The Social Security Trust Fund reported an August net deficit of $5.865 Billion. This is the largest monthly deficit in nineteen years. Base on recent years data it was not surprising the Fund ran a deficit in August. But the magnitude of the shortfall was a surprise to me. This deficit is now the seventh in the past twelve months. That pace has never been seen before.
…The August deficit reconfirms that the Funds foundations are wobbly. Some observations:
-In August the US Treasury had to borrow an additional $6 billion in the public market to finance the cash shortfall of Social Security. We already have too much paper for sale to fund the budget deficit. SS added to the supply problem last month.
-The expense side is exploding. The September monthly benefits cost will be $56.6b up from $51.5 in 2008, a 10% increase.
-In 2007 the SSTF produced a surplus of $191b that it invested in the US economy. This year it will be closer to $100b. Based on the current trends that surplus will be gone by 2012. Six years earlier than the Trustees forecast in June of this year.
SS is the mother of all systemic risks. Even the debate on this topic brings risk. It will expose an additional $7trillion unfunded liability.
9/9/09
On Social Security’s Trust Fund: 7 Deficits in 12 Months.
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