Social Security is reaching its tipping point

[peejay 327]

Social Security is reaching its tipping point

By MARY WILLIAMS WALSH

New York Times

March 24, 2010, 10:06PM

The bursting of the real estate bubble and the ensuing recession have hammered jobs, home prices and now Social Security.

This year, the system 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.

Stephen 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, he said, is that 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 revenues have fallen sharply, because millions of jobs have disappeared, leaving fewer paychecks to tax.

Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program's finances.

“When the level of the trust fund gets to zero, you have to cut benefits,” Alan Greenspan, architect of the plan to rescue the Social Security program the last time it got into trouble, in the early 1980s, said Wednesday.

That episode was more dire because the fund could have fallen to zero in a matter of months. But partly because of steps taken in those years, and partly because of many years of robust economic growth, the latest projections show the program will not exhaust its funds until about 2037.

Still, Greenspan, who later became chairman of the Federal Reserve Board, said: “I think very much the same issue exists today.”

The Social Security Administration is expected to issue in a few weeks its own numbers for the current year within the annual report from its board of trustees.

Though Social Security uses slightly different methods, the official numbers are expected to roughly track the CBO projections.

Goss said Social Security's annual report last year projected revenues would exceed payouts until at least 2016 because economists expected a quicker, stronger recovery from the crisis. Officials foresaw an average unemployment rate of 8.2 percent in 2009 and 8.8 percent this year, though unemployment is hovering at nearly 10 percent.

Goss emphasized that even the $29 billion shortfall projected for this year was small, relative to the roughly $700  billion that would flow in and out of the system. The system, he added, has a balance of about $2.5 trillion that will take decades to deplete. Goss said that large cushion could start to grow again if the economy recovers briskly.

Indeed, the Congressional Budget Office's projection shows the ravages of the recession easing in the next few years, with small surpluses reappearing briefly in 2014 and 2015.

After that, demographic forces are expected to overtake the fund, as more baby boomers leave the work force, stop paying into the program and start collecting their benefits. At that point, outlays will exceed revenues every year, no matter how well the economy performs.

Greenspan recalled that the sour economy of the late 1970s had taken the program close to insolvency when the commission he led set to work in 1982. It had no contingency reserve then, and the group had to work quickly. He said there were only three choices: raise taxes, lower benefits or bail out the program by tapping general revenues.

The easiest choice, politically, would have been “solving the problem with the stroke of a pen, by printing the money,” Greenspan said. But one member of the commission, Rep. Claude Pepper, blocked that approach because he feared it would undermine Social Security, changing it from a respected, self-sustaining old-age program into welfare.

Greenspan said that the same three choices exist today — though there is more time now for the painful deliberations.

http://www.chron.com/disp/story.mpl/business/6928962.html

[Obama 2012 1,714]

LOL, social security hasn't been self-sustaining since day one.

On top of that Alan Greenspan is a puppet and an idiot. Never trust the guy who heads the Federal Reserve, EVER. Do you really think he ever had the best interests of the nation at hand? Please. Alan Greenspan is almost solely responsible for the economic collapse we just had with his refusal to regulate the derivatives market. What he and the Clinton Administration (not Clinton himself mind you) did to Brooksley Born and her warning (oh god forbid we challenge the FED) about the market, was outright ugly and disgusting and het let a $50 trillion back-door economy run wild and then #### over the American people.

Alan Greenspan should be in prison for crimes against the United States in all honesty.

Sorry /rant.... Greenspan makes me sick and those who still look to him for any answers after the mess HE helped cause.

[Hilarious Clinton 452]

No worries. Obama will just have more money printed.