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 | |  | Will Social Security be the Next Bailout Candidate? | | | | | For the first time in 25 years, Social Security will spend more on benefits than it will receive in taxes. As a result, the government program may well be the next candidate for a massive government bailout.
The nonpartisan Congressional Budget Office (CBO) released a report last week showing that for the first time in more than two decades, Social Security will be cash-negative. The CBO estimates that Social Security will see an overall surplus of $92 billion in 2010. That sounds good in theory, except that $120 billion of that total is interest income. Excluding interest income, Social Security will see an overall deficit of $28 billion in 2010.
Interest income must be excluded given that it's not actually income. The interest is "paid" in the form of Treasury IOUs; it's not cash with which the fund can pay benefits to retirees. It's merely an accounting entry in a ledger.
Looking forward, the CBO estimates that deficits will be smaller in 2011 and 2012, will then break even for a few years, before deficits again become the norm. These deficits will have to be funded with cash. Plus, they are only expected to grow as the population ages.
Advocates of Social Security reform have long pointed out that the program's solvency would eventually come to an end. Now that it potentially has – earlier than expected – it looks like a bailout maybe on the horizon. Given that Social Security will surely be considered too big to fail, someone will have to pay for it. Whether they fund the bailout through direct taxation or the indirect tax of inflation, it won't be cheap.
Rep. Paul D. Ryan (R-Wis.) has proposed "A Roadmap for America's Future," which has received some national attention lately. The Ryan proposal would preserve the current Social Security plan for people aged 55 and older. For those younger than 55, the plan would provide the option of investing more than a third of their Social Security taxes into personal retirement accounts.
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| |  | | | | | Ryan’s bill, H.R. 6110, titled "Roadmap for America's Future Act of 2008" was introduced May 21, 2008
I hate to say it, but it is, or was, the usual populist theme; universal access to health insurance; strengthen Medicare, Medicaid, and Social Security; lift the debt from future generations; and promote economic growth and job creation in America.
All buzz words and directed towards issues that may be too complex, or too expensive to resolve although I wish he could provide practical solutions before its too late.
He’s a very likable guy, speaks well and comes across as a serious public servant.
He is also a 2012 presidential hopeful.
As to Social Security, how do you bailout something with unfunded liabilities of over $14 trillion when you have no money?
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| |  | | | | | I just hope that one way or another it gets fixed before it is time for me to be on social security. My father and mother contributed to social security and now receive the benefits. It is not much but since I help them out we are managing. After all, it is better to get a little help than no help at all. |
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