Social Security to See Payout Exceed Pay-In

[alp227]

Source: Mary Williams Walsh, The New York Times

The bursting of the real estate bubble and the ensuing recession have hammered jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.

Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.

The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because millions of jobs have disappeared, leaving fewer paychecks to tax.

Read more: http://www.nytimes.com/2010/03/25/business/economy/25social.html

[Demeter]

1. So?

This was the way it was designed to be. No big panic--except for the rich, who will be seeing significant tax increases sooner rather than later to pay back the money they blew on war and corporate welfare.

[Warpy]

3. The huge panic will be in Congress, who won't be able to rob overpayments

that were running about 40% before the economy tanked and people got thrown out of work.

The Democrats need to take this opportunity to get Social Security OUT of the General Fund and make it back in to the pay as you go insurance it was always meant to be. These experiments with putting it into the General Fund have been a dismal failure.

Once Congress won't be able to rob it any more, they'll have to address the issues of unfair taxation and overspending on the military.

We have to do all these things to save this country. Getting Social Security back on track might be a good first step in that direction.

[golfguru]

7. +100

[Bitwit1234]

11. If Reagan had started stealing money from social security

to balance the budget when he gave those humongous tax cuts to the rich this wouldn't have happened.

[ShockediSay]

17. Bush the same - the right wing agenda is to starve middle class

entitlements to death.

The solution? Tax the wealth this nation has enabled for the Filthy Wealthy.

[DGG]

18. A bit of history...

Reagan and the two Bushes were the only two presidents since World War II to increase the ratio of national debt to gross domestic product during their terms, but in Reagan's case this was probably more the result of spending increases (especially military) and (in the early 1980s) economy-deadening Federal Reserve policies. The top income tax rate on Reagan was 50% for his first six years and 38.5% for the last two, versus 28-31% under Bush 41 and 39.6% under Clinton.

And Reagan didn't do anything different to the Trust Fund. It has always been invested in US Treasury Bonds, and Social Security taxes have been included in deficit calculations since 1969 (and this was not done to hide a deficit -- despite being at the height of the Vietnam War, the war on poverty, and the Apollo program, there was a surplus that fiscal year, the last before Clinton's).

Debt service on those bonds in the Trust Fund is paid out of general revenues derived mainly from progressive income taxes and corporate income tax rather than a regressive tax on workers like FICA.

If you don't think the Trust Fund should be invested in Treasury bonds and hence used to finance the government -- including research, education, infrastructure, and other things that increase the size of the economy and make it easier to service the debt -- then what should be done with the money? Turn it over to Wall Street speculators? Invest it in foreign countries to their benefit rather than ours?

For reference:
History of FICA tax rates: http://www.ssa.gov/OACT/ProgData/taxRates.html
Response to some "Internet myths": http://www.ssa.gov/history/InternetMyths.html

[JackRiddler]

24. Good review but missing an essential point...

The trust fund at its current mammoth size is a byproduct of the increase in Social Security taxes under Reagan, when taxes on the rich were cut. Thus about half of the huge regular budget deficits were from that time on financed by Social Security taxes, and effectively hidden from view (since the use of SS funds invested in T-bills for the regular budget wasn't accounted as deficit spending).

In effect, this was a means of shifting much of the tax burden from the rich to the working class.

In principle, there's nothing wrong with keeping the social security surplus in T-bills.

The problem is in the designs of the currently dominant neoliberal policy consensus. They've had an eye on that surplus for some time now, and hope to see it "invested" in "the market." Thus the artificial declaration of a Social Security crisis - when at the same time it's the regular budget that is in trillion dollar deficits and "the market" that just went bankrupt due to ponzi schemes and other scams.

The problem is in the widespread attitude displayed by Bush when he called the Social Security trust fund T-bills "meaningless IOUs." Do you really think the federal government, or the community of those making policy for it, really want to pay back the $2.5 trillion owed to Social Security, when they could instead pulverize that on wars and financial scams?

These machinations have to be called out as class war, but instead you see even Obama and many of the Democrats bemoaning the supposed unaffordability of "entitlements" when at the same time trillions for the bankers is okay. Who's side are they going to be on (once again)?

And then let's see what the Simpson-Bowles "budget commission" full of old apparatchiks reports as "the best medicine" come December 1, 2010!

Finally, I must reject your view that the "Trust Fund... invested in Treasury bonds" is "used to finance the government -- including research, education, infrastructure, and other things that increase the size of the economy and make it easier to service the debt."

Right now, more than one-half of the regular budget goes to "defense" (which should include most of Energy and NASA) and the cost of past wars (debt service and veterans benefits, among other things - and of course I support veterans' benefits, so don't misread me).

To this you must add the cost of the current wars, for a total of about 1.5 trillion in the military-industrial sinkholes. If it's research, then mainly for killing machines.

The REST - all the good things you list - has been declared fair game for cuts. Just like the "entitlements" that have until now always paid for themselves. Again, after the election, you get to hear the pronouncement from the Apparatchiks Roundtable, which will provide Obama with the "bipartisan" justifications for whatever they recommend. I'll bet you right now it won't involve cutting the precious Pentagon budget, or foregoing the next round of "bailouts" when the next inevitable bankster crash comes. It will be all about "entitlements" and "welfare."

So yeah, long as the overwhelming majority of the non-"entitlement" side of the federal budget goes for war and the banksters, we should all have a problem with using the Social Security fund to finance these essentially self-destructive ventures that not only have zero economic benefit but are speeding up the bankruptcy of the country as a whole.

[cornermouse]

2. On to social security.

By the way, do we finish the public school system first or can we do them simultaneously?

[Mari333]

4. end both of those illegal occupations in Iraq and Afghanistan

and then complain.

in the meantime,dont fuck with SS.

[onehandle]

5. Return the top tax rate to FDR levels.

Problem solved.

[nebenaube]

8. and global outsourcing of jobs has no effect on this, right?

Is that what you are saying?

[onehandle]

16. No, that's clearly stated in the article.

I just propose taxing those who outsource as they should be taxed.

[joeglow3]

26. Do you also implement the FDR tax deductions?

Sorry, but as a tax CPA I hate it when people take this out of context. Taxes you pay consist of 2 key parts - taxable income and the tax rate. Tax rates were MUCH higher then, but you could also deduct just about anything. Thus, while the percentage was much higher, taxable income was much lower. No one paid the top tax rates on taxable income calculated as it is today. In fact, it was so bad that this is why they implemented the AMT - so many people were literally paying ZERO in taxes, even with a 90% top rate.

[CLANG]

6. Too bad we didn't get Al and his lockbox.

[groundloop]

9. Get rid of the ceiling on Social Security tax

There's no reason top earners can't pay the same effective rate into social security as the rest of us.

[virgogal]

10. Ditto,and then some.

[MindandSoul]

15. I agree. . .but with one of those "donut hole"

Keep the rate exactly as it is today for all earnings below $250,000 a year. . .
And once they reach that level. . .take out social security tax at an even higher rate every time they reach another $250,000

For exemple:
Everyone pays SS tax for the first (what is it???) $110,000

Then. . .no more SS tax until they reach $250,000

Then from $250,000 to $500,000 Raise the rate of witholding of SS to 10%

Then from $500,000 to $1 million Raise the rate to 15%

And above $1 million. . .raise the rate to 17.5 %. . .with no limit!

Hey. . .that would be fair. . .people making millions would still pay the lower rate until they reach the $250,000 mark. . .
Which some of them would reach in on the 10th of January!!!

By the way. . .do you realize that all those million dollars bonuses NEVER social security taxes???? Maybe that's where it should begin!

[RedSpartan]

25. I've never heard that suggestion before.

I think it's excellent. Bravo.

[bemildred]

12. So it WAS intended to pay it all back out someday, wasn't it? nt

[jaysunb]

13. SS has plenty of money

they just need to call in the loan from it's largest debtor: US Treasury. :evilfrown:

[L0oniX]

14. I'd like to know how much they have robbed from SS.

Obviously there would be enough money if they had not ripped SS off. I wonder how much money could have been made from the ripped off amount had it been placed in government bonds. Fucking pyramid scheming government thieves!

[Xolodno]

19. Econimist have been warning about this situation for over...

..a decade now.

I remember sitting in class where my Econ Prof jokingly said "Well...I know I've got mine (SS)"

As population growth slows and life expectancy increases, more funds will be drawn from SS with less people putting in funds.

Reagan's fix was to increase the retirement age and increase the amount to be contributed (if I remember correctly...could be wrong)...but this was just a band-aid. GWB wanted people to invest it into the market...good thing he didn't succeed on that. But I'll give him credit for recognizing this was going to be a problem.

Al Gore's idea of a "lock box" was nice...but, would have only bought time, not a solution.

They've been putting this problem off for a long time hoping some other politician was willing to get the boot out of office for messing with SS.

They could always do another quick fix, raise the retirement age, increase the amount to put in and decrease some benefits...but I don't think too many will go for this idea this time around...particularly the decrease in benefits when everyone saw their 401k's tank.

[mbperrin]

22. If nothing at all changes, the system will pay benefits at full value

until 2037, when benefits would have to be reduced by a quarter.

The first baby boomers would be 91 that year, and the youngest, 73. Life expectancy in the US? 77. Not really a problem, but we could raise the ceiling on which taxes are paid and solve it forever.

Shame on your economics professor. He must have been swilling at the fount of Ayn Rand.

[Xolodno]

23. His specialty....

..was Environmental Economics, and he donated to Greenpeace, Friends of Mono Lake, etc. This was in the mid 1990's and he was retiring in a year.

Remember, his statement was in jest. He was pointing out that it would be a problem our generation would have to deal with.

[Romulox]

20. Hey--our children can "pay us back" while enjoying significantly lower standards of living

and not doing a damn thing to shore up their OWN retirement (401k, of course!)

What problem?

[AngryAmish]

21. I'm sure this will end well