The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.
With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund's annual surplus is forecast to all but vanish next year -- nearly a decade ahead of schedule -- and deprive the government of billions of dollars it had been counting on to help balance the nation's books.
Plan for a longer working career. Save more for your old age. Expect to get less from government. Expect to pay more to government. Think about how to shelter your income from the higher taxes which governments will levy to pay for some of their liabilities.
Trust fund? Surely those government jokers jest. Mish Shedlock argues Social Security: There Is No Trust; There Is No Fund.
Can we stop with the nonsense? Revenues exceed payouts but that does not mean there is a fund. Every penny and then some has been borrowed and spent. And even the so called surplus is falling like a rock, a decade faster than expected.
Maybe the surplus will come back for a few years. But the US government will come out of this deep recession with a much heavier debt burden. Americans will pay for this with benefits cuts and higher taxes.
In the context of writing about Peak Oil Gail the Actuary points out that it is much harder to repay debt in a shrinking economy. Debt becomes a larger percentage of output and income even if total debt is held even. The same holds true for unfunded liabilities. I see some fundamental reasons why US economic growth isn't going to be strong in the 2010s and 2020s. We have an aging and dumbing population. Plus, natural resource supply limitations are going to make themselves felt. We are already living beyond our means (chronic trade and budget deficits and huge increases in all forms of debt - really, lots of debt) even before these problems become severe.
|Share |||By Randall Parker at 2009 April 04 09:49 AM Economics Demographic|