SOCIAL SECURITY TO START CASHING UNCLE SAM'S IOUS
March 16, 2010
The retirement nest egg of an entire generation is stashed away in Parkersburg, a small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration. It's time to start cashing them in, says Townhall.com.
For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits -- billions more each year. Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes -- nearly $29 billion more.
Sounds like a good time to start tapping the nest egg, says Townhall:
- The federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors.
- In return, the Treasury Department issued a stack of IOUs in the form of Treasury bonds -- which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.
- Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse.
- The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
Social Security's shortfall will not affect current benefits, says Townhall. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program's finances are deteriorating: Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits.
Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits and stops paying payroll taxes, Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.
Source: Stephen Ohlemacher, "Social Security to start cashing Uncle Sam's IOUs," Townhall.com, March 15, 2010.
Browse more articles on Tax and Spending Issues