Obama and Congress Puts Another Nail in Social Security Coffin

The road to serfdom is paved with good intentions and Congress swiftly laid down the Grecian asphalt this afternoon. Today they extended the payroll tax cut and unemployment benefits. This legislation would add $85 billion to the budget deficit, and deplete the Social Security “trust fund” of $93 billion through 2022.

WASHINGTON Congress swiftly approved legislation Friday renewing a payroll tax cut for 160 million American workers and jobless benefits for millions more, backing the main items on President Barack Obama's jobs agenda in a rare burst of Washington bipartisanship.

The Senate approved the $143 billion measure on a 60-36 vote minutes after the House approved it by a sweeping 293-132 vote. Obama is expected to sign it shortly after returning from a West Coast fundraising swing.

On Friday in an appearance at a Boeing factory in Everett, Wash., Obama gave lawmakers a verbal fist bump.

"It is amazing what happens when Congress focuses on doing the right thing instead of just playing politics," Obama said. "This was a good example, and Congress should take pride in it."

Only 41 democrats and 91 republicans voted against this bill in the House of Representatives; the Senate 5 democrats and 31 republicans. These defectors should be commended for not raiding the treasury for what is obviously a give away to buy votes. Of course, there are some whose intentions were not so honorable.

Social Security is projected to run at a deficit. The Great Recession has taken its toll on revenues. Business Insider explains our dire situation:

Looking at the data on this basis, you'll see the actual deterioration that took place in 2011.

2012 will be worse than 2011. Benefits are going to jump by $50B+ next year. 10,000 new people are signing up for checks every day of the week. Add the fact that every one of the 55mm beneficiaries will be getting 3.6% more in their checks (COLA adjustment). The revenue side is a wild card. What will GDP be? If it's around the 2% that is currently anticipated, revenues at SSA will fall well below plan. A flat economy (+2%) would translate into a $100B 2012 primary deficit (payroll receipts minus benefits). A number like that is not on anyone’s radar today.

It definitely isn’t on the D.C. Swamp Monster’s radar. They just depleted Social Security even more by extending the tax cut. But when the crisis comes to ahead in a few short years, even raising “revenues” will be impossible to cover the obligations promised by pandering politicians. Business Insider continues:

The 2011 numbers for SSA indicate that we are at least five years ahead of existing thinking on the SSA deficits. When this realization sinks in, it will break the hearts of the SS defenders. If we are, as I contend, five to six years ahead of “schedule” with cash deficits at SSA, there is no alternative besides cutting scheduled benefits. Raising taxes to fill a hole this big is not an option. Nor is it an option to maintain the status quo and allow for a very rapid rundown of the SS Trust Fund.

If we are going to experience what I believe we will, then the cumulative SS cash shortfall over the next decade will add ANOTHER $1.5 trillion onto Public Sector Borrowing ("PSB"). (A shift from the Intergovernmental account into the PSB account; AKA the Chinese). This increase in PSB more than offsets the $1.2 T of cuts that the congressional super committee failure has just mandated.

The consequences of SS (and similarly the other government retirement funds) on PSB over the coming years is not now being considered by those looking at America’s debt profile. It will be soon enough. The current thinking is that SS is a problem that can be worried about in another ten years or so. That's simply not true.

And this payroll tax cut upped the ante.

Source: http://articles.businessinsider.com/2011-12-06/home/30481042_1_adjustments-ssa-payroll-tax-revenue#ixzz1mh24skO4


http://www.charlotteobserver.com/2012/02/16/3018891/house-speaker-says-payroll-tax.html#storylink=cpy


http://nbcpolitics.msnbc.msn.com/_news/2012/02/17/10435191-congress-passes-payroll-tax-cut-extension