From Martin Crutsinger (AP, Annual report due for Social Security and Medicare, May 12, 2009):
Fewer people working means less being paid into the trust funds for Social Security and Medicare.
The obfuscation that Social Security collections go into a "trust fund" continues. The reality is that, since its inception, the collections for Social Security have gone into the General Fund. The "General Fund" is the set of monies the Federal government may use for anything and everything.
The bait-and-switch is that there is a notation of the amount that was collected for Social Security, but no money is actually transferred to a special account ("lockbox") for this purpose. It would be unlawful to do so. The Feds are required to spend that money each year and are prevented from setting it aside (where it could earn interest for future recipients). This has always been to the Feds advantage, until very soon:
For years, the Social Security trust fund has taken in more than it spent on benefits, resulting in a cushion of billions of dollars that the government could spend on other programs while giving the trust fund an IOU.
The FICA deduction has always been a way for the Federal government to fill the coffers with a tax paid by anyone who collects a paycheck (half paid by the employee and half the employer), all the while claiming that a certain segment of taxpayers (the bottom feeders) didn't pay any taxes.
As the linked article goes on to explain:
The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits.
This means that in 2011 (with just a $3 billion delta between collections and payouts in 2010) Social Security will begin to drain the Federal receipts swamp. Add the "Galt Effect" with many choosing to opt out of the earning side of the equation sooner, and this could get ugly.
The flip of the pyramid (where the amount paid out to those collecting exceeds the amount collected) will also occur for Medicare earlier than expected.
Combined with the baby boomers entering their retirement years and the high unemployment rate, the Federal government will be bankrupt sooner rather than later.
Without the Social Security surpluses to feed upon, the Federal spending in Obama's budget will incur even greater borrowing and an even higher deficit than announced in February, re-announced yesterday, and recalculated upward (on a near-daily basis).
Without Social Security reform (means-testing recipients, raising the age of eligibility, lowering the amounts paid, or raising FICA taxes) the Feds will have to deal with an ever-shrinking pool of taxpayer money to play with. The problem with all the reform ideas is that it will make a lot of people very, very angry. Social Security won't be quite the sacred cow it was, once it causes the swamp to drain, rather than providing a surplus with which to engage in other unconstitutional spending activities.
George Bush had Social Security reform on his second-term platform, but no one would touch it.
This should be fun!
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