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Recession Hammers Social Security Surplus
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By jchoi on March 31st, 2009
More bad news has emerged from last week's Congressional Budget Office report: the surplus in the Social Security trust fund is now expected to dramatically dwindle next year -- about seven years faster than in the CBO's projections issued just last August. Due to skyrocketing unemployment rates, payroll tax revenue has taken a major hit and the result is that the CBO, which months ago expected the 2010 surplus to be $82 billion, now projects a surplus of just $3 billion.
The implications for this stretch even further than might at first meet the eye, as the Washington Post lays out. The Social Security trust fund, having enjoyed a surplus until now, was being used, often by the Treasury Department, to fund various governmental operations. It's safe to say the Treasury Department has gotten used to "borrowing" from the trust fund, but without a surplus, it's likely they'll start looking to other nations and investors to help finance the government's needs. Amid all the borrowing, however, at some point they'll need to start paying back the debt they've been building up for the past 25 years.
Add to this the fact that the baby boom generation is now facing retirement. And while reports of deferred retirement have certainly abounded amid the economic collapse, the ratio of workers to retirees could seesaw off-balance at any time. The annual Trustees Report last projected that by the year 2030, there will be only two workers for every one retiree.
Even before the current recession, the public showed signs of serious concern regarding the state of Social Security. In fact, 7 in 10 said Social Security is likely to go bankrupt eventually if Congress doesn't take action. Roughly half said they believe retirees get back less than what they paid in payroll taxes.
There are signs that the public is reluctant to accept tradeoffs proposed in response to this impending imbalance. Asked about various proposals to reform Social Security, including increasing the retirement age and increasing the payroll tax, pluralities rejected all of them.
For more on Social Security, fiscal responsibility and the nation's budget crisis, be sure to check out our Discussion Guide on Social Security at FacingUp.org, our web site on the federal budget deficit and the national debt; Students Face Up to the Nation's Finances, our curriculum educating and empowering citizens to take action on the nation's fiscal problems; and our Citizen's Survival Kit Guide to Taxes, Spending & Debt.
2 comments on this entry
»A new report finds the main problem in getting the public to deal with our fiscal problems isn't opposition to tax increases or spending cuts -- it's their lack of trust in the government to spend their money wisely.