How Economic Insecurity is Pressuring Social...

Here's a measure of both how important Social Security is and the problems it faces: the program will actually run a deficit over the next two years because fewer people are paying in and more are applying for benefits.

Of course, over the long term, that's the fundamental problem facing Social Security. As the baby boomers retire, there aren't going to be enough people paying into the program to support those who are getting benefits. But this is a specific short-term issue, as the "Great Recession" pushes more older people out of the workforce and into early retirement. And, of course, higher unemployment means fewer people are paying taxes in general and Social Security taxes in particular.

It makes perfect sense for more older workers to file early; times are tough and Social Security is, well, secure. But this is a taste of what's to come. On paper, when Social Security spends more on benefits than it takes in by taxes, the system digs into its trust fund, built up during the years when far more people were paying in than drawing out. But the trust fund itself exists only "on paper," since the government has been borrowing from Social Security and Medicare to make its annual deficits look smaller.

That means the government will have to pay the trust fund back, and it will. There's no question that the benefits will be paid. The problem is that the government will have to pay it back out of general revenue, which means either the deficit gets worse or other programs get squeezed. We've already started seeing this dynamic with Medicare, and now Social Security is feeling the squeeze sooner than anticipated. That's why our long-term fiscal problems really need to be dealt with soon: the long term is arriving sooner than you'd think.