Reuters – Social Security to start cashing Uncle Sam’s IOUs:
For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.
Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
I’ve been blogging about Social Security since 2004. The outlooks keeps getting worse, not better. From a 2006 post:
- The projected point at which tax revenues will fall below program costs comes in 2017 — the same as the estimate in last year’s report.
- The projected point at which the Trust Funds will be exhausted comes in 2040 — one year earlier than the projection in last year’s report.
Just two years ago, those same projections were for 2018 and 2042.
The actual time of the first projection will apparently be 2010. Same crisis, but eight years earlier, and at a time when our economy is least able to cope with it. The outlook for Medicare is even worse. Together, those two programs account for about 45% of federal spending and that’s set to rise as the ratio of workers to retirees decreases.
RSS Posts Feed
As a 36 year, old I resigned myself to paying into SS and never seeing a dime back long ago. I consider it “taxes,” and we all know those don’t pay back.
At least I know people who are seeing a dribble out of that faucet today.
“Sounds like a good time to start tapping the nest egg.” Hmmm. Let’s do some simple math.
The Social Security Trust Fund holds $2.5 trillion in government bonds. At the current interest rate of 4.5%, it receives around $112 billion in interest income annually.
$112 billion in annual interest – $29 billion in payouts this year = + $83 billion INCREASE in the SS Trust Fund this year. So, no, they will not be tapping the principal this year. Associated Press can’t do arithmetic. What is our country coming to?
I realize you may be ideologically opposed to Social Security, which is fine, but that is no reason to outright lie about it.
Patricia, what does this statement from the article Les is commenting mean:
“For the budget year that ends in September, Social Security is projected to collect $677 billion in taxes and spend $706 billion on benefits and expenses.”
2nd question: whats 706 minus 677…um yeah, I thought so…
Have a happy day!
P.S. Les, you rock!
Rather, Commenting On…
I can read, I just cant type…
Patricia, the government that owes Social Security checks to millions of retirees every month is the same government that owes the interest on those bonds.
Try this experiment: loan yourself money out of your savings account at 4.5% and see if you turn a profit. Go ahead – get that sports car you’ve wanted, cruise the Mediterranean for a month, or treat yourself to some cosmetic surgery. If you’re right the interest you’re paying yourself will pay for your indulgences.
SPOILER ALERT!!!
It doesn’t work. If it did, you’d make more money by charging yourself 45% interest or even 450% interest or 4500% interest.
An entity can’t make money by paying itself interest.