The “Social Security surplus” has vanished. That figure has long referred to the amount in Social Security taxes collected over and above the amount the system pays out that year. The federal government spends the leftovers every year, issuing itself an IOU rather than setting money aside for future liabilities. According to calculations from both the White House and the Congressional Budget Office (CBO), the year of reckoning when Social Security spending exceeds Social Security tax revenue has moved up from 2017 to…2009.
Kevin Hassett, an economist at the conservative American Enterprise Institute, is sounding the alarm about this undercovered side-effect of the recession. In recent years, Hassett points out, Social Security “has raised $50 billion to $100 billion more in payroll taxes than it paid out in benefits. Sure, deficits were expected far off in the future, but the current program was on sound financial footing.” As Time recently noted, however, “Social Security benefits ($659 billion, according to the CBO) will exceed payroll taxes ($653 billion) in fiscal 2009 for the first time since 1984. Payrolltax receipts generally hold up much better in recessions than do income taxes, but job losses have been so severe that the CBO expects them to decline slightly from 2008, while benefits rise almost 9 percent because of cost-of-living adjustments and the beginnings of the baby-boomer retirement wave.”
The system isn’t insolvent yet on a year-to-year basis. That’s largely because, when the rest of the government raids the retirement fund for spending money, Social Security gets to collect interest payments on that debt. But keeping Social Security in technical surplus through payments from the federal government itself doesn’t ease the government’s overall liabilities.
If official forecasts of improved economic performance come true, Social Security’s current yearly deficit will disappear early next decade. That’s the good news. The bad news, as Time notes, is that “whatever long-run deficits [are] project[ed] for Social Security will pale beside those expected for sister program Medicare.”