Washington Post: Recession Puts a Major Strain on Social Security Trust Fund

This is not an April Fool's story....

Considering the Social Security Trust Fund is nothing but a virtual box filled with IOU's I am not sure how we are creating any strain. I mean, nothing divided by nothing still works out to infinity. Anyhow, I used to be worried about things like this [Jul 28, 2008: US Budget Deficit to Half a Trillion] [Mar 26, 2008: Annual Spring Entitlement Warning Falls on Deaf Ears] but now that I see all our problems can be "made to disappear" by the magic hands of government, I don't even understand why the liberal elite press bothers with such dire warnings. We can also close down the fuddy duddy Congressional Budget Office... deficits don't matter (source: Cheney). We're fine... just fine. And dandy.

Via Washington Post

• 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.
• The trust fund has long taken in more in revenue from payroll taxes and other sources than it pays out in benefits. Last August, the CBO predicted that surplus would exceed $80 billion this year and next, then rise to around $90 billion before slowly evaporating by 2020. But the rapidly deteriorating economy -- particularly the loss of more than 4 million jobs -- has driven those numbers much lower much faster, with the surplus expected to hit $16 billion this year and only $3 billion next year, then vanish entirely by 2017. (must of been the same model used in our highly levered financial institutions which said housing prices could never fall nationally. Darn models - always the cause of all our issues)
• In addition to declining revenues, Lassiter said the system is likely to incur higher expenses due to big jumps in new retirement and disability claims. Both are expected to rise by at least 12 percent this year compared with 2008. "There are some people who are, in fact, delaying retirement" because the plunging stock market took a huge bite out of their retirement accounts, Lassiter said. (I knew there was a solution - work til you drop nation) [Sep 1, 2008: Laboring Longer is Growing Trend for Americans] "But the stronger trend is that people who are losing a job are looking for other sources of income. And if you're of retirement age, you're going to go ahead and file for Social Security benefits."
• 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.
• The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations. If it is no longer able to do so, it could be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors. (or we can borrow it from ourselves - Banana Republic style)
  
• And at some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.
• The new forecast is fueling calls for reform of the Social Security system from conservative analysts, who say it underscores the financial fragility of a system that provides a primary source of income for millions of Americans. "It suggests we better get working on Social Security and stop burying our heads in the sand," said Sen. Judd Gregg (N.H.), the senior Republican on the Senate Budget Committee. "The Social Security trust fund, though technically in balance, is going to put huge pressures on taxpayers very soon." (yes, I do believe I've heard politicians talk about this for the better part of my adult life.... "one of these years, we are going to attack this problem... just you wait")
• Many liberal analysts reject the notion that Social Security needs fixing, arguing that the system is projected to fully support payments to beneficiaries through 2041 -- so long as the Treasury repays its debts. But they agree that the news is not good for the federal budget.
• Though Obama has pledged to address the precarious financial situation of Social Security, the administration currently has no plans to do so. Under pressure from congressional Democrats who argued that Social Security should not be at the top of the new administration's agenda, the White House last month dropped a proposal to name a task force to reexamine the program. (Change I can believe in)