CBO: Social Security Surplus? What Social Security Surplus?

Three years after the first Baby Boomer applied for Social Security, very disturbing news came out of a new semi-annual CBO report.

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.

Obama's New Economic Policy, Just Like His Old Policy: Spend, Spend, Spend

Obama’s new economic is just like his old economic policy. Wall Street Journal is reporting that, in his State of the Union, Obama wants to spend more instead of less, you know, because it worked so well the last time:

President Barack Obama will call for new government spending on infrastructure, education and research in his State of the Union address Tuesday, sharpening his response to Republicans in Congress who are demanding deep budget cuts, people familiar with the speech said.

Mr. Obama will argue that the U.S., even while trying to reduce its budget deficit, must make targeted investments to foster job growth and boost U.S. competitiveness in the world economy. The new spending could include initiatives aimed at building the renewable-energy sector—which received billions of dollars in stimulus funding—and rebuilding roads to improve transportation, people familiar with the matter said. Money to restructure the No Child Left Behind law's testing mandates and institute more competitive grants also could be included.

While proposing new spending, Mr. Obama also will lay out significant budget cuts elsewhere, people familiar with the plans say, though they will likely fall short of what Republican lawmakers have requested….

Republicans are casting the White House's pivot toward competitiveness as an excuse for bigger government and more spending. They say a surge in federal spending and a $1.3 trillion budget deficit are impeding job creation, and dramatic spending cuts are needed immediately.

In the House, Republicans are pushing to cut $100 billion from the annual budget as soon as this year. A coalition of House Republicans proposed Thursday cutting $2.5 trillion in spending over a decade, pushing nondefense discretionary spending down to 2006 levels for 10 years.

This is bad for Obama for two reasons:

1.)High deficits are part of the reason why we are in the economic trouble that we are in, today. Polls have consistently said that people want Washington to reduce the deficits and return to fiscal sanity.

2.)Unemployment rate has been stalled over the last two years, since the stimulus passed. People don’t believe that federal stimulative spending worked the first time, and they won’t like Obama doubling down with another massive stimulus package, when the only long term result will be more debt that our children and grandchildren will have to pay down the road.

Why would Obama want to do this? He needs to move to the center, if he has any shot at winning in 2012. This will be seen by the voters as a sign that Obama hasn’t learned his lesson from the failure of the last stimulus and that he is still the far-left ideologue that everyone on the right and Republicans have said that he is.

Maybe he’s just saying it to appease his base but has no intention to, actually, pass new spending because he knows that the Republican-led House will never agree to it. Even if he is just appeasing his base, it won’t look good to the American people. However, if his words don’t turn into any real action and legislation, what he says on Tuesday will be long forgotten by November 2012.

Republicans From Both Sides of Congress Planning to Introduce Balanced-Budget Amendments Soon

There has been a big push in the country looking for government to get their fiscal house in order. This push is being lead by the TEA Party, which had a huge impact in last year’s election and doesn’t seem to be going away anytime soon. The Republicans are seeking to take advantage of this and is looking to make spending cuts and balance the budget. In response, Senators Hatch (R-UT) and Cornyn (R-TX) have announced their intent to introduce a balanced-budget amendment that would force the federal government to make the changes necessary to stop borrowing money, start acting like adults, and keep their promise to the American people to curb the deficit spending:

Sens. Orrin Hatch (R-Utah) and John Cornyn (R-Texas) penned a letter to their Senate colleagues Tuesday pitching a constitutional balanced-budget amendment.

"The American people are demanding action from Washington to get our fiscal house in order once and for all," part of the letter read. "They don't want any more empty rhetoric or excuses."

Six Senate Republicans have already signed on as co-sponsors of the legislation — Sens. Saxby Chabliss (Ga.), Jim DeMint (S.C.), Olympia Snowe (Maine), John Ensign (Nev.), Michael Enzi (Wy.) and David Vitter (La.) — with more expected.

Along with Hatch, Snowe and Ensign are up for reelection in 2012. Hatch and Snowe are rumored Tea Party targets and Ensign could also face a Republican primary if he opts to seek another term.

Hatch and Cornyn are looking to roll out the balanced budget amendment effort the week the Senate returns.

Republicans in the House, meanwhile, are hopeful there is renewed momentum for a balanced-budget amendment introduced by Rep. Bob Goodlatte (R-Va.).

One of the measure's co-sponsors in the House is Rep. Jason Chaffetz (R-Utah), a rumored primary challenger to Hatch in 2012.

The House Republicans are preparing to introduce their own balanced budget amendment, too:

Some House Republicans are expressing renewed confidence that the push for a balanced-budget constitutional amendment will gain real steam in the 112th Congress — aided by the newly elected crop of budget-slashing GOP freshmen.

"We're very optimistic that we'll be able to get a vote on this at some point," said Rep. Bob Goodlatte (R-Va.), who has introduced two separate balanced-budget amendment measures...

"Right now I'm just in the process of signing up as many co-sponsors as I can," said Goodlatte, who noted that he hasn't yet spoken to the Republican leadership about moving the measure to the floor. "There's such great support for this both outside and within the Congress, that I anticipate we can move it."

Goodlatte has already signed on 137 co-sponsors, including one House Democrat — Rep. Jim Matheson (Utah) — and he said both Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) have supported his push for a balanced-budget amendment in the past.

Ready to aid Goodlatte's effort is the new class of Republican freshmen, many of whom have Tea Party activists looking over their shoulder ahead of 2012 as they cast their first votes and set priorities for the new Congress.

"You have a host of new Republican freshmen who were sent here with a mandate for a balanced budget," said Rep. Jason Chaffetz (R-Utah), one of the co-sponsors of Goodlatte's bill.

"When I was sent here, it was with a mandate for a balanced budget. So I think it's time we act on that."

This should be a no-brainer for the House. The Senate may be a bit trickier, but I highly doubt that it would fail there, either, especially since most of the Democrats that are up in 2012 are from historically red states. I don’t see the vulnerable Democrats risking their political futures voting against something that has such huge support from their constituents. Yeah, I know. Many of them did vote for ObamaCare, despite hearing from people in their town hall that they didn’t want it, but after the tsunami last election, I think (or hope) that they have learned their lesson. Obama should sign it, too, now that he is trying to triangulate into a repeat of what Bill Clinton did in the 90s.

This should be a rare kumbiya moment for DC, when they all come together in spirit of bipartisanship to vote for something that will actually benefit the country. However, that will all come to a quick end, when the debate starts on HOW they will balance the budget.