Soc Sec XIII: ‘Crisis’ at Shortfall; or Show me the Money
Social Security ‘crisis’ is normally discussed in terms of Trust Fund Depletion. But given that this event has been pushed back to at least 2041 and boils down to a benefit in real terms 25% better than the one my Mom gets today (78% of 160% = 125%), and that some awareness of this leaked out during the ‘There is no crisis’ campaign of 2005, opponents of Social Security had to retool and redefine crisis at Shortfall, which is to say the time that receipts from taxation fall behind Social Security cost and so require the General Fund to start paying back the money it borrowed. Since no serious argument can be made that the debt is not real, because after all they continue to borrow the current surplus presumedly in good faith, instead they pivot to ‘explain’ that paying it back will put some intolerable strain on the overall budget and so require massive spending cuts or ruinous taxation increases. But as almost always they never actually put a price tag on this. So lets price Shortfall in inflation adjusted Constant Dollars. Source data here: Table VI.F7.—Operations of the Combined OASI and DI Trust Funds, in Constant 2008 Dollars, Calendar Years 2008-85″ [In billions]
Now generally when people talk about the Social Security surplus they include the accrued interest and talk about the General Fund borrowing $200 billion a year. And viewed from the standpoint of legacy debt this is fair enough, they are assuming future obligations for that amount. But that interest is not in fact financed, the only real cash extracted from the economy and so the only real dollars that can be used to pay for real current spending are the actual excess tax dollars over current costs. Lots and lots of nummy numbers below the fold.
Between 2008 and 2017 the system is projected to run surpluses, but how much of that is actually cash? In this case the first column represents total surplus, the second cash flow (all under Intermediate Cost assumptions, dollars in billions)
2008 $196 $79
2009 $208 $86
2010 $214 $84
2011 $216 $76
2012 $214 $66
2013 $209 $52
2014 $200 $35
2015 $190 $18
2016 $180 $2
2017 $164 -$19 {oops, had to edit from -$21, which is the net change from 2016 and not the actual transfer for 2017}
In light of this we can see how misplaced the hysteria really is. These are not particularly big dollars to start with and over the next ten years the General Fund will be gently weaned off what is in context a pretty meager flow, the idea that a transition from a $2 billion cash surplus in 2016 to a $19 billion dollar cash deficit in 2017 roiling the world credit markets or demanding huge slashes in spending or ruinous tax increase is in numeric context simple nonsense, particularly as here if you adjust the numbers for inflation. But doesn’t it just get worse going forwards? Well lets see. At this point the table shifts to five year periods meaning we have to interpolate for 2023, the date the total surplus is being tapped and principal has to be repaid. These figures represent total transfers from the General Fund, once again adjusted for inflation. {Oops had to edit, got 2017 and 2023 mixed up the first time around}.
2017 $19
2020 $77
2023 ~$150
2025 $172
2030 $258
2035 $313
2040 $335
2042 $0
In short financing Social Security through 2041 means deficits in real terms less than the typical ones run by this Bush Administration and in context much smaller than those run in Reagan/Bush I days. If we exercise even a little restraint on the General Fund side this gap is easily digestible, especially if we note that it is in principle temporary, there is no positive legal obligation for the General Fund to backfill any income/cost gap after 2041. Once you put the numbers in context any real content to ‘crisis’ simply melts away. Which is why privatizers never put the numbers in context.