Daily Finance: Social Security Payouts To Top Revenue This Year
Thursday, March 25, 2010 at 11:05AM What a surprise, Social Security ran out of money years before they predicted it. Wonder if that has anything to do with the Obama economy and less tax revenue? Check out the detail from Daily Finance:
Economists have said for some time that the Social Security fund would run out of money sometime between 2035 and 2040. At that point, it won't be able to provide older Americans any safety net at all. This year the fund will take its first step toward the grave as payouts exceed collections, according to the Congressional Budget Office (CBO). The red ink will be $29 billion. That's against total payouts of $7.08 trillion.
Chief actuary of the Social Security Administration Stephen C. Goss explained to The New York Times: "Payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program's revenue has fallen sharply, because there are fewer paychecks to tax."
The reasons that the problem will worsen are clear. The American population is aging, unemployment is near 10%, and many economists don't see it dropping below 8% until the end of next year. After that, creating new jobs may be so difficult that persistent high unemployment could last for years. The base for the Social Security tax will simply have fallen too far for the fund to make up the ground to refill its coffers.
Years of Austerity Ahead?
It's much more difficult to forecast what the federal government will do about the problem. The national deficit will remain high for a decade, according to both White House and CBO estimates. The national debt will become so large that interest on it alone will reach $700 billion a year by 2019, so the Treasury won't be a realistic source for money to replenish the Social Security fund.
A number of economists, including prominent Harvard University Professor Kenneth Rogoff, have predicted years of austerity for Americans as they face the need to pay higher taxes to offset budget deficits, combined with lost services that the government can no longer provide.
While no one is suggesting that Social Security will go away altogether, its payments may need to drop for the fund to survive. Americans will face less generous benefits for their retirement years, but that process has already begun in privately funded retirement plans because many Americans who put aside money for their golden years saw much of that cash wiped out by the stock market crash. Adding to the problem, many corporate and government pension programs are underfunded, and the money to rebuild them may not be available as payouts to retirees rise while less money comes in from corporate profits or from taxes at cities and states.
The end game for Social Security may be that future American retirees won't get that social safety net they had counted on, at least compared to what was available in the past.
Reader Comments (5)
This is really pathetic. I'm sure Obama will do what needs to be done to handle this problem.
Yeah, right.
Gee, I thought privatizing Social Security to rein in unfunded government liabilities was a bad idea. Matt Lauer, Katie Couric, Paul Krugman, Harry Reid, et al said we couldn't afford the switch and people's retirements would be at risk in the stock market.
So now we find out that Social Security, which is all the retirement income that a large percentage of Americans have, is not going to last long. No worries, I'm sure our fine leaders will make the tough decisons to do what needs to be done before it gets too bad. They never put off challenging decisions when it comes to looking out for their constituents.
Not only that but Obama's economic plan will start to hit full speed soon and we'll probably grow ourselves out of the problem. Those green jobs are coming soon to save us, I just know it. What's even better, Nancy Pelosi said the health care bill will spur economic growth and Henry Waxman said cap and trade will drive positive economic activity.
The country's in the best of hands.
Well said Herb. Very well said.
And just think, everyone said Obama was stupid.....
I'm still looking for that man who said he was going to bring America and the world
together, not tear it all to hell with the most ethical and transparent administration ever.
Mr. President, all America has come to one conclusion, you are a empty suit and cheap
no good one at that..You find yourself in the highest and most cherished office in the
world and have managed to turn it into a corrupt and infested graveyard of bullies and
thugs for your own glory.........