Will Social Security go cash flow negative this year?
Posted on 30 July 2009
Permanent URL of this article: http://retirementrevised.com/money/will-social-security-go-cash-flow-negative-this-year
Fortune magazine offers a dire take on the Social Security solvency issue, stating that the system’s problems are more acute and immediate that generally recognized.
The formal projections show Social Security remaining solvent for another 26 years. But Allan Sloan, Fortune’s senior editor at large, argues that the recession is cutting into payroll tax contributions at a far sharper rate than realized–and that the system could go cash-flow negative as early as this year:
Just last year Social Security was projecting a cash surplus of $87 billion this year and $88 billion next year. These were to be the peak cash-generating years, followed by a cash-flow decline, followed by cash outlays exceeding inflows starting in 2017.
But in this year’s Social Security trustees report, the cash flow projections for 2009 and 2010 have shrunk by almost 80%, to $19 billion and $18 billion, respectively. How did $138 billion of projected cash go missing in just one year? Stephen Goss, Social Security’s chief actuary, says the major reason is that the recession has cost millions of jobs, reducing Social Security’s tax income below projections.
But $18 billion is still a surplus. Why do I say Social Security could go cash-negative this year? Because unemployment is far worse than Social Security projected. It assumed that unemployment would rise gradually this year and peak at 9% in 2010. Now, of course, the rate is 9.5% and rising — and we’re still in 2009.
I’d love to be able to give you a report on Social Security’s cash flow so far this year, which is more than half over. However, it’s impossible to get interim numbers. So I don’t know where we stand, and we probably won’t find out before next spring, when the 2010 trustees report comes out.
When Social Security goes cash flow negative, it will rely on its trust to fund obligations; that had been forecast to occur around 2017, although government forecasters pushed that date a couple years closer recently due to the recession.
Sloan’s article points to a range of solutions to get Social Security back on track. All told, it’s one of the best efforts at explaining the Social Security crisis and well worth reading.
July 31st, 2009 at 8:37 am
Could it be that Social Security and Medicare are the BIG EVENTS that will trigger an explosion of a nuclear magnitude that will send the economy and markets diving like we have never seen before?
We all knew the clock was ticking. But no body figured that time was up NOW.
December 17th, 2009 at 9:07 am
Time is up. The undisciplined, selfish way of the baby boomers has ruined the standard of living of a multitude of generations to come. Kudos to the greedy jerks!! Way to go.
December 17th, 2009 at 9:09 am
Here’s the answer.
All those who are presently 58 years or older will be assessed a special tax. It’s called the “Disco Days are Over and Time to Be Responsible to Our Children” Tax. Each person over 58 years old will hereby pay an additional 10 percent tax to Social Security to make up for the days when they didn’t pay enough to cover the expansion of benefits that they gave themselves. Pony up chumps!
January 11th, 2010 at 10:47 am
The Social Security survival issue wasn’t/isn’t the “fault” of the citizenry (Baby Boomers or later generations)and it’s this accusitive attitude that Ripped Off at Birth fosters that’s taking our attention from where it logically should be directed.
It’s the fault of the two party political system that’s used the Social Security Trust Fund over the past 40 years+ as a way to keep a double set of books and cover up deficit spending issues. The ultimate “fix” is insuring that politicians-no matter the party- be put on notice that the citizenry will not tolerate this deceit via the November 2010 Congressional election process. A post November 2010 new beginning and a stabilization process will right this ship. Let’s keep the focus on where the accountability is for this theivery. You have the power-use it.