I have these stories over the last few years on the topic of SS:
It turns out I was right. Social Security turned a tremendous corner in 2009. That was the last year of cash surpluses. We will never see them again. When I first made this observation I got rained on hard. Liar, charlatan, bond vigilante, “chicken-little” and a few other things were tossed at me. This week the Congressional Budget office took me a bit by surprise and proved what I have been saying all along.
Consider this slide from the CBO. This is their estimate of the surplus at SS all the way out to 2021.
The CBO’s definition of “surplus” includes script interest from Treasury. This script is not a cash item. All other flows into and out of SS are actual cash receipts and disbursements. Therefore the CBO surplus minus non-cash interest is equal to net cash flow. The Social Security Trust Fund projects this interest surplus in their report to congress. Of all of the variables, the interest income is the easiest to forecast. The SSTF estimate for script interest minus CBO surplus produces these results:
That’s right. SS will run a cash deficit forever. They will run up a trillion dollar (+) cash deficit over the next decade. All of it must be borrowed in the public market. This big nut must be added to the trillion dollar deficits that have to be financed. Even worse is the trend. It starts off slow but then explodes. It is truly a slippery slope that we are now on.
IMHO even the CBO numbers will not be realized. It will be worse. The CBO assumes that there will no economic recessions over the next ten years. History says that is a very unlikely outcome. SS gets killed in periods of low relative employment and high relative inflation (AKA: Stagflation). This economic condition will be the result of ZIRP and QE. Those policies will bring us inflation, but very few new jobs.
The SSTF told Congress, the press and the American people that the SSTF was a 2037 problem in their 2010 report. That date has been used repeatedly in defense of the program. Supporters point to something that is far into the distant future and say, “Worry about something else”. Wrong! The CBO has confirmed it. The future is today.
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