About that Social Security "deficit" this year.

[BlueCheese]

All of the usual media sources are telling us that Social Security will start running a deficit this year. The AP, to take one example, makes it seem like the beginning of the apocalypse:

Social Security now seen to run permanent deficits
(AP) – 4 hours ago

WASHINGTON (AP) — Sick and getting sicker, Social Security will run at a deficit this year and keep on running in the red until its trust funds are drained by about 2037, congressional budget experts said Wednesday in bleaker-than-previous estimates...

This year alone, Social Security will pay out $45 billion more in retirement, disability and survivors' benefits than it collects in payroll taxes, the nonpartisan Congressional Budget Office said...

Sounds bad. But something struck me about this claim, as it did DU user wishlist on another thread. The article only mentions payroll taxes as a source of income. It does not mention the other major source of income to the Social Security trust fund--namely, which is interest. Without that, any talk of a deficit makes no sense. The total value of the SS trust fund might still be increasing. So would reporters actually say that the SS trust fund is running a deficit even when it is growing? What's the truth?

Off we go to the CBO web site, which makes no real mention of this finding. What we do find is a long publication about the federal budget situation overall (summary: it's bad). On page 122 in Appendix C, we find a nice chart and this excerpt:

For Social Security as a whole, the estimated surpluses peak at $94 billion in 2016 and decline to $45 billion in 2021 (see Figure C-1). Excluding interest, surpluses for Social Security become deficits of $45 billion in 2011 and $547 billion over the 2012–2021 period.

So there you have it. The trust fund is actually running a surplus in every year from 2011-2020. The figure says the total surplus in that time will be $868 billion. Does that sound like a "permanent deficit" to you?

[Autumn]

1. No it doesn't sound like a "permanent deficit" to me,

it's a bullshit lie, but this is what they need to get out there to give the cover to "reform"(hand over to Wall street) SS.

[tabatha]

2. If they have to lie about something

it means they do not have a case.

[Hannah Bell]

4. exactly. if it's so awful, why do they need to cherry-pick the data?

[Yo_Mama]

9. They aren't lying.

The people who wrote the report probably want their SS benefits also.

The only way to protect Social Security benefits is to raise taxes so as to have a stream of income coming in that can be used to pay benefits. CBO is just pointing that out, not that it can tell Congress explicitly what to do.

DU as a whole is in a state of total denial about the facts. Read at least the short CBO summary of the report (revised to take into account the recent changes in law) posted on their website:
http://www.cbo.gov/doc.cfm?index=12039

If we don't raise Social Security taxes, by 2025 payments will certainly be cut. Probably payments to beneficiaries will be cut by 2022. The reason why is that we are running huge deficits, and as soon as people stop believing we can repay the money they will stop buying Treasuries, and then there is no money to pay the benefits except the revenue that comes in each year from the Social Security taxes.

[librechik]

15. Raise or Remove the cap (Link to DFA petition)

http://safestableandsecure.com/e2

[stevedeshazer]

3. +1

[Demoiselle]

5. Thanks for this.

I knew the Social Security "deficit" scare was bullshit, but haven't seen the debunk so simply stated before.
I shall now happily attack my Republican acquaintances at every opportunity.

[slipslidingaway]

6. knr - and thanks for finding which report this was buried in, link ...

http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf

As you noted page 122 of the report and page 140 of the above pdf.

The body of the AP article is a little more balanced, but many people will just read the headline.

http://www.google.com/hostednews/ap/article/ALeqM5gAU2-jtPEDCH3pZrhjdQPpJUg1ww?docId=a9fb321a8efc41699a672b960d4096b4

"...The program has been supported by a 6.2 percent payroll tax, paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.

Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 — unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration..."

Out of a 190 page file, this is what the corporate media highlights.
:(

[markpkessinger]

7. It has a current surplus of $2.5 trillion

Yet they say it's "running on the red." Very misleading.

[Yo_Mama]

8. It is not bullshit at all

Not in the context of the full report. CBO is looking out for the interests of the beneficiaries by pointing this out.

If we execute what we are currently planning, CBO projects that debt held by the public will be 97% of GDP by 2021.

At that point, we won't be able to borrow much more, if anything. When that happens, we will cut payments. Just as you may be entitled legally to a payment from an entity, but not de facto entitled to payment if that entity is bankrupt, when the US is unable to borrow more the Social Security and Medicare Trust Funds become piles of worthless paper.

The Social Security Trust Fund is only worth anything to the beneficiaries if the US is able to turn around and borrow that money. It's a bookkeeping method, not a source of money that can be paid to beneficiaries; the interest "paid" to the fund is taken from the general fund, and so is any money advanced from the "assets" of the fund. The general fund does not have the money, and so must borrow it.

This is the short text version of the report on the CBO website:
http://www.cbo.gov/doc.cfm?index=12039

And I quote:
As a result, the baseline projections understate the budget deficits that would arise if many policies currently in place were extended, rather than allowed to expire as scheduled under current law. For example, if most of the provisions in the 2010 tax act that were originally enacted in 2001, 2003, and 2009 or that modified estate and gift taxation were extended (rather than allowed to expire on December 31, 2012), and the alternative minimum tax was indexed for inflation, annual revenues would average about 18 percent of GDP through 2021 (which is equal to their 40-year average), rather than the 19.9 percent shown in CBO's baseline projections. If Medicare's payment rates for physicians' services were held constant as well, then deficits from 2012 through 2021 would average about 6 percent of GDP, compared with 3.6 percent in the baseline. By 2021, the budget deficit would be about double the baseline projection, and with cumulative deficits totaling nearly $12 trillion over the 2012–2021 period, debt held by the public would reach 97 percent of GDP, the highest level since 1946.

[slipslidingaway]

11. 744 billion in reduced revenues, why is this not being highlighted from the new report...

Most people who are paying attention get the big picture and that it will have to funded from somewhere, maybe the media should highlight the 744 billion reduction in revenues as a consequence of the 2010 tax cut.

:shrug:

page 108 of the report, page 126 of the pdf

"...As a result of legislation enacted since August—most
significantly, the 2010 tax act—CBO has reduced its
projections of revenues for 2011 and 2012 by a total of
$744 billion and its estimate for 2013 by $68 billion and
raised its projection of revenues for the 2014–2020
period by $98 billion.

Enactment of the 2010 tax act decreases projected revenues
by $780 billion from 2011 to 2013 and boosts them
by $59 billion from 2014 to 2020. The legislation
extends for two years a number of income tax reductions
enacted in 2001, 2003, and 2009 that had been scheduled
to expire at the end of calendar year 2010, as well as
relief from the alternative minimum tax that expired at
the end of calendar year 2009 (see Box 1-1 on page 8). In
all, those provisions reduce revenues by an estimated
$447 billion over the 2011–2013 period (and also
increase outlays for refundable tax credits by $77 billion
over that time);3 over the 2011–2020 period, those provisions
reduce revenues by a total of $463 billion.
Besides those extensions, the 2010 tax act includes several
new provisions that significantly affect revenues. A modified
estate and gift tax structure for calendar years 2011
and 2012 (and some modifications to the tax structure in
effect for 2010) are estimated to lower revenues by
$68 billion over the 2011–2020 period, largely in the
first three years. In addition, a reduction of 2 percentage
points in the employee payroll tax for Social Security in
2011 is expected to reduce revenues by $84 billion in
2011 and by $28 billion in 2012..."

[Yo_Mama]

13. That's why I was so upset about it

The tax breaks went mostly to the wealthy, and in the long term, they endanger those who are most dependent on SS.

It is true that the SS tax cut is going to be "paid back" to the trust funds, but that just means more public debt, which endangers the trust funds. That's why certain legislators were claiming that this amounted to an attack on SS. I think factually they were right.

[slipslidingaway]

16. Many other items could have been highlighted from the CBO report, but SS obviously...

must be painted in a negative light.

Exactly ...

"...The tax breaks went mostly to the wealthy, and in the long term, they endanger those who are most dependent on SS..."

And why is the first solution for SS an increase on wages (lifting the cap) instead of a higher tax on investment, such as long term capital gains, which have been reduced in recent years. If we just adjust one side, the cap on paying in and do nothing with the other side of the ledger, a cap on what can be collected, then it will just appear that the wealthy give to the poor under the Social Security system. Not sure that is what working people want.

:shrug:

[pnorman]

10. This is just the info & insights I was looking for!

THANKS!

[BlueCheese]

14. No problem.

I'm being self-indulgent and kicking this up since I see the article is still getting a lot of play today. I even heard it repeated on my local news radio station--the usually harmless one that deals with traffic, weather, local news, etc.

[gratuitous]

12. Gosh, it's almost like they're setting the stage for something

Deficit commission, Tea Bagger nonsense, "bipartisan" "consensus" that deficit reduction needs to happen, but that taxes can't possibly be raised on the wealthy. Now, think, think: What could possibly be the end result of all this?

It's a puzzlement!

[underpants]

17. Local radio host quoted all the talking points this afternoon

totally misinformation.