CBO: Social Security Revenues Are Now In Permanent Deficit

Or, put another way, the system is broke and must now begin calling in roughly $2.5 trillion worth of IOU’s the Treasury Department has put into the Social Security trust fund.

Which, in turn, means that our federal government is going to have to borrow more money, adding more to the national debt, in order to keep Social Security afloat.

Today’s CBO report has some bad news about the deficit. But CBO has some really, really bad news about Social Security: It’s officially broke.

The CBO’s revenue/expenditure estimates now place the program in permanent deficit. There had been some hope that payroll taxes would recover sufficiently post-recession to put the program back into the black (the theoretical black) for at least a few more years, putting off the day of reckoning for an election cycle or more. No more: The new CBO estimates put Social Security in the red for as far as the eye can see.

But there’s a bit of camouflage attached: If you include the “interest” that the federal government “owes” the fictitious Social Security “trust fund,” then the program is in the black. Which is to say, if you think that borrowing another $1 trillion from the bond market to shift money from one government account to another government account makes the nation $1 trillion richer, then everything’s hunky-dory.

For those of you who don’t quite understand how the government has been playing a shell game with social security funds for decades now (and who could blame you if you don’t?), what’s happened is this: Social Security had a trust fund into which excess revenues from payroll taxes were placed. Unfortunately, the federal government has been borrowing from that fund to finance other spending.

To borrow, the Treasury Department issues a bond to the Social Security Trust Fund promising to pay back the borrowed money with interest.

For a long time, thanks to the baby boomers, Social Security was able to collect more in revenues than it paid out in benefits. Thus there was no need to dip into the trust fund. Indeed, it meant there was more in the trust fund for the federal government to spend elsewhere.

But now those revenue surpluses are gone. In order to continue paying benefits Social Security must use its trust fund. Only the trust fund is gone, meaning that now there is no choice but to borrow to continue payments through this entitlement program.

This is scary stuff, but keep in mind that even as this is happening the President has touted his payroll tax cuts which are cutting into Social Security severely by reducing the amount of money Americans are paying into the program.

The long and short of it is that we need major Social Security reform, and we need it now.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • SigFan

    All good Ponzi schemes crash eventually. SS is the biggest of them all, so the crash is going to be big, and loud, and horrific. Brought to you courtesy of the American Mafia, otherwise known as the Federal Government.

    • robert108

      B-but the drama queen just told us that Tip O’Neill saved Social Security!

  • $8194357

    The camels nose under the tent in the name of a private savings account to be held in trust, voluntary, never spendable by congress, and tax free….What the heck happened? Ponzi me that one…Check the history and see who controled the congress or the white house when all of the changes over time were made…If you come up with leftists large and in charge democrats go to the head of the class…..In the Name of savings, run the future unfunded debt liablilty up to 100 trillion unfunded and buy your selfs some voting blocks with other peoples savings…..What a scam…

  • Bat One

    It should be remembered that five years ago, the Bush administration tried to convene a conference on Social Security and Medicare with leaders of both parties in Congress. Congressional Democrats refused the invitation, although there were no preconditions attached to the meeting, citing President Bush’s prior suggestions that for those who wished to do so, a portion of their SS withholding could be put in a private managed account.

    Of course, being arithmetically challenged Democrats (forgive the redundancy) they ignored the fact that there is no 30 year period since the inception of Social Security during which the return on an S&P index hasn’t significantly outperformed the return on money “invested” in Social Security.

    So thanks to Democrats, we are five years further into Social Security solvency crisis.

    • $8194357

      The third rail of politics? Seems to ring a bell Bat. Create dependents from farmers to seniors to public unions to minorities to ect. ect. ect..47 percent in the no tax or on the public dole for the other 53 % to support? I asked Byron Kent and Earl about this over a year ago. No repley of course…Although several of them did decide to jump out.

  • Neiman

    To paraphrase: A trillion here, a trillion there and pretty soon you are talking about real money.

    • Bat One

      The stentorian echo of Everett McKinley Dirksen, I believe. Nice quote.

  • http://sayanythingblog.com Mountainmouth

    Ask algore where the key to the “lock box” was hidden.

    Hard to believe a Dem entitlement program would cause financial problems.
    Thank goodness Obamacare will actually reduce the deficit – Dooohhhh!!!

    • $8194357

      Marxist deconstruction. It is by design that in the name of something good or well intentioned you later use it for tearing down thru debt or division. To create the crisis so the western Jeudeo/Christian culture falls from within….Read up on it…This has been the intended consequences for the last 100 years thanks to Great marxist thinkers

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