It’s a huge problem that our fiscally reckless government has been kicking down the road for decades. It’s the bankruptcy of social security, which everyone knew was going to happen, but government economists were saying would not happen until 2017. But now thanks to a deep recession, and probably also due to incorrect government calculations, the day has come 8 years early.
From the Associated Press article on Social Security, is the following:
Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that’s happened since the 1980s.
The deficits — $10 billion in 2010 and $9 billion in 2011 — won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.
Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement, but they didn’t expect the increase to be so large.
What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security.
But there is a huge flaw in the AP article, mainly in their statement that “Social Security has accumulated surpluses from previous years totaling $2.5 trillion”. This is only partly true, and its related to the demographic trend of the population. When social security was created there were far more workers paying into the system than pulling out of the system, resulting in decades of accumulated social security surpluses. Normally this would not be an issue, if social security were a true trust fund. But politicians have been raiding the surpluses nearly since social security’s inception, counting the surpluses in the same bucket as general income tax revenue, and every penny of the surpluses has already been spent. To that point, consider the following snapshot of the current total outstanding government debt of the United States, directly from the source, the United States Treasury website.
As of September 24, 2009, the total national debt of the United States is nearly 11.771 trillion dollars. Of that total, 7.46 trillion is held by the “public”, which represents the current total ownership of U.S. government bonds. The other portion of the national debt – some 4.31 trillion dollars – is the money borrowed stolen raided from retirement funds – social security retirement funds and other government worker retirement funds. I haven’t verified the $2.5 trillion figure from the AP article, but one thing is certain. Regardless of the true figure of social security “surpluses” built up over the last few decades, it is more than accounted for in the $4.3 trillion dollars already borrowed and spent. Social Security is now officially bankrupt.