The tide has finally turned, and the ink on Social Security's budget has turned red. This year will be the the first time that the government program will have a deficit, after decades of having surpluses:
The Congressional Budget Office (CBO) reports that Social Security will effectively run a $45-billion deficit in 2011 and continue to run deficits totaling $547 billion over the coming decade.
The admission comes in the CBO’s semi-annual economic review that projects federal spending, debt, and economic growth. In the report, the CBO also examines the impact of projected economic performance on the trust fund that nominally funds Social Security.
“Excluding interest, surpluses for Social Security become deficits of $45 billion in 2011 and $547 billion over the 2012–2021 period,” the CBO reported.
This means that in order to pay benefits Social Security will need $45 billion more than it will collect in payroll taxes this year, and $547 billion more over the next decade.
The “interest” the CBO mentions is the interest that the federal government owes to the Social Security trust fund because the trust fund is legally obligated to take Treasury bonds – federal government debt – in exchange for the cash revenues raised by Social Security payroll taxes.
Basically, balancing Social Sececurity's books has become a shell-game:
However, the fund is not taking in enough money to pay out its obligations, nor will it for the foreseeable future, according to the CBO. Adding the interest owed by one government account – the general fund of the U.S. Treasury – to another – the Social Security trust fund – is merely an exercise in moving money from one part of the federal budget to another. It does not mean that there is extra money available to pay Social Security benefits.
Adding in the transfer payments makes Social Security and other federal entitlements appear to be fiscally sound.
“That surplus is bolstered by interest receipts and other sums transferred from elsewhere in the [federal] budget,” the CBO explained. “Such intragovernmental transfers … reallocate costs from one category of the budget to another but do not directly change the total deficit or the government’s borrowing needs.”
In other words, Social Security is not taking in enough money in taxes to pay current or future benefits and instead will have to rely, in theory, on future federal borrowing to meet its needs.
Republicans have been warning us about this for years. However, the fact is that Social Security has had, until now at least, a surplus, and Republicans haven't been able to gin up enough support for any sort of meaningful social security reform. Because every time that it has been brought up in any form Democrats would bring up the surplus and demagogue that Republicans want to throw granny under the bus or something.
Well, the day of reckoning for Social Security has finally arrived, and we need significant reform to save social security for our kids and grandkids. At the rate we're headed, it won't be there for them, when they get old enough to apply.
I don't know if privatizing it is the answer, but raising the retirement age, for those under 55, should be a given.