What Social Security deficit?
There are many reasons why President Bush failed last year to win support for his Social Security overhaul, but here's one of them: Far from being drenched in red ink, the Social Security trust fund is still showing huge year-to-year surpluses. And these surpluses are still continuing to grow! This year Social Security is expected to take in about $80 billion more in cash than it spends on benefits, and by 2009 the surplus probably will top $100 billion. CBO Budget Outlook (Note chart on p. 22)
These growing surpluses don't negate Bush's central point -- that the trust fund will drop like a rock with the Baby Boomers' retirement and that something needs to be done. (Within a decade or so these year-to-year surpluses are projected to become year-to-year deficits.) But it's tough to declare a national emergency at a time when the money is pouring in -- and, by the way, being steered to other pieces of Bush's fast-growing federal budget. For every crisis there is a season, and this one's time clearly hasn't arrived.
Comments:
What is the truth behind a "grand bargain" during the Reagan Administration? Was the goal to prepare for this upcoming social security deficit with a combination of higher social security taxes in the short run (1980s through now) and higher income taxes later? Or is that an urban myth?
Posted by: ScottM at February 23, 2006 8:25 AM
I'm not sure it's possible to assign a consensus view to the strategy behind the 1983 deal that rescued Social Security from a tough financial spot. It is true, however, that payroll taxes were raised high enough to produce a couple of decades worth of surpluses. It's also true that the net effect was for these surpluses to subsidize other operations of government, a plus for high-income earners and a negative for lower wage-earners. Time will tell (and perhaps not for many years) who will pay for the Baby Boomers' higher retirement costs.
Posted by: David Westphal at February 23, 2006 9:29 AM
I agree that this is the time to address the future SS deficit. But there's no reason for a drastic overhauling. Simply raising the ceiling on taxable SS income by a moderate amount would accomplish what is needed, and at far less cost than Bush's plan would have done.
Posted by: Mike at February 23, 2006 11:21 AM
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