Here’s another casualty of the economic downturn: Social Security.
The Social Security program operates on a pay-as-you-go basis. Money coming in from workers is neither saved nor invested, but rather pays benefits today for current retirees.
Government officials had predicted that Social Security would take in more than it paid out until 2016, whereupon it would start drawing down surpluses from the Social Security trust fund.
But the severe recession has hurt government revenues, which means the future is here. The Congressional Budget Office now says that Social Security is already short: $10 billion this fiscal year and $9 billion next year.
No worries—Social Security can just dip into that $2.5 trillion Social Security trust fund, right? Maybe, if the trust fund had any money. But the government has been borrowing it over the years to pay for other, unrelated spending because government IOUs to the Social Security trust fund didn’t show up in the deficit figures.
Of course, seniors need not be worried—at least for now. Congress will borrow or print the money. Indeed, some of our elected officials get a little steamed if someone even hints at the possibility that Social Security might not meet its obligations.
During the Social Security reform debate during the Bush years, several Democrats sent a letter to the president noting that the federal government had never welched on its obligations, and that it was irresponsible to hint that it might welch on its Social Security obligations.
Of course, there is a first time for everything. And the Obama administration is setting a bunch of what we might call “budget firsts.” Record high spending, record high deficits, massive government incursions into the private sector—all of which would have seemed impossible a few years ago.
But the financial train wreck facing Social Security is not a discussion politicians want to have right now. The last thing they want to do when trying to push through a massive and costly new entitlement program is to highlight the fact that the entitlements we already have are broke.
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Today’s TaxByte was written by IPI resident scholar, Merrill Matthews.