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.
—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters
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I don't expect the Pravda
September 23, 2009 - 00:44 ET by rockyracoonI don't expect the Pravda media to report anything that may cast their chosen messiah in a bad light. I been going to UK papers online more and more to help find out what''s going on, besides this website and a few others.
This country is beyond broke, and now the government-schooled...
September 23, 2009 - 01:03 ET by R D Helm...dumbMases are going to wake up to the unpleasant fact that the Social Security "trust fund" has never been anything more that an IOU tucked away in a dank, musty drawer somewhere in DC, and contains a balance of exactly $0.
I can't wait to hear what slobbering Bawney Fwank's lame-ass, totally gay excuses will be for this latest train-wreck, but we all know they are coming.
Good going, America!
-Dave
I agree with Rush. It's time for Obama to resign.
I posted about this in the
September 23, 2009 - 05:15 ET by G. MayI posted about this in the forums a couple of days ago.
One might argue that the SS trust fund is more than an IOU, but when you consider that it's mostly made up of U.S. government securities and those securities' values are being propped up by the Fed, then it really does amount to nothing. If congress decided to sell off those bonds, the only people buying them would be the Fed, or in an even more bizarre scenario - the Treasury. I know that sounds odd, but with the way the Treasury and the Fed have been run as of late, I wouldn't be surprised.
Toss on top of all this that there won't be any inflation adjusted COLA to SS this January and the picture gets that much worse. Many economists - both left and right - fear that inflation will begin to rise soon due to those very same incestuous actions of the Fed and Treasury. I'm not in the mood to crunch numbers, but the lack of COLA in a period of rising inflation will amount to an unintended benefit reduction. All this without discussing the ideas for actual benefit reductions that are being tossed around.
THEN there's the next step of just raising the retirement age. I'm betting on it being 90 by the time I retire.
Honestly, this compulsory Ponzi scheme has always pissed me off.
G.May,
September 23, 2009 - 06:00 ET by AgnosticExcellant post unfortunately I'm a lot more cynical than you are about some of the key items. I don't believe that the benefit reduction is entirely "unintended" nor do I think that their will be a retirement age in the future. Whether under the same name or program the money will be used for those considered "unable to work" only and the idea of retirement will be limited to those with enough family wealth, those who can afford to retire by life savings (which will become more difficult with another wave of inflation) or those the government deems socially incapable of contributing to the work force.
Yes, this ponzi scheme backed by circular financing and subject to governmental embezzlement does piss me off as well.
A person may be won over with logic and reason but the masses must be bought with spectacle and platitudes. - 2008 Elections
not that pesky CBO
September 23, 2009 - 01:06 ET by candanceThey're the ones who keep spreading that rumor about healthcare reform being too expensive. The nerve of these people to think our government will go broke! All they have to do is seize more wealth or print more money - problem solved!
I am 29 years old. I know that SS will not be there when I retire. It's a charity for old people that I am being forced into paying. But the worst part is, as long as SS keeps going it will have more and more spending built on top of it (you can't call this socialist since we already have SS!), so the original concept will never die, it'll just be shifted to a new stack of money.
Not old people's charity
September 23, 2009 - 06:57 ET by KC BeachCandance,
At 29 you may consider it charity for old people, but at 46 I see it differently and I am willing to bet those over 67 1/2 would too. I do not consider this is not charity since I have been paying into this black hole (is that still legal to say) since I was 13 and earned my first paycheck. If there is anything let when I reach the government determined age of "retirement" I will look at it as the worst ROI of any of investment I have ever made. The fact that I had no choice but to "invest" in this Ponzi scheme makes me mad, but if I get anything out of the system it will most definitely
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not be charity.
Good morning candance
September 23, 2009 - 07:19 ET by cocodrieI have been paying into the social security rip-off since 1953. There was a huge surplus until the dimmocrats put the trust funds into the general fund. I have been soaked good because for 45 of those years I was self employed. The charity is MY MONEY bring given to the non-working class of citizens and illegal aliens.
I am still self employed at over 70 years old and I am still paying into SS. This is CHARITY to me?
Jesus Loves You so much He died for you
by no means did I mean that old folks are to blame
September 23, 2009 - 11:27 ET by candanceYour money was forcibly taken from you to "invest" in it when you were younger. Of course you have every right to ask for it back. In no way do I begrudge you that.
But therein lies the difference. Most seniors paid in with a reasonable belief that some of it could be recouped. My money literally is going into a black hole.
Miss Candance, you have
September 23, 2009 - 08:00 ET by dscottMiss Candance, you have just fallen into the trap of class warfare, in this case blaming old people. That's what Obama and the Dems want, to divide and conquer, the younger generation against the older generation. Your finger of acusation is pointed in the wrong direction, it should be pointed at Congress for embezzling $3.5 trillion from Social Security, leaving IOUs like Bernie Madoff and then using smoke and mirrors accounting to claim the government wasn't going into as much debt as it was. (BTW-When Democrats crowed the budget was balanced at the end of Clinton's term, that was a flat out lie, it only appeared that way due to surplus SS funds that should have been properly invested for the future) This is Enron on steriods, we don't blame the workers whose money was stolen from them and then used for other purposes by those who sought the public limelight and praise like the Kennedys of the world. This is the legacy of Ted Kennedy, a self styled Robinhood who stole from all of us and gave money to those who would vote for him.
Nancy Pelosi and Harry Reid, starving the poor one gallon of ethanol at a time. Fill your tank with E85 and cull a village.
But, but, but,it's okay, cause we is gonna fix all this in 2012!
September 23, 2009 - 01:24 ET by R D Helm/sarc.
Yeah, y'all so-called "conservatives" out there jezz keep right on believing that this is all going to be "fixed" in 2010, or even in 2012.
ROFLMAO!
Forked, roasted and stuffed, we are.
-Dave
I agree with Rush. It's time for Obama to resign.
Prepare for rough waters ahead
September 23, 2009 - 02:00 ET by richb313The one thing that comes to mind when reading this article is that we must all prepare for rough waters ahead. The news that we are at a turning point or that the recssion has ended are pre-mature. This negative cash flow is much worse than it seems.
For years we have financed a large portion of our Government with excess SS collections. So not only are we on the hook for the shortfall in SS payments but we also have less money to pay for Government Operations. What will the remedy be that Obama considers? If past performance is any indication he will use this as an excuse to do two things: 1. Raise SS witholdings. 2. Spend more money. There will be no overhaul of SS except to reduce benifits if at all.
When the budget is finally considered will this new reality be reflected or will it be the same old thing with our elected representatives burying thier heads in the sand and ingnoring the problem.
A fact for politicians to learn:
September 23, 2009 - 05:55 ET by Red JeepPonzi schemes don't work, especially when you kill (abort) millions of future participants.
On the bright side the
September 23, 2009 - 07:45 ET by dscottOn the bright side the Social Security trust fund will no longer be the piggybank for Congress to embezzle from and then buy votes with other social programs that aren't paid for. Secondly, the trust fund will now start getting the money BACK that was embezzled, with interest. Now Congress will finally have to focus on creating jobs by lightening the load of government on the economy both in taxes and regulations. Any failure to do either will mean the collapse of the economy because Obama and his incompetent rhetoric of proposed ObamaCare, Cap & Trade and misc. stupidity were the final straw that broke the camel's back.
Finally, and most importantly, this is pay back to all the know-it-all meddling busybodies (Democrats) who thought they knew better when they thwarted W's call to reform Social Security by claiming nothing was wrong. It's too much to hope for that an organization full of little Bernie Madoffs would be frog marched to jail, I will have to settle for second best - them getting their pink slips come November 2010.
Nancy Pelosi and Harry Reid, starving the poor one gallon of ethanol at a time. Fill your tank with E85 and cull a village.
It's not that difficult.
September 23, 2009 - 09:30 ET by b4m4wyIt's not that difficult. If you have never paid into Social Security, then you are NOT allowed to receive ANY payments.
Government's first duty is to protect the people, not run their lives.
Ronald Reagan
Re Charity
September 23, 2009 - 09:47 ET by slickwillie2001It's outrageous to consider SS a charity program. SS is a program paid for by the beneficiaries through premiums, as is Medicare, and Unemployment Insurance. Had seniors been able to keep those premiums in private interest-bearing accounts they would be much better off. This distinguishes these programs from real government charity like welfare and food stamps and farm subsidies etc. Our government has a contract with seniors and that contract cannot be violated in my opinion.
The fact that people today have little faith that they will get their social security is a lack of faith in government leaders. The problem should not be misdirected.
This highlights a problem with any government program. Government functions best in a role where it regulates private business. If government becomes the business, it is thereby unregulated and a monopoly because government cannot regulate themselves. A private company running Social Security would never have gotten away with what the government does.
Tom - the MSM blocked SS reform
September 23, 2009 - 11:22 ET by Gary HallOnce again, Tom - what an analysis you have prepared!! Thanks from the citizens of the US.
I reflect back on a bit of media bias history - why we are here, and "why the media is dozing".
During the 90's, Clinton and Gore traveled the country and at every stop proclaimed that SS was heading for a financial crisis. The press yawned. President Clinton offered up a Social Security Reform Commission for the purpose of gathering the facts and making their recommendations to the people. At times, even Bill Clinton toyed with the possibility of limited private accounts - and there was some strong support here from a key Democrat. Along the way James Glassman, AEI, wrote in the WaPost:
Well, it was such big news that our MSM decided that there was so much risk here of SS being reformed in a direction which did not fit their agenda, that the MSM walked away from the story -and from that point on, lost interest in a national discussion on SS reform.
Such it was that Clinton's SS Reform Commission ended. Clinton was impeached. MSM had no stomach for talk of actual reform - it went away.
Numerous efforts by Bush to bring up significant SS reform during his first term, but an inherited recession, 9/11, and a few years of a cantankerous war kept it sidetracked. Bush promised action during his second term, and he drew on the same argument made by his predecessors: 'SS is headed for a financial crisis.'
And the MSM woke up - 'oh my,' they considered. 'He could do this.'
And thus began a war of words, waged by the MSM, to convince the country that SS did not have a financial crisis. Day in and day out, the MSM brought out their liberal and socialist economists and experts to make the case that Bush had it wrong. The president speaking of the coming financial crisis (which is now upon us) brought the nation's liberal newspapers like the Los Angeles leading early with headlines like:
It's incredible - take a look at the LA Times archives. Search: Bush + "social security" Between: 01/01/2005 and 12/31/2006 all 470 hits.
John Snow wrote in Jan. 2006:
Along the way, national polling clearly showed strong support for reform involving voluntary partial private accounts, especially amongst young people. The national MSM had their work cut out to make sure that the American people did not find out about how they felt (when you don't like the poll results - hide them); national indoctrination of the public with the media's view would follow.
Social Security reform would be killed by our national media. The MSM sought to smear the facts in front of the American people - all for the purpose of satisfying the MSM's political agenda. they would make the case that there was no coming financial crisis for SS that Bush needed to deal with; Bush was simply using fear tactics to scare the people. Clinton, and Obama, we note, aren't guilty of such scare-tactic style leadership, in the eyes of the MSM.
Of course, the MSM did the same thing to the discussion of Iraq, Afghanistan, Immigration Reform, the National Photo ID (strongly supported by the Baker/Carter Commission), Medicare reform, Bush's Energy Bill, and tried to do it with Medicare Part D and with Bush's historic effort (now recognized as widely successful) to combat the HIV/Aids and malaria pandemic in 3rd world countries, notably on the African continent.
And here we are.
(;~/ gary
Thanks, Gary
September 23, 2009 - 13:01 ET by Tom BlumerI specifically remember Mario Cuomo predicting in late 1996/early 1997 that Clinton would be the one to fix Social Security. Maybe he would have, but Monica and lying under oath stopped any hope for it.
But remember, character doesn't matter. (/sarc)
As to Bush, you're right about the media, but I also don't think Bush tried hard enough.
And to think I started blogging largely because I thought Social Security reform was coming. ....
Tom..
September 23, 2009 - 13:39 ET by Gary HallWell, on Bush.. didn't try hard enough? Well, I just don't think he had the tools to understand how to get anything past the wall of the media. He just did not understand that they simply hated him - and conservative/populist views. If he'd tried harder, so to speak, they'd ganged up even more.
There's this one consistent pattern I see in the media's effort to win for their side that I don't think we look at enough. In the battle over SS reform with Bush, as with any of the other major issues that the MSM draws the line in the sand over with the conservative side, the MSM does a knock up job of dividing the Repbulicans against themselves. They will harness any dissident view or voice, ever how slight, amongst the Republicans; the broad public were quickly well informed of any potential conflict within. If a Repubican congressman voiced a bit of concern about the details of the Bush (et. all) proposal, then all of America would hear it time and time again. The rest of the MSM pack would rush out to find more voices.
On the other shoe - well, take the Moynihan position on SS reform. It was broadly censored from the view of the voters, as was some of views held by Clinton which supported the Bush proposal. We would not hear dozens of TV reporters quizing those opposed to Bush's SS reform effort saying, "But what about what the late Democratic Senator Patrick Moynihan's views here? What do you say to that? And Clinton? He thought some of it had merit?"
(;~/ gary
The Republican's consistently fall into the trap
Good points, Gary ....
September 24, 2009 - 09:19 ET by Tom Blumer.... especially media's lionization of any RINO who sells out principles or opposes a GOP President's initiatives. You may have noticed that NB has a "Sudden Respect" category for the purpose.
We sure aren't hearing much about the several dozen if not more Dems who oppose Obamacare, are we? Where's their "sudden respect"?
The media is not asleep.
September 23, 2009 - 13:06 ET by buddycThe media is not asleep. Bush warned us. The media ridiculed his warnings because the Dems told them it was ridiculous.
If they report it someone might notice they were wrong.
Margaret Thatcher was right
September 23, 2009 - 19:55 ET by deerjerkydaveMargaret Thatcher was right when she stated:
"The trouble with Socialism is that eventually you run out of other people's money."
We are at that point now in America. The Federal government is broke. The politicians have spent and they have spent, and they have spent. All in an attempt to create prosperity through socialism. And now, after maxing out our credit cards in the form of 12 trillion dollars, we begin to see the fall of their socialist institutions.
The solution to social security is to transition people into retirement savings accounts, much like health savings accounts. This way it is real money in real bank accounts, not this black hole of a ponzi scheme that the socialists have instituted.
I gave the CBO the benefit of some doubt
September 24, 2009 - 11:24 ET by steveeggFirst things first; thanks for the mention.
I could easily have limited the post-recession income growth to the historical average of roughly 4% (or specifically the FY2015 4.02%). I re-ran the numbers with that upper limit, and it does indeed get even uglier: The minimum primary deficit balloons to $6 billion in FY2012 (compared to $2 billion that year and a minimum of $1 billion in FY2013), and the FY2019 primary deficit jumps to $101 billion.
Predicting the timing of the recovery is beyond my ability to predict. A later recovery would again make things worse.
Calculating what not having that "interest" available to re-"invest" in the general fund would require figures I don't have easy access to, but I suspect that would mean the long-term bonds would need to be called early starting right about 2019 with absolute "fund" exhaustion coming several years earlier than the 2037 currently projected.
As for the immediate situation, the July 2009 payroll tax collections were 1.2% above July 2008, but the August 2009 payroll tax collections were 2.1% below August 2008.
Of note, August 2009 had the 5 Mondays that September 2008 did, and still the monthly primary deficit was over $5.8 billion, the highest since the anomalous August 1990 deficit of $18.4 billion (caused by a shift of most of September's SS payments to August). That would make the rolling 12-month primary surplus a mere $26.9 billion, the lowest since June 1995-May 1996.
To get to the $18 billion (really, $17.5 billion-$18.4 billion) FY2009 primary surplus, the September 2009 would need to drop roughly 12.9% from September 2008. It certainly seems possible given the numbers for the first 21 days of September.
Thanks steveegg
September 24, 2009 - 13:03 ET by Tom BlumerYou must have access to slightly different info, because the Monthly Treasury Statement info, which I just re-verified, shows year-over-year declines in both July and August.
Is it from SocSec itself?
I decided to be careful in the post and predict sub-$10 million, but it is conceivable that it could go negative.
Yes, it's from Social Security
September 24, 2009 - 13:48 ET by steveeggSpecifically, it's from the Office of the Chief Actuary. I took the total income and total outgo from the combined funds "income, outgo and assets" chart, and get the interest amont from the "income components" chart.
For most months, the "net contributions" portion of total income (which are the payroll and self-employment) taxes are slightly higher than what the Treasury reports. I cannot explain the discrepancy.
save the internet from bankruptcy!
September 24, 2009 - 11:44 ET by candanceLook at what a free, unregulated market has done to the internet! Millions of working class Americans have cheap access! Why, poor kids can even take their $300 laptop to Chik Fil A and use wi-fi for free! We must do something to stop this atrocious gap between rich and poor.
And don't even get me started on how the free market has ravaged OTC drugs. Poor kids taking Tylenol to lower a fever? Old people fending off heart attacks with aspirin? And I've even heard (horror!) that some poor people use oatmeal or Cheerios to lower their cholesterol.
Then there's this awful situation where some families grow food in their own gardens at home. Free tomatos every fall. Can't you hear their sad little voices, please sir, I grew too much squash, take some to cook for yourself. And in some places... listen at this... unregulated churches host community picnics where everyone in town can eat for free.
And that terrible place called Goodwill lets poor people buy clothes on the cheap. And the Dollar Store - ack! - I was in there just the other day and saw T shirts for $5 each. Darn the free market! Darn it to heck!!
I'm so glad our governmnet is wise enough to run Social Security. A bloated, manipulated, bankrupt program is so much better than silly capitalism. Yes folks, the answer is clear: the free market is obviously a failure.