Social Security Is Officially in Deficits--And It's Only the Beginning.

In an era of $2 trillion dollar federal budget deficits, another $10 billion deficit might not seem like that big of a deal. It’s practically a rounding error.
 
But the fact that $10 billion is the amount Social Security is in the red is a big deal.
 
After years of people—including (now) Nobel Prize winning Economist, Paul Krugman—claiming that the financial problems with social security were invented or even over, benefits have exceeded payroll taxes. That wasn’t supposed to happen until 2016, but because of the recession there are fewer workers and lower wages supporting retirees. It’s a whole new ball game.
 
One thing Krugman was right about is that, even under these circumstances, nothing will happen to Social Security in the short term: The benefits your already-retired parents or grandparents are receiving will not be cut to eliminate deficits. But something is going to happen to you as a young worker and future taxpayer. You get to pay for it.
 
The $10 billion hole will be papered over by the Treasury, who will just use other non-payroll tax monies to pay benefits. Some refer to this move as “repaying money borrowed from the Social Security trust fund.” But that’s really accountant-speak to hide the fact that it’s your money being used for “repayment.”
 
The government should be thought of as having one big pile of money that consists of all tax revenues (plus money lent to the United States) that is used to pay for everything. Payroll taxes used to be a big part of that pile--so big, in fact, that those dollars were spent on things besides Social Security benefits. Treasury promised to restore Social Security’s share of the pile if benefits exceeded the payroll taxes in the future. Now the future is here, $10 billion is needed for Social Security, but there is still just one pile of money.
 
Money in this year’s pile could have been used to fund college loans, improve highways, cut taxes or lower the national debt. Instead, $10 billion will be used for Social Security. This means more than just the payroll taxes you contributed are funding the program. The income taxes and all other taxes you pay are now being used as well.
 
Starting to feel like you’re overpaying?
 
They’re starting small, but Social Security deficits are a big deal for young generations. If nothing is done to revise Social Security’s current structure, it will quickly consume more and more of your tax dollars now and in the future. In today’s terms, we’ll actually end up needing to add $7.7 trillion more into the pile. 
 
Today’s $10 billion deficit is really just the first bite at the apple. 
 
(Image: President Franklin D. Roosevelt signing the Social Security Act, August 14, 1935.)
 
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