Coming For The Social Security Checks, Again
How interesting that the Washington Post, in the midst of this Great Recession, decides that the biggest fallout of the loss of millions of jobs is not the health and welfare of those unemployed themselves, but the concurrent depletion of the Social Security Trust Fund, with a not-so-subtle inference that benefits need to be cut.
The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.
With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund's annual surplus is forecast to all but vanish next year -- nearly a decade ahead of schedule -- and deprive the government of billions of dollars it had been counting on to help balance the nation's books.
While the new numbers will not affect payments to current Social Security recipients, experts say, the disappearing surplus could have considerable implications for the government's already grim financial situation.
Since the WaPo doesn't make it clear, Dean Baker can explain what they're talking about. Payroll tax revenue may be coming into balance with current payouts from the system during this recessionary period, but the article conveniently sidesteps the $2.5 trillion dollar surplus the system has generated over the years.
While those seeking to cut Social Security benefits are highlighting these new projections, in reality they have very little significance for the program. Under the law, Social Security benefits are paid out of its trust fund. This trust fund has accumulated a surplus of almost $2.5 trillion. The lower projected surpluses for the next few years will have some impact (if the projections prove correct) on the date at which the fund is projected to be depleted, but the projected depletion date will almost certainly be beyond 2040, even after CBO adjusts its numbers for the downturn.
Remarkably, this piece alludes to plans to cut benefits without ever noting that older workers and retirees have just lost close to $15 trillion in wealth due to the collapse of the housing bubble and the plunge in the stock market Presumably this would be an important factor in any debate over reducing benefits.
The issue here is not the successful administration of Social Security, but the historic maladministration of the economy and the rest of the budget by the "deficits don't matter" crowd. Of course, to them deficits only matter with respect to Social Security, not the magic doesn't-cost-any-money military budget.
By the way, I don't know why this wasn't heavily pushed all that much by the White House, but as part of the federal stimulus, beneficiaries of Social Security will receive a one-time $250 payment, beginning in May. This puts money into the hands of those who need it, for the most part, and goes a little way to strengthening the social safety net and helping out those who are collateral damage to this economic storm. We need more of it, not the Village nonsense about how benefits have to be cut based on misleading fiscal projections.