The Associated Press finally noticed that the cash Social Security is taking in won’t cover its current obligations:
For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.
Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
I give the writer, Stephen Ohlemacher, credit for remembering that even the net interest paid on the bonds is, if it needs to be paid out in cash, something the Treasury Department doesn’t have so much as a penny to pay out. A few points of order:
- Those 12-month primary (or cash, if you prefer) deficits actually began in the February 2009-January 2010 period, when Social Security ran a $114 million primary deficit. An estimation using numbers from the Febraury 2010 Monthly Treasury Statement, which shows a $7.59 billion “gross” deficit (including the interest paid out on securities cashed in February) and a $7.71 billion primary deficit, bumps that 12-month primary deficit to $6.47 billion (between March 2009 and February 2010).
- That nearly-$29 billion cash deficit for FY2010, or $34 billion if one prefers to go with the Office of Budget and Management numbers, tells only half the story. The FY2010 budget counted on $21 billion in primary surpluses from the Social Security “Trust Funds” to spend on other items in the budget, which makes the total amount of unplanned borrowing on the open Treasury market $50 billion-$55 billion.
- Also from the OMB, for at least FY2010, the Old-Age and Survivors Insurance Fund is expected to run a primary deficit. It would join the Disability Fund, which began running primary deficits in 2005 and running gross deficits (i.e. shrinking its “Trust Fund” and entering the final stage of collapse) in 2009.
A quick note about the February 2010 numbers – while they are not the final numbers from Social Security’s Office of the Chief Actuary, they are rather reliable. They also represent, outside of the anomalous month of August 1990, when almost all of September 1990’s benefits were shown as paid out in August, the second-largest primary deficit (behind December 2009’s $11.307 billion primary deficit) and the largest gross deficit since monthly records have been kept in January 1987.
Even if we had taken Al Gore’s suggestion and put it the “Trust Funds” into a “lockbox”, it would, at best, only delay the inevitable. Between March 2001 and February 2010, the funds accumulated $869 billion in interest, and the primary growth was $607 billion, which together masked $1,475 billion in deficit spending over the last 9 years. Given the current problem is converting the “Trust Funds” to cash, and the problems both parties have had in saying no to spending, I don’t see how that “lockbox” would have helped any.
Revisions/extensions (3:19 pm 3/15/2010) – I really need to pay more attention to my feed reader over the weekend – Owen had it up yesterday.
R&E part 2 (7:00 pm 3/15/2010) – First, thanks to Ed for linking to me. Sorry about the problems that you may have experienced in loading this site; StatCounter had some issues.
Since Glenn Reynolds wanted to know what happened to the “lockbox”, I decided to take a somewhat-quick back-of-the-spreadsheet look at what would have happened had a “lockbox” been in existence the last 9 years. Do note that it would not have affected the primary deficits in the least, but it would have put at least some actual money into the “Trust Funds” for the future.