SOCIAL SECURITY TO SEE PAYOUT EXCEED PAY-IN THIS YEAR
March 26, 2010
This year, Social Security will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office (CBO).
Stephen C. Goss, chief actuary of the Social Security Administration, said that while the CBO projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.
The problem, according to Gross:
- Payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned.
- At the same time, the program's revenue has fallen sharply, because there are fewer paychecks to tax.
Although Social Security is often said to have a "trust fund," the term really serves as an accounting device:
- The "trust fund" is used to track the pay-as-you-go program's revenue and outlays over time.
- Its so-called balance is actually a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays.
- The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue year after year.
Accumulated revenue will now slowly start to shrink, as outlays start to exceed revenue. By law, Social Security cannot pay out more than its balance in any given year.
According to former Federal Reserve Board chairman Alan Greenspan, only three choices exist to make Social Security solvent in the near-term: raise taxes, cut benefits or bailout the program using general revenue funds.
Source: Mary Williams Walsh, "Social Security to See Payout Exceed Pay-In," New York Times, March 25, 2010.
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