latest happenings
	Mad Enough? Join the Fight
	Stop the Raid! Sign the Petition
	No Health Rationing! Sign the Petition
	No More Bailouts! Sign the Petition
	Seniors Sound Off Submit your Blog Posts
	Please Support SSI With Your Online Donation

Recent News

Big Pharma researcher admits to faking dozens of research studies for Pfizer, Merck

February 18, 2010

Source: Naural New

(NaturalNews) It's being called the largest research fraud in medical history. Dr. Scott Reuben, a former member of Pfizer's speakers' bureau, has agreed to plead guilty to faking dozens of research studies that were published in medical journals.
Read Full Story

Federal pay ahead of private industry

March 6, 2010

Source: USA Today

Recession is nutrient for bureaucrats, elixir for government growth

These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.

Read Full Story

American reliance on government at all-time high

March 1, 2010

Source: The Washington Times

Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.

Read Full Story

Plan to Seek Use of U.S. Contracts as a Wage Lever

February 26, 2010

Source: The New York Times

The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

Read Full Story

Climategate Meets the Law: Senator Inhofe to Ask for DOJ Investigation

February 23, 2010

Source: Pajamasmedia.com

Senator James Inhofe (R-OK) today asked the Obama administration to investigate what he called “the greatest scientific scandal of our generation” — the actions of climate scientists revealed by the Climategate files, and the subsequent admissions by the editors of the Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report (AR4).

Read Full Story

IRS Employees Face Rising Threats

February 23, 2010

Source: ABC News

A suicidal pilot's attack on an Internal Revenue Service building in Austin, Texas, last week was the worst but hardly the lone example of threats against the tax agency, according to the U.S. government.

The number of threats against the tax-collection agency has increased significantly in recent years, Treasury Department officials said.

Read Full Story

Read All Recent News

Senior Resource Center

Related Sites
•America's All Right
•National Tax Limitation Cmte
•Rights Radio, Dr. Joyce Star
•Rebuild The Party
•Take Back Medicine

Government
•Social Security Administration
•Administration on Aging
•Social Security Retirement Benefits Estimator

Media & Blogs
•AARP: Social Security
•CNN: Social Security
•NYT: Social Security

Pharmaceutical
•RxList
•PharmWeb

Health & Wellness
•NIH Senior Health
•WebMD

Retirement
•Center for
Retirement Research
•The Retirement
Security Project

Insurance & Medicare
•Medicare

Elderly Information
•Global Aging Institute