Media Dozes While Social Security Is on the Verge of Negative Annual Cash Flow
Ed Morrissey at Hot Air had the catch of the day yesterday when he revealed, based on Congressional Budget Office internal projections distributed to Congress during the summer, that the Social Security system will spend more cash than it takes in during the government's next fiscal year ending September 30, 2010. Read about it there, or here, because you won't see the establishment media acknowledge the existence of these revelations.
Morrissey isn't clear as to when the report was prepared, but if it dates back to July or even early- mid-August, it's possible that Social Security will show a measly positive cash flow of less than $10 billion when the dust settles on the current fiscal year that will end next week, compared to +$72 billion a year ago. That's because the decay in Treasury's cash collections during the current quarter has been that bad.
Here's the relevant portion of the spreadsheet Morrissey obtained:
The green box shows cash inflows for fiscal 2009 through 2011, while the purple box has the cash outflows. The "Primary Surplus" figures in the red box represent positive (in 2009) or negative (in 2010 and 2011) cash flow.
The rest of CBO's spreadsheet shows that the system will have tiny net positive cash flows from fiscal 2012 through fiscal 2015 (never more than $20 billion), and will begin to go irretrievably negative after that, until by 2019 the cash hemorrhage will be -$63 billion.
Morrissey points out that the report lays bare the fundamental incompetence and/or dishonesty earlier this year of Peter Orszag, President Obama's Director of the Office of Management and Budget:
.... Democrats wanted analyses that allowed them to ignore the problems in Social Security, and Orszag was happy to supply them. Douglas Elmendorf has had to right the ship at CBO while Orszag continues to blow his predictions at OMB, most notably in overall deficit projections, which Orszag had to admit were off by more than 40% and $2.2 trillion over the next ten years.
Of course, they were helped along by a complacent media unwilling to do math, and a host of apologists for the Left.
.... The situation at Social Security is much worse than this administration and Democrats in Congress want to admit. They want to continue busting the deficit and creating new entitlements while the existing ones careen towards collapse.
The situation may be much worse than even the CBO portrays.
First, the current year's projected postive "Primary Surplus" of $18 billion is itself be on shaky ground, because the current quarter has been horrible. Here are the collections of employment taxes, which include both Social Security and Medicare, in July and August of 2009 compared to July and August of 2008 (links are to respective Monthly Treasury Statements; information is at Table 3 of each report, and is the sum of "on budget" and "off budget" employment taxes, numbers are in millions):
July 2009 -- $64,003; July 2008 -- $65,277; year-over-year decrease of $1.3 billion, or 2.0%
August 2009 -- $63,569; August 2008 -- $65,440; year-over-year decrease of $1.8 billion, or 2.9%
Employment tax collections in September 2008 amounted to $71.307 billion, and were helped by the fact that there were five high-collection Mondays that month. Because this year has only four Mondays, a $10 billion negative year-over-year September decline in employment tax collections is not out of the question. That would mean a cumulative difference during the quarter of about $13 billion ($1.3 + $1.8 + $10). How much of that is Social Security and how much is Medicare cannot be determined.
Now let's look at how bad September collections overall have thus far been:
Social Security tax collections are part of the first and third line items above, and are more than likely a significant element of their combined shortfall of over $40 billion.
As to future year collections, Morrissey points to work by "steveegg" at No Runny Eggs showing that tweaking CBO's rather optimistic assumptions of payroll tax growth downward by very small percentages in 2012 and 2013 would cause all future years to come in with a negative cash flow.
Given how poorly the economy is performing, and more to the point, how even the Obama administration has acknowledged that high unemployment rates will linger for quite some time, even the No Runny Eggs scenario may turn out to have been optimistic.
Separately, as to total collections for September, though I believe that $210 -$215 billion is a more likely result, I would not be surprised if this month's grand total comes in at less than $200 billion. That would be a breathtaking year-over-year decline of well over 25% in one of the most important collections months of the year.
Cross-posted at BizzyBlog.com.