The End of Social Security’s Cashflow Surpluses

by Dave Schuler on December 10, 2012

Bruce Krasting has used the Social Security’s estimate of December 2012 benefits paid and taxes received to extrapolate what we’re likely to see when the Social Security trustees will say when they issue their annual report in six months. The news, as I reported a couple of weeks ago, is not good.

Among his findings and conclusions are that:

  • Benefits paid increased by 6.9%
  • Taxes received increased by 6.5%
  • Interest received decreased by 1.7%
  • There was a cashflow shortfall of $46.7 billion in 2012
  • Social Security will never see a cashflow surplus again

The implication of that is that interdepartmental debt will be decreased to pay for the shortfall and debt owed to the public will be increased. He estimates that the shortfall will reach critical mass in about five years. I think the wheel will really hit the road in about eight years when the trust fund runs dry, receipts are sharply below outlays, and the Congress will be left with two very unpalatable alternatives. Either they can allow the benefits they pay to fall or they can just pay the full benefits anyway, rapidly increasing debt owed to the public and/or sucking up an increasing amount of the total budget.

{ 13 comments… read them below or add one }

Drew December 10, 2012 at 10:21 am

Gasoline on the fire:

State public pension obligations, mostly contractually guaranteed, are now probably $4billion instead of a $2 billion estimate just a few years ago due to errant return expectations.

Another fine mess………

Steve Verdon December 10, 2012 at 12:08 pm

Doesn’t matter, ask Krugman, Ben, and the rest of them. The U.S. can just “print” as much money as it needs. Since we are suffering from an aggregate demand short fall (of course, aggregate demand doesn’t really exist, but meh) no worries we can “print” as much as we need.

Personally, I can’t wait till that million bucks shows up in my checking account courtesy of the government.

Drew December 10, 2012 at 12:11 pm

Just make sure when that million printed bucks shows up in your account you empty it pronto to buy stuff at current prices, not future prices. Else you will be treading water.

jan December 10, 2012 at 12:31 pm

I’m hearing more and more talk about the inflation which is sure to follow the Krugman recipe of recklessly printing money to create his recovery meal for the U.S.. Isn’t there such a thing as pragmatic logic eventually preempting or overriding pure ideology?

Also, why don’t the administrative fiscal thinkers ever consider falling birth weight + fewer people in the employment pool + greater numbers of boomers entering the beneficiary stages of their lives in their calculations, as to the degree of unsustainable trauma ahead, causing red flags to be hoisted up on public radar screens everywhere?

Dave Schuler December 10, 2012 at 12:36 pm

I’m hearing more and more talk about the inflation which is sure to follow the Krugman recipe of recklessly printing money to create his recovery meal for the U.S..

Playing devil’s advocate, a point in Dr. Krugman’s favor is that the inflation that some have been predicting hasn’t emerged so far.

jan December 10, 2012 at 1:14 pm

Playing devil’s advocate, a point in Dr. Krugman’s favor is that the inflation that some have been predicting hasn’t emerged so far.

Charles Payne, a conservative business analyst, was saying this morning that he thinks we are already experiencing inflation. I tend to agree, albeit a more creeping kind of price inflation.

We see it everyday just in the building trades, where yesterday’s prices are steadily marked up. It’s not rampant, by any means, where you need a wheelbarrow to haul money around to pay for a loaf of bread. But, it’s still apparent in continuing building materials, food, rent increases etc. It reminds me of a low grade temperature, symptomatic of a larger internal problem just festering below the surface.

Dave Schuler December 10, 2012 at 1:26 pm

He may say whatever he cares to but that doesn’t make it so. With the caveat that in this context I’m talking about inflation reflected in prices of consumer goods, there’s plenty of evidence that it’s not happening, whether you look at the CPI-U, the CPI-W, or indices with stronger empirical bases like the Billion Price Project.

If you’re talking about asset inflation, it may well be happening.

If you’re talking about the rising prices of healthcare and education, that’s just ordinary rising prices. We throw more money at it, the supply is capped, the price goes up.

Drew December 10, 2012 at 3:30 pm

“Playing devil’s advocate, a point in Dr. Krugman’s favor is that the inflation that some have been predicting hasn’t emerged so far.”

And Dave’s post at 1:26

It seems to be a pea in the shell game. Count this, not that. Explain away this, not that. Housing, overweighted in the index, has brought the index down, but at wealth destruction for owners.

As anyone who follows what I write will know, take the professors and academics and flush them down the toilet. Given enough time they can pretty much “prove” anything.

Question: anyone not seeing a general 5-ish percent rise in prices of general consumption items? I deal in everyday people and business.

Steve Verdon December 10, 2012 at 4:31 pm

Just make sure when that million printed bucks shows up in your account you empty it pronto to buy stuff at current prices, not future prices. Else you will be treading water.

Bah, with weak aggregate demand prices wont go up, so no worries.

Andy December 10, 2012 at 5:20 pm

Question: anyone not seeing a general 5-ish percent rise in prices of general consumption items? I deal in everyday people and business.

I’ve long had a sense that was the case, but when I look at the data, it doesn’t show it.

michael reynolds December 10, 2012 at 7:29 pm

Actually I’m seeing gas prices dropping like a rock. But that was last month’s panic, I guess.

Steve Verdon December 11, 2012 at 12:43 pm

Actually I’m seeing gas prices dropping like a rock. But that was last month’s panic, I guess.

Most likely a cyclic down swing. We are out of the driving season and Thanksgiving is past.

Steve Verdon December 11, 2012 at 3:48 pm

I know you probably thought that was an insightful comment Michael, but seriously, do you ever get tired of being wrong in these threads?

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