Bruce Krasting: Social Security lost track of $25 billion?

We Lost Track of $25 Billion?

I have been keeping an eye on the monthly numbers for the Social Security Trust Fund...

...There was no logical explanation for the continued drop in YoY payroll tax receipts.

Two important sources have “explained” this drop. Both the SSTF [Social Security Trust Fund] and the CBO [Congressional Budget Office]have confirmed that somehow there was a miscount over at Treasury for $25-29 billion.

 

Receipts from social insurance taxes
are also expected to decline this year
by $29 billion (3.2 percent) from last year,
mostly because of an adjustment by the Treasury
to correct for the allocation of receipts in earlier years.

The explanation from the CBO

 
    The estimated decline in trust fund income from 2009 to 2010
is due to the economic recession
and to an expected $25 billion downward adjustment to 2010 income
that corrects for excess payroll tax revenue
credited to the Trust Funds in earlier years.

The explanation from the SSTF

 ...This is not supposed to happen. In the monster numbers the government tosses around this is not a big deal. But $25b is still a lot of dough.

...There is not an adequate explanation of what has happened. What the hell does “earlier years” mean? (Note the common language by both CBO and SSTF)

...this money was invested in Special Issue Treasury securities. It earned interest on those securities. So Treasury created the $25b and gave it to the TF in cash, then the TF invested it back with Treasury. But there was no money. It was a double count. One would have thought that Treasury actually balances and confirms its cash accounts from time to time. This gets back to the question how long this error has been going on.

-In my opinion the SSTF has misrepresented its financial condition to the public and to Congress for more than eleven months. Faced with an embarrassing $25billion restatement what do they do? They bury the loss. They have artificially reduced reported monthly payroll tax receipts by approximately $2b per month for all of 2010.

That is not how a loss of this magnitude should be handled. A public announcement and a one-time loss would have been the appropriate way to account for it.

...If a public company played fast and loose with top line earnings to obfuscate a bottom line loss there would be hell to pay. The market would take the stock out in the woods and shoot it. The SEC would fine them 10% of what they hid. The press would have a field day and anyone near the cover up would be forced to resign. But this is D.C.

Bruce Krasting