Social Security Is Running Out of Money
Entitlements: Social Security's chief actuary reports that the social safety net will run a deficit for 2010, nine years earlier than predicted. Put down that big gavel, Madam Speaker, we're about to hit the iceberg.
No sooner had House Speaker Nancy Pelosi, carrying the gavel used when Medicare was enacted, taken a victory lap around the Capitol Building after passage of the health care bill than did the chief actuary of the Social Security Administration report that his part of the social safety net had a big hole in it and would run a deficit for all of 2010.
Stephen C. Goss said that payments rose "unexpectedly" during the economic downturn as jobs disappeared and people feeling no hope and seeing little change opted to apply for benefits sooner than planned. Revenues also shrank due to fewer paychecks to tax.
Failure of the stimulus to keep unemployment under 8%, as the administration promised, has taken its toll on the entitlement. According to Goss, the administration expected a quicker, stronger recovery from the financial crisis. Officials foresaw an average unemployment rate of 8.2% in 2009 and 8.8% this year, though unemployment is hovering near 10%.
The 2010 shortfall is expected to be $29 billion, but it's still early. It could get bigger as the economy collapses under the weight of increased debt and deficits spurred on by the new taxes and economic disincentives of newly passed ObamaCare. Then, looming ahead, is the angel of economic death known as cap-and-trade.
Peter Orszag, now director of the Office of Management and Budget, predicted as director of the Congressional Budget Office in August 2008 that no one need worry about Social Security. We were told: "CBO projects that outlays will first exceed revenues in 2019 and that the Social Security trust funds will be exhausted in 2049." SSA's report last year put the first deficit year around 2017. Oops.
As baby boomers have started retiring and the economy has collapsed, that day of reckoning is here, nine years earlier than expected. That's why we were so suspicious of projections that health care reform would produce surpluses two decades hence. Such estimates of costs are always wrong and always low.
Private, insurance company-run annuity plans are legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem those promises. Social Security is not, and any insurance company CEO that ran a Ponzi scheme like Social Security would soon be incarcerated for fraud.
There is no trust fund, and there is no trust in a government that may soon have to redeem those IOUs it's been putting in a "lock box" while treating Social Security revenues as a slush fund for other wasteful government spending. There are no accounts with our names on them and our money, real money, in them.
We're using one credit card to pay the other, running up deficits and making new fraudulent promises we can't keep. We are borrowing so much from foreign countries like China that it may soon impact our foreign policy, if it hasn't already.
Instead of celebrating the passage of the mother of all entitlement programs, Speaker Pelosi et al. should start dealing with the imminent collapse of those we already have.