View Full Version : Will Obama bail-out current old folks?

Kein Haar
4th February 10, 03:24 PM

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 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.

4th February 10, 03:59 PM
Soylent Green is Grandma!!!

4th February 10, 08:39 PM
...and yet we keep electing these asstards to power.

We are fucked. There is no hope.

4th February 10, 10:33 PM
Soylent Green is Grandma!!!

Kinda gamey doncha think? Would making soap compounds be better?

4th February 10, 11:45 PM
...and yet we keep electing these asstards to power.

We are fucked. There is no hope.

Wait. Are you blaming the social security problem on Obama? Becuase that would be pretty stupid.

5th February 10, 12:15 AM
Kinda gamey doncha think? Would making soap compounds be better?Grammy always did want us washing behind our ears.

5th February 10, 12:26 AM
Wait. Are you blaming the social security problem on Obama? Becuase that would be pretty stupid.

I think he means the screwheads in office that vote with the same amount of zeal and insight as your average person taking a telephone survey.

5th February 10, 01:02 AM
I think screwheads generally is fair, since neither party is really willing to address the issue.

I don't totally agree with the comment about the interest being an accounting entry. If you are talking about the overall impact to the federal budget, it is true. If you are talking about social securities ability to be self supporting on payroll taxes, then it isn't. It seems like this context is more like the latter. But any way you slice it, social security will be going into the hole sometime in the next 15 years, and I don't see anyone really ready to address it.

5th February 10, 05:08 AM
The problem is y'all are too old. Hurry up and die already.

5th February 10, 11:33 AM
That's true, the avg age in the US has been steadily going up.

5th February 10, 12:30 PM
Wait. Are you blaming the social security problem on Obama? Becuase that would be pretty stupid.

Not at all. You cannot blame him for it. The blame goes a long way back.

But ultimately, it lies with the American voter who continues to elect both repugs and dummycrats to power who think that "hey, although the checking account is in the red, we STILL have money because we still have blank checks."

THAT is why we are fucked. How will we EVAR take care of a 14 trillion dollar debt?

Kein Haar
5th February 10, 12:43 PM
Whatever it takes to keep our old folks snow-birding.

Ya know...

Cuz they still gotta come up north for the grand kids.

5th February 10, 09:35 PM

I found this one. You want it for an avatar, or shall I?


Vieux Normand
6th February 10, 02:40 PM

Expect mo' nursy.