Social Security Meltdown is Here

It's been almost a couple of years now, but when I challenged Bruce Webb sometime back on his endless claims of "solvency" for Social Security, the guy practically blew a gasket. And now he's got some totally unintelligible post up today on the public debt ceilings and entitlement reform, although this quote gives you an idea of his agenda:

As long as the Social Security Trust Funds are throwing off enough interest dollars to cover the gap between Income excluding Interest and Cost there is absolutely no reason why workers should simply sacrifice their own interests here.

Translated: There's no reason for reforming the system to reduce liabiliaties or shift to marketization. But for Bruce Webb, frankly, if you keep spinning out enough opaque accounting gimmicks, there'll never be any reason to consider actually reforming a system that's essentially bankrupt. And Bruce will come back screaming in your face that there's now way you can truly understand these issues unless you've read the "primary documents" like he has!

Actually, it's not that complicated. In fact, John Hawkins has the goods: "It Has Begun: The Big Social Security Meltdown":

For years, conservatives have been saying that we need to get a handle on Social Security. Even George Bush, who wasn't a fiscal conservative, understood the risks and he tried desperately to reform the program -- but, not no avail.

Well now, a few years earlier than most people predicted, the program is going into the red:

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

...No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

...Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.

To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.

For a long, long time in this country, we've sacrificed the "future" for the "now." The problem with doing that is that eventually, the future arrives and you have to deal with it. Say hello to the future of Social Security, folks, because it's here a little early.

There's more at the link. And John's link goes to CNN, "Next in Line for a Bailout: Social Security."

But no doubt Bruce Webb's got everything under control!