Social Security: $39 Billion Deficit in 2014, Insolvent by 2035

Abstract

Social Security ran a $39 billion deficit in 2014, closing out five years of consecutive cash-flow deficits as the program’s revenues from the payroll tax and the taxation of benefits are falling short of benefit payments. Absent reform, Social Security benefits will be cut across the board by 23 percent in 2035. Action should be taken today to protect Social Security’s most vulnerable beneficiaries from such drastic cuts without burdening younger generations with massive tax increases or unsustainable debt. Lawmakers should immediately replace the current cost-of-living adjustment with the more accurate chained consumer price index; raise the early and full retirement ages gradually and predictably; phase in a universal, flat benefit; focus Social Security benefits on those who need them most; and enable more Americans to save their money in private retirement accounts.

Social Security’s main program, also known as Old-Age and Survivors Insurance (OASI), ran a $39 billion deficit in 2014, closing out five years of consecutive cash-flow deficits as the program’s unfunded obligations continue to grow.[1] According to the 2015 annual Trustees’ Report, the 75-year unfunded obligation of the Social Security OASI Trust Fund is $9.43 trillion, a $70 billion increase from last year’s unfunded obligation of $9.36 trillion.[2] After including federal debt obligations recorded as assets to the Social Security trust fund of $2.73 trillion, Social Security’s total 75-year unfunded obligation is nearly $12.2 trillion.

The Social Security OASI program is projected to reach insolvency in 2035. This means that the program is expected to have only enough revenue from payroll taxes, interest on the Trust Fund balance, and repayment of borrowed Trust Fund dollars to pay out scheduled benefits until 2035. This is one year later than projected in last year’s report.[3]

If no action is taken to improve Social Security’s solvency before its Trust Fund runs dry, benefits will either be delayed or reduced across the board by 23 percent. Congress should avoid indiscriminate benefit cuts which would harm the most vulnerable beneficiaries the most by adopting commonsense reforms that modernize the outdated Social Security program.

Social Security Is Already Adding to the Deficit

While Social Security’s OASI program is considered to be solvent on paper through 2035, Social Security’s cash-flow deficit is already adding to the federal budget deficit.

Since 2010, the OASI program has taken in less money from payroll tax revenues and the taxation of benefits than it pays out in benefits, generating cash-flow deficits. The 2014 cash-flow deficit was $39 billion. Over the next 10 years, the OASI program’s cumulative cash-flow deficit will amount to $840 billion, according to the trustees’ intermediate assumptions. For as long as the federal government is running deficits in excess of Social Security’s cash-flow deficits, we can assume that this $840 billion shortfall will be matched dollar for dollar by an increase in the public debt.

Social Security’s cash-flow deficits add to the public debt because, in order to pay full Social Security benefits, the Treasury Department has to raise cash in excess of what it receives from the payroll tax and the taxation of benefits. Cash-flow deficits mean that the Treasury can no longer pay all Social Security benefits from the program’s tax income alone. Instead, Treasury must produce additional cash from taxes or borrowing. With annual federal deficits in excess of Social Security’s cash-flow deficit, the OASI program is already adding to the deficit.

Since 2010, the OASI program has taken in less money from payroll tax revenues and the taxation of benefits than it pays out in benefits, generating cash-flow deficits. The 2014 cash-flow deficit was $39 billion. Over the next 10 years, the OASI program’s cumulative cash-flow deficit will amount to $840 billion, according to the trustees’ intermediate assumptions. For as long as the federal government is running deficits in excess of Social Security’s cash-flow deficits, we can assume that this $840 billion shortfall will be matched dollar for dollar by an increase in the public debt.

Social Security’s cash-flow deficits add to the public debt because, in order to pay full Social Security benefits, the Treasury Department has to raise cash in excess of what it receives from the payroll tax and the taxation of benefits. Cash-flow deficits mean that the Treasury can no longer pay all Social Security benefits from the program’s tax income alone. Instead, Treasury must produce additional cash from taxes or borrowing. With annual federal deficits in excess of Social Security’s cash-flow deficit, the OASI program is already adding to the deficit.

What About the Trust Fund?

In the past, when Social Security ran cash-flow surpluses, the federal government spent those surpluses on other federal spending, and in return, the Treasury credited Social Security’s Trust Fund with special-issue government securities. Although this $2.73 trillion in securities is not counted in the total amount of debt held by the public, it represents real debt that will have to be repaid over the coming decades, unless Congress changes current law.[4]

The Social Security Trust Fund represents legitimate repayments plus interest, but this distinction has no bearing on the federal budget’s bottom line. Congress spent all the excess revenues when Social Security was running surpluses, and now repaying those revenues is adding to deficits. As Chart 1 shows, shortfalls in Social Security’s programs represent a considerable portion of current and future deficits.

 

Nevertheless, Congress may change current law at any time, including by eliminating the Social Security Trust Fund. Funds earmarked for OASI through its Trust Fund do not represent accrued property rights, even though these funds come from taxing workers’ wages. Congress’s authority to modify the Social Security program was affirmed in the 1960 Supreme Court decision in Flemming v. Nestor, wherein the Court held that individuals do not have a “property right” to their Social Security benefits, regardless of how many years they paid payroll taxes.[5]

Via: Heritage Foundation

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$2,446,920,000,000: Federal Taxes Set Record Through June; $16,451 Per U.S. Worker—Feds Still Run $313B Deficit

(CNSNews.com) - The federal government raked in a record of approximately $2,446,920,000,000 in tax revenues through the first nine months of fiscal 2015 (Oct. 1, 2014 through the end of June), according to the Monthly Treasury Statement released today.

That equaled approximately $16,451 for every person in the country who had either a full-time or part-time job in June.

It is also up about $178,156,270,000 in constant 2015 dollars from the $2,268,763,730,000 in revenue (in inflation-adjusted 2015 dollars) that the Treasury raked in during the first nine months of fiscal 2014.

Despite the record tax revenues of $2,446,920,000,000 in the first nine months of this fiscal year, the government spent $2,760,301,000,000 during those nine months, and, thus, ran up a deficit of $313,381,000,000 during the period.

According to the Bureau of Labor Statistics, total seasonally adjusted employment in the United States in June (including both full and part-time workers) was 148,739,000. That means that the federal tax haul so far this fiscal year has equaled $16,451 for every person in the United States with a job.

In 2012, President Barack Obama struck a deal with Republicans in Congress to enact legislation that increased taxes. That included increasing the top income tax rate from 35 percent to 39.6 percent, increasing the top tax rate on dividends and capital gains from 15 percent to 20 percent, and phasing out personal exemptions and deductions starting at an annual income level of $250,000.

An additional 3.8 percent tax on dividends, interests, capital gains and royalties--that was embedded in the Obamacare law--also took effect in 2013.

The largest share of this year’s record-setting October-through-June tax haul came from the individual income tax. That yielded the Treasury $1,167,500,000,000. Payroll taxes for “social insurance and retirement receipts” took in another $771,048,000,000. The corporate income tax brought in $255,453,000,000.

The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.

Via: CNS News

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$2.1T: Tax Revenue for FY15 Hit Record Through May; Gov't Runs $365B Deficit

(CNSNews.com) - Inflation-adjusted federal tax revenues hit a record $2,103,987,000,000 for the first eight months of the fiscal year this May, but the federal government still ran a $365,156,000,000 deficit during that time, according to the latest Monthly Treasury Statement.

Each month, the Treasury publishes the government’s “total receipts,” including all revenue from individual income taxes, corporate income taxes, social insurance and retirement taxes (including Social Security and Medicare taxes), unemployment insurance taxes, excise taxes, estate and gift taxes, customs duties, and “miscellaneous receipts.”

In constant 2015 dollars, the $2,103,987,000,000 that the federal government collected from October through May in fiscal 2015 was $170,187,740,000 more than the $1,933,799,260,000 it collected in October through May in fiscal 2014.

The Treasury has been tracking these data since 1977 and at that time the federal government collected $868,767,320,000 in inflation-adjusted revenue in the first eight months of fiscal 1977. This means that since then, revenues have more than doubled, increasing by 142 percent.

Via: CNS News

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Treasury: Debt Up $0 in August; CBO: But Deficit Was $146B

(CNSNews.com) - The federal deficit increased by $146 billion in August, according to a report released today by the Congressional Budget Office. But, at the same time, according to the U.S. Treasury, the federal debt did not increase at all during the month.

Total federal receipts were $185 billion during August, according to the CBO, while total federal outlays were $331 billion. Thus, the Treasury was forced to engage in $146 billion in deficit spending.

Despite this deficit spending, the Treasury reported that at the close of every single business day in August, the federal debt subject to a legal limit by Congress remained exactly $16,699,396,000,000.

That is approximately just $25 million below the legal limit on the debt that is $16,699,421,095,673.60

If the federal debt had climbed by the same $146 billion that the deficit climbed in August, it would have exceeded the legal limit by almost $146 billion.

In fact, according to the Daily Treasury Statements that the Treasury publishes at 4:00 p.m. on each business day, the debt subject to the legal limit has remained at exactly $16,699,396,000,000--or about $25 million below the legal limit--every day since May 17.

Via: CNS News

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Morning Bell: 5 Immigration Falsehoods from the White House

Congress gets back to its regularly scheduled work on Monday—and there’s plenty of immigration propaganda greeting them.

The falsehoods from the White House just keep on coming, and Catholic leaders have calledfor clergy to preach in support of the Senate-passed immigration overhaul this Sunday.

On the White House blog, Cecilia Muñoz, assistant to the President and director of the Domestic Policy Council, laid out the Obama Administration’s take on the benefits of “commonsense immigration reform.” The blog, complete with “fact sheets” and the reposting of an animated video, made numerous claims about what the Senate-passed immigration bill (S. 744) would do for U.S. citizens and immigrants alike.

Here is how five of the White House’s latest claims stack up against the facts.

1. CLAIM: The Senate-passed bill would reduce the deficit.

FACT: It would explode the deficit.

Via: The Foundry

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Commander-And-Confused

Obama Was Unaware Of His Record And Not In Command Of The Facts During The Final Presidential Debate

OBAMA WAS UNAWARE THAT HE MADE THE “BIGGEST GAFFE” OF THE NIGHT ON SEQUESTRATION

Obama: “First of all, the sequester is not something that I proposed. It’s something that Congress has proposed. It will not happen.” (President Barack Obama, 2012 Presidential Debate, Lynn University, Boca Raton, FL, 10/22/12)

The Wall Street Journal: “By Far The Biggest Gaffe-Or Deliberate Evasion-Of The Evening Was Made By Mr. Obama When He Denied Paternity For The Sequester Defense Cuts Now Set For 2013 And Said They ‘Will Not Happen.’” “By far the biggest gaffe-or deliberate evasion-of the evening was made by Mr. Obama when he denied paternity for the sequester defense cuts now set for 2013 and said they ‘will not happen.’ Mr. Obama’s aides rushed out after the debate to say he meant to say the cuts ‘should not happen.’ But the truth is that Mr. Obama has been using the fear of huge defense cuts as a political strategy to force Republicans to accept a tax increase. As Bob Woodward describes in his recent book, Mr. Obama and the White House helped to devise the defense sequester strategy-no matter the actual risk to defense.” (Editorial, “Commanders In Chief,” The Wall Street Journal, 10/23/12)

Obama “Startled Washington During Monday Night’s Foreign Policy Debate When He Said Billions In Automatic Pentagon Cuts ‘Will Not Happen.’” “President Barack Obama startled Washington during Monday night’s foreign policy debate when he said billions in automatic Pentagon cuts ‘will not happen’ – a line that could weaken his bargaining power during an epic spending and tax fight expected when Congress returns.” (Phillip Ewing, “D.C. Caught Off Guard By Obama Sequester Vow,” Politico, 10/23/12)

• Obama Has Repeatedly Used Sequestration As A “Bargaining Chip” In Deficit Reduction Negotiations. “Obama was responding to criticism from Republican rival Mitt Romney that American national security is at risk if the defense cuts are triggered in early January. ‘First of all, the sequester is not something I proposed, it’s something that Congress proposed,’ Obama said. ‘It will not happen.’ The remark stakes new ground for the president, who has said he wants to avert the sequester cuts by taking a ‘balanced’ approach to solving the budget debacle – meaning he will not sign off on a deal that cuts spending, but doesn’t increase revenues. His strongest bargaining chip: the sequester cuts, which he may have just taken off the table.” (Phillip Ewing, “D.C. Caught Off Guard By Obama Sequester Vow,” Politico, 10/23/12)

Immediately After The Debate, Obama’s Advisers Worked To Tone Down Obama’s Remarks. “After the debate, White House senior adviser David Plouffe toned down the president’s remarks, saying that ‘everyone in Washington agrees that sequester ‘should not happen.” And Obama’s senior campaign adviser David Axelrod also took a less firm stance on sequester, telling CNN that a balanced deal is widely appealing: ‘There are plenty of people on both sides who want to get that done, and will get that done.’” (Phillip Ewing, “D.C. Caught Off Guard By Obama Sequester Vow,” Politico, 10/23/12)

Via: GOP.com

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Poll: 86 percent of Americans say government spending has not helped them

President Obama’s solutions to economic problems invariably involve more spending, but 86 percent of likely  say that government spending has not helped them, according to a new poll.

“On the question of whether federal government spending has improved the overall economy, 74 percent say it has not helped, with 52 percent responding that it has actually hurt the economy,” The Public Notice announced yesterday after questioning 1,005 likely voters.  “When asked how federal government spending has impacted personal financial situations, 86 percent of those surveyed say it has not helped, with 35 percent responding that it hurt.”

The Tarrance Group, the Republican-leaning firm that conducted the poll, added in its memo that “this pessimism over the impact of government spending is consistent throughout many key demographic groups that are frequently mentioned as ‘target’ voters in the upcoming Presidential election.”

Federal debt hit $16 trillion this year. Obama blames George W. Bush for the deficit, but The Washington Examiner’s Phil Klein argued last week that this reflects a “responsibility deficit” on the part of the president.

“[When Obama was inaugurated], the CBO projected deficits of $1.2 trillion in 2009 and $703 billion in 2010, for a total two-year deficit of about $1.9 trillion,” Klein explained. “The Obama administration went on to run deficits of $1.55 trillion in 2009 and $1.37 trillion in 2010, for a total of more than $2.9 trillion. In other words, in just his first two years, when Obama had a Democratic Congress that gave him virtually everything he wanted, deficits were $1 trillion higher than what the CBO was projecting when he was inaugurated.”

Via: Washington Examniner

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Debt Jumped $1.2759T in FY 2012; Up $10,855 Per Household in Just 12 Months; Beats 2011

According to the U.S. Treasury, the debt of the U.S. government climbed by a total of $1,275,901,078,828.74 in fiscal 2012, which ended yesterday.

That means the federal government borrowed approximately an additional $10,855 for each household in the United States just over the past twelve months.

The total debt of the United States now equals approximately $136,690 per household.

In fiscal 2011, the debt increased by about $10,454 per household--$401 less than the $10,855 per household increase of 2012.

The $1.2758 trillion that the debt increased in fiscal 2012 was about $47.18 billion more than the $1.2287 trillion that the debt increased in fiscal 2011.

The federal fiscal year begins on Oct. 1 and ends on Sept. 30.

At the close of business on Sept. 30, 2011, the total debt of the U.S. government was $14,790,340,328,557.15, according to the Treasury. At the close of business on Sept. 28, the last business day of fiscal 2012, it was $16,066,241,407,385.89

That meant the debt increased in fiscal 2012 by $1,275,901,078,828.74.

At the close of business on Sept. 30, 2010, the debt had stood at $13,561,623,030,891.79.  Over the course of fiscal 2011, it increased by $1,228,717,297,665.36 before closing at 14,790,340,328,557.15 on Sept. 30, 2011.

The fiscal 2012 increase of $1,275,901,078,828.74 exceeded the fiscal 2011 increase $1,228,717,297,665.36 by $47,183,781,163.38

The Census Bureau estimated that there were 117,538,000 household in the United States in 2010. The $1,275,901,078,828.74 that the debt increased in fiscal 2012 equaled about $10,855 for each one of those 117,538,000 households.

Via: CNS News

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The Magnitude of the Mess We're In

Sometimes a few facts tell important stories. The American economy now is full of facts that tell stories that you really don't want, but need, to hear.

Where are we now?

Did you know that annual spending by the federal government now exceeds the 2007 level by about $1 trillion? With a slow economy, revenues are little changed. The result is an unprecedented string of federal budget deficits, $1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 trillion in 2011, and another $1.2 trillion on the way this year. The four-year increase in borrowing amounts to $55,000 per U.S. household.

The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.

The government has to get the money to finance its spending by taxing or borrowing. While it might be tempting to conclude that we can just tax upper-income people, did you know that the U.S. income tax system is already very progressive? The top 1% pay 37% of all income taxes and 50% pay none.

Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve? Foreign governments accounted for most of the rest, as American citizens' and institutions' purchases and sales netted to about zero. The Fed now owns one in six dollars of the national debt, the largest percentage of GDP in history, larger than even at the end of World War II.

The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.

Via: Wall Street Journal

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Debt Up $6.35T Since Ryan Predicted--in 2008-U.S. Was Headed Toward Bankruptcy

Rep. Paul Ryan of Wisconsin and former Gov. Mitt Romney of Massachusetts in Norfolk, Va., on Aug. 11, 2012, where Romney announced Ryan as his running mate. (AP Photo/Mary Altaffer)

(CNSNews.com) - Rep. Paul Ryan, whom Republican presidential candidate Mitt Romney has picked as his running mate, told CNSNews.com four years ago, in August 2008, that the U.S. was heading toward bankruptcy on the fiscal path it was then following and that it would be “mindboggling” to make the problem worse by adding the sort of health-care plan that then-Sen. Barack Obama was advocating in his presidential campaign.

CNSNews.com asked Ryan: “If our country, if the federal government of the United States, stays on the fiscal path it is currently following, is the government going to go bankrupt down the road?"

“Yes. We know that for a fact,” said Ryan. “All the actuaries, all the objective score-keepers of the federal government are predicting this. So, this much we know. What we know is our government is growing at an unsustainable pace and it will overwhelm our economy’s ability to pay the bills.”

Since CNSNews.com first published Ryan making this prediction on Aug. 4, 2008, the debt of the federal government has grown by $6.35 trillion--rising 66 percent, from $9,565,042,361,845.53 then to $15,915,814,457,919.46 now.

Via: CNSNews:

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