No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

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Social Security “Trust Fund” – 2010 in review

by @ 17:28 on January 12, 2011. Filed under Social Security crater.

I know, it’s been too long since I did a wrap-up of the Social Security “Trust Funds”. However, we have final numbers from the Social Security Office of the Chief Actuary through November, and preliminary numbers from the Treasury Department for December, so it’s high time to do this.

Both the Disability Insurance (DI) “Trust Fund” and the Old-Age and Survivors (OASI) “Trust Fund” lost money on a primary (cash) basis in 2010. The OASI fund had a $15.9 billion primary deficit on $569.0 billion in tax revenue and $585.0 billion in total expenses, while the DI fund had a $32.9 billion primary deficit on $94.7 billion in tax revenue and $127.7 billion in expenses (note; the numbers will appear to be off due to rounding). Of note, before the Social Security Trustees admitted that the OASI fund would run a primary deficit in the 2010 Trustees Report, they did not anticipate in their “intermediate” estimations that it would run a primary deficit this early in any Trustees Report from at least 1997 onwards.

Once one adds in the $108.2 billion in interest “earned” by the OASI fund and the $9.3 billion in interest “earned” by the DI fund, the OASI fund had an increase in theoretical value to $2,429.1 billion (or $92.3 billion), while the DI fund had a decrease in theoretical value to $179.9 billion (or $23.66 billion).

How does that compare to the “intermediate” estimations in the last two Trustees Reports? In 2009, the Trustees estimated that the OASI fund would see a primary surplus of $42.1 billion and a fund value increase of $152.7 billion (to $2,502.2 billion from an estimated $2,349.6 billion in 2009 and an actual $2,202.9 billion in 2008) on taxes of $623.3 billion, interest of $110.6 billion, and total expenses of $581.2 billion. In 2010, that estimate changed to a primary deficit of $8.9 billion and a fund value increase of $99.9 billion (to $2,436.7 billion from an actual $2,336.8 billion in 2009) on taxes of $577.3 billion, interest of $108.9 billion, and total expenses of $586.2 billion.

For the DI fund, the Trustees estimated in 2009 that it would see a primary deficit of $23.7 billion and a fund value decrease of $14.3 billion (to $191.7 billion from an estimated $206.0 billion in 2009 and an actual $215.8 billion in 2008) on taxes of $104.4 billion, interest of $9.5 billion, and total expenses of $128.1 billion. In 2010, that estimate changed to a primary deficit of $32.4 billion and a fund value decrese of $23.2 billion (to $180.3 billion from an actual $203.5 billion in 2009) on taxes of $96.0 billion, interest of $9.3 billion, and expenses of $128.4 billion.

While costs have gone up a bit faster than expected, the primary driver of the earlier/faster collapse of Social Security has been the collapse of tax revenues, specifically payroll taxes, in the second year of the full-on POR (Pelosi-Reid-Obama) Economy. Since the full calendar-year 2010 numbers are not available from the Social Security Office of the Chief Actuary yet, and it is nigh impossible to accurately estimate the breakdown between payroll taxes and taxes on benefits using the Treasury’s Monthly Treasury Statement, I’m using the Fiscal Year numbers (which run from October 1 of the prior year to September 30 of the current year) from Social Security. In FY2008, Social Security took in $671.8 billion in payroll taxes and $17.8 billion in taxes on benefits for a total tax take of $689.6 billion. In FY2009, while the total tax take of $689.0 billion was hardly changed, the mix of payroll taxes and taxes on benefits radically changed, with payroll taxes dropping to $668.2 billion and taxes on benefits increasing to $20.8 billion. In FY2010, a further increase in taxes on benefits to $22.8 billion was overwhelmed by a drop in payroll taxes to $646.6 billion, as total taxes dropped to $669.4 billion.

For those who weren’t paying attention, FY2008 and much of FY2009 was declared to be in a “recession” period, while the end of FY2009 and the entirety of FY2010 was declared to be in a “post-recession” period of “recovery”.

Revisions/extensions (6:07 pm 1/12/2011) - I read off the wrong columns in my spreadsheet for the 2010 DI fund primary deficit and 2010 DI total expenses. The figures have been corrected.

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