Charles Blahous, Public Trustee for the Social Security Trust Fund, and Bruce Krasting on Permanent Social Security Deficits: Andrew, Ed, Harold and Polifrog?

The 2011 Trustees’ report

is the first in which Public Trustees have ever participated

to have concluded that an era of permanent annual deficits has been reached.

Social Security expenditures exceeded the program’s non-interest income in 2010

for the first time since 1983.

This deficit stood at $49 billion last year and is projected to be $46 billion in 2011.

This deficit is expected to shrink to about $20 billion for years 2012-2014
as the economy strengthens.

"The problem is that the economy is simply not producing enough jobs.

There are fewer workers contributing to the system.

The SSTF is anticipating “a strengthening economy”,
I see no evidence of this today and have no expectation for a turnaround in the jobs picture
any time over (at least) the next five years.

The recession killed us.

As of today the number of workers contributing to SS
is less than it was in 2000.

SS is adding to the annual budget deficit ($116b in 2011).

It is adding to our funding deficit (the amount we need to borrow from the Public).

In less than a decade it will become unmanageable.

After 2014, cash deficits are expected to grow rapidly

as the number of beneficiaries continues to grow

at a substantially faster rate than the number of covered workers.

Social Security operations are currently adding to the unified federal deficit

and will add substantially more in the years to come.

If we look at the bonds from the perspective of the Trust Funds, they are assets.

If we look at them from the perspective of the unified federal budget,

they are a net wash, as are the interest payments that they receive.

The costs that will be borne by younger generations will grow significantly each year

that a new cohort of baby boomers joins the benefit rolls.

...it is absolutely insane to think that the Baby Boomers (I’m one)
can put the burden of SS on younger workers.

Who is going to be most hurt by what is coming (absent changes)?

The answer is clear.

Older people who are 100% dependent on SS
and younger workers who are on the bottom of the income scale.

...The result of a policy approach that sticks everyone under 50
with the cost of the Boomers is going to result in deep social divides.

...if the plan to “fix” SS is one that sticks the bill onto young people
we WILL have age warfare, it’s inevitable.

The social consequences would be greater than the economic costs.

Elected officials will best serve the interests of the public

if financial corrections are enacted at the earliest practicable time.

Earlier action will also afford elected officials with a greater opportunity

to minimize adverse impacts on vulnerable populations,

including lower- income workers

and those who are already substantially dependent on program benefits.

Charles Blahous

Public Trustee for the SS Trust Fund

My position on this complicated issue:

-We can’t cut benefits across the board.

Too many people would be eating cat food.

-We can’t put the burden of the Boomers on younger workers.

It’s simply not fair.

-The solution(s) have to be born (largely) by the Baby Boomers themselves.

Post the Boomers, SS can be a PayGo concept.

But the transition is not PayGo.

It is a huge inter-generational transfer of wealth.

This means that well off Boomers (there are many, including myself)
are going to have to dig into their pockets to support those in their age group
who did not fair so well.

That, in my opinion, is the only viable solution.

That would be more representative of the American way.

Fairness."

Bruce Krasting