No Runny Eggs

Ever since Ed Morrissey figured out that Social Security had started to run monthly deficits back in May, I’ve been on it on-and-off. There’s some bad news, and some REALLY bad news over the last couple months:

• The FY2009 primary (cash) surplus of the combined funds was $19.356 billion. While that is slightly higher than the summer 2009 Congressional Budget Office estimate thanks to slightly-higher-than-projected revenues, it does not represent any meaningful improvement in the ugly projections for the future. That also was the worst 12-month performance since January 1993-December 1993, and the worst fiscal-year performance since monthly records were kept starting in 1987.
• The $4.377 billion primary deficit for September 2009 and the $4.829 billion primary deficit for October 2009 were, excepting the anomalous August 1990 performance, the 4th- and 3rd-worst monthly performance (respectively), trailing only 2nd-worst December 2008 and worst-ever August 2009.
• For the third straight month, both halves of the Social Security “trust fund”, the Old-Age Insurance Fund and the Disability Insurance Fund, ran monthly primary deficits. That stretch has never happened before. Moreover, the prior two times that happened were in December 2008 and November 1993.
• But wait, it gets worse. That $4.8 billion primary deficit for October made the September 2008-October 2009 12-month primary surplus only $14.902 billion, the worst 12-month performance since monthly records were kept starting in 1987.

Do remember that there is not a single penny set aside in the federal budget to pay cash to either the interest or principal owed to the Social Security “trust fund”.

Revisions/extensions (1:51 pm 12/8/2009) – With a tip of the hat to Ed Morrissey, Chuck Blahous provides some more bad news:

• October marked the 6th straight month of red ink for Social Security, yet another record-bad performance.
• Before the CBO’s summer 2009 projection that the fiscal-year cash deficits will begin in 2010, neither the CBO nor the Social Security Trustees had predicted this situation to begin prior to 2012 since 1983.
• Since 1987, November has been a negative month 11 of the 22 years, and all 6 years following a negative October.

Chuck also explains why this situation is a bad thing far better than I can:

The rising debt that the Trust Fund holds can perhaps best be understood by conceptualizing it as being like a mortgage owed by the federal government, albeit an unusual kind of mortgage in which no cash payments are made by the borrower (the federal government) until the lender (Social Security) needs money. As long as Social Security’s own incoming tax revenue is sufficient to fund its benefit payments, the government is not required make any payments on the mortgage. When Social Security’s incoming tax revenue falls short, however, the government needs to produce extra cash and start paying that mortgage off. The mortgage debt will continue to grow, however, as long as the interest on the debt is greater than the monthly cash payments being made.

An individual analogy may help to make this clearer. If an individual homeowner took out a mortgage and then paid only $1770 on it over six months, when the mortgage’s interest costs alone over that period were $5930, then at the end of those six months that person would owe a further $4160 on the mortgage despite having made several payments. Paying down just a portion of the interest and none of the principal on a mortgage parallels what is happening here. The money obligated to the Social Security Trust Fund continues to rise as the fund accrues interest; but our cash-strapped government now has to deliver additional money to support benefit payments, and has had to do so for half a year.

Revisions/extensions (12:16 am 1/7/2010) – I don’t know how I missed the various typos confusing “billions” and “trillions”. Sorry about that.