• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Social Security in the Red

    In February, we reported that in 2010, Social Security would start running deficits in 2010.  Well, Social Security deficits have officially arrived, as analyst Michael Barone lays out in the Washington Examiner:

    Social Security tax receipts for the first half of 2010: $346.9 billion; Social Security benefits payments for the same period: $347.3 billion. Before this year, projections have always been that Social Security wouldn’t cross that line into negative cash flow for five years or so. Now it’s a reality. Congress has been spending Social Security’s positive cash flow for years. Now there’s no positive cash flow to spend.

    These deficits are a result of the current economic climate.  Federal revenues have continued to dwindle as job creation stagnates, reducing tax collection along with it.  Unemployment has also forced many Americans into early retirement, adding to the ranks of those dependent on Social Security.

    Whether the current Social Security deficits are temporary or not, they are projected to become permanent in 2016.  From then on, the Social Security Trust Fund is expected to pay out benefits until 2037.  But as Michael Tanner of the Cato Institute explains, even that isn’t reassuring, since “the Trust Fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to pay back those IOUs.”  In other words, the Trust Fund doesn’t actually have any real money in it.

    Social Security benefits will not be reduced in response to today’s growing deficits.  Instead, taxpayers will pay the difference, via the Treasury, to keep benefits checks from bouncing.

    The early arrival of the need for a Social Security bailout should serve as a severe reminder to the Obama Administration that entitlement reform is needed now to ensure a sustainable economic future for the country.  Heritage expert David C. John writes, “Social Security’s future has arrived early. After years of talk about how well-funded the program is, the reality is that never-ending deficits will eat up money that could be used for other programs or tax cuts. Despite reassuring words that these deficits are temporary, the reality is much worse. These deficits are likely to be permanent, and the only way out of this cash crunch is to fix the program.”

    Posted in Economics [slideshow_deploy]

    19 Responses to Social Security in the Red

    1. Disinterested Specta says:

      Quit licking your chops. You're never going to get your hands on any of that "money that could be used for other programs or tax cuts." We greedy geezers will see to it that we get all we've got coming to us.

    2. Bobbie Jo says:

      While government has been and continues to give it away as they see fit.

    3. LALaw, Los Angeles says:

      And let me guess – Heritage does not favor raising the income cap at which people stop paying FICA, the ONLY way to get a bipartisan deal (which is the only way Republicans could ever even touch it – see 2005). And let me also guess – Heritage favors privatizing social security as a way to eventually make it voluntary, then to phase it out – too bad privatizing costs more than continuing the same program because someone has to fund the current retirees. Oh yeah, you don't talk about reforming "social security" and "medicare" because it's too unpopular with votes – you go with "entitlements".

    4. West Texan says:

      Houston, we have a problem. Chinese Yuan is overloading the U.S. Treasury. "She's going to blow captain!"

    5. Pete Stroempl of For says:

      The Federal Government has squandered this fund. This is strong evidence that these folks are not capable of Managing anything. It is time to get these folks out of the Management business; and into their areas of expertise… police and military; and those things specified in the Constitution.

    6. Dennis Social Circle says:

      Nevr fear, master obama has the answers to all our problems. Ask him he will tell you. What socialism and communism does not do for us, radical muslims will.

    7. Norm Klevens says:

      Yes and George W Bush was lying when he warned of this a couple of years ago. He was demonized by his own political party, the democrats and their willing accomplices in the press. Obamacare has been set up to solve the problem by dumping senior citizens, thanks to Tom Daschle. Obama told us to go take an aspirin.

    8. Sanford Olnhausen - says:

      Social Security is now officially a "ponzi scheme"!

    9. Drew Page, IL says:

      It puzzels me why so many seem to take a perverse joy in broadcasting the fact that Social Security is underfunded and is going broke. Of course it’s going broke. Almost from its beginning, our government has continued to take (i.e. steal) money from the Social Security ‘Trust’ Fund and leave behind IOUs for posterity to payoff. All this money was supposed to be kept in a “lock box” and be used only for thethe purpose of paying out S.S. benefits.

      Maybe all of our space exploration and trips to the moon were paid for by S.S. Maybe the Korean War, the Vietnam War and the wars in Iraq were paid for with these funds. God only knows where it went, but we all know that it’s gone.

    10. TJS, FL says:

      Socialist security is a Ponzi scheme. Not one penny is invested, ever. Our lying government pretends the bonds are worth something, but they are not. When times were good, government stole one quarter of the incoming money and spent it on general government expenses. Another one quarter of the money goes to people who don't need any government help.

      The amount taken in, 12.5% of payrolls, is enough to make every lifelong worker into a multimillionaire. Democrats would rather we be dependent on a sinking socialist boat than we all be millionaires at retirement.

    11. coberly oregon says:

      I can't believe you people don't understand that the purpose of a trust fund is to lay up money you can call on in a time of need. Calling on that money is not being "in the red."

      The money is "lent" to the government, just the way you lend money to the government if you buy a savings bond. Of course it "has been spent." That's why the government borrowed it.

      Now the need to pay it back.

      Since I don't believe you are too stupid to understand this, I have to conclude you believe your readers are too stupid to understand it.

      Social Security has contributed nothing to "the deficit" and never will. If the next generation live longer than the last, as predicted, it can pay for it's own increased benefits by increasing the payroll tax at the rate of twenty cents per week per year. This result has been scored by the chief actuary's office of the social security administration. I'd be glad to send you a pdf that will help you see how it was arrived at.

    12. Randy Powell says:

      How does it make sense to blame Social Security for lending money to the Treasury? Do we blame China for lending us their money?

      Asking the Treasury to pay back the money lent to it by Social Security is the least we could expect, actually if I was in charge of SSA I would demand a higher interest rate on the funds borrowed because of all the conservitive think tanks that threaten the seniors that the trust fund will never be repaid!

    13. Mike, Wichita Falls says:

      A government trust fund is a contradiction in terms. Hasn't the trust been violated enough? Whether it's SS, Medicare, or Highway, it has been raided. Various provisions of Obamacare mandate benefits to be collected for four years before benefits are paid out; bet on it being raided. There is even talk of a BP oil spill damage fund; bet on it being overtaken and raided.

      Whatever happened to the concept of setting money aside in your own private account for your own rainy day medical or other emergency as well as retirement? Is that too insensitive? We forgo many luxuries in striving to build up our trust fund because we do not trust these government-managed ones will be there at our time of need.

      Uncle Sam makes Bernie Madoff look like a piker, and he's serving a 150-year prison sentence for what he did.

    14. Norma in Nebraska says:

      "This result has been scored by the chief actuary’s office of the social security administration." One can only assume that any number the chief actuary's office came up was based on a set of perimeters set up by some obscure liberal just like they were for the health care bill . . . or the Stimulus package . . . . or cap and trade. So it is SOOOOO reassuring to know that we can really count on anything that is based on supposition to take care of our seniors in their "twilight years"!!!

      Get real . . . if the money is gone and all that remains is IOUs from the government the only way to pay it back is by borrowing from China or some other nation foolish enough to loan us the money! Take a look at the debt clock . . . do you really think we have any money? We might as well use those IOUs for toilet wipe because that is just about what they are worth . . . hope they got their paper recipe from Charmin because I don't like the idea of my behind being chapped and broke!!!!

    15. Kevin Habib says:

      Those claiming Social Security is a major issue for the future show themselves to be laughable when it comes to eocnomic issues. The fix for social security is a drop in the bucket compared to real issues our country faces in terms of mid and long term economy.

      Not surprisingly, the economic downturn has shrunk the Social Security surplus. Recessions take a toll on the entire federal budget, and Social Security is no exception. Payroll taxes are very sensitive to macroeconomic conditions in the short run, while Social Security benefits are less so. The Social Security surplus also slumped during the recessions of 1981-1982, 1990-1991, and 2001. The recession that began in December 2007, the deepest since the Depression, has weakened the Social Security outlook more than those previous downturns, but it has not erased the trust funds’ surplus or endangered the program’s ability to pay currently promised benefits in the near term.

      The fact that Social Security can pay full benefits for nearly another three decades does not mean that policymakers should wait that long to address program solvency. They would do far better to address the challenge sooner rather than later, by carefully crafting a package that spreads sacrifices fairly across generations and income groups and allows those affected ample notice so that they can adjust their financial plans accordingly.

      But sounding alarms over Social Security is ridiculous. Social Security’s imbalance is manageable in size and poses a far less thorny challenge than the explosive growth in health-care costs, which fortuantely, we have a President and Congress with the will to ake on the health care challenges that so many have been scared to work on.

    16. Ron in Poland says:

      House Republican Leader John Boehner said in an interview with the Pittsburgh Tribune-Review out today that he would back raising the Social Security retirement age to 70 for those who will not retire for another 20 years.

      Why don't they make the retirement age 90 or better yet 100. If they need to make social security fiscally sound, they should return it to a 100% retirement program – its original intent. Fund nothing else out of social security. Stop those senseless costly wars and fund social security. Everything funded by the federal should be cut drastically before one penny is cut from social security and medicare.

    17. Pingback: ObamaCare - Son of Social Security

    18. dlturner flowood, MS says:

      And George Bush was excoriated for attempting to make SS have value.

    19. adams fort wayne says:

      "I can’t believe you people don’t understand that the purpose of a trust fund is to lay up money you can call on in a time of need. Calling on that money is not being “in the red.”

      The money is “lent” to the government, just the way you lend money to the government if you buy a savings bond. Of course it “has been spent.” That’s why the government borrowed it.

      Now the need to pay it back.

      Since I don’t believe you are too stupid to understand this, I have to conclude you believe your readers are too stupid to understand it.

      Social Security has contributed nothing to “the deficit” and never will. If the next generation live longer than the last, as predicted, it can pay for it’s own increased benefits by increasing the payroll tax at the rate of twenty cents per week per year. This result has been scored by the chief actuary’s office of the social security administration. I’d be glad to send you a pdf that will help you see how it was arrived at."

      In response to your interpretation of the purpose and structure of FICA, I cannot speak for Heritage, but I will tell you that a MAJORITY of Americans are not stupid just because they have a philosophical difference of opinion then you.

      The problem I see with those who don't want the TRUTH is that this is a more of a philosophical argument….it is ridiculous to believe that this "lend and spend" mentality that you espouse to be ok, is ok. It is not OK, the system is literally and figuratively BROKE….It was never intended to be in place this far into our history….This is another example of failed Keysian policy that NEVER works.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×