Friday, August 6, 2010

Social Security Trustees Report Just Released

According to the Trustees report, Social Security will run a cash flow deficit of $41 billion (0.3 percent of GDP) this year, will return to small surpluses in 2012-2014 of a few billion dollars a year, and then will begin running increasing deficits from 2015 onward. By 2020, the system will run a cash flow deficit of over $100 billion (0.4 percent of GDP) and by 2030 it will have a shortfall of nearly $460 billion (1.2 percent of GDP).

In the short-term, the health of the Social Security program deteriorated compared to last year's estimates, due to worse economic conditions. Over the longer-term, it improved somewhat, due to the effects of higher tax revenues resulting from more compensation in the form of cash wages as opposed to heath care benefits, resulting from health care reform.

Due mainly to aging and an expanding retired population, costs are expected to increase from 4.8 percent of GDP today to 6.1 percent of GDP by 2030. These costs are generally in line with last year's projections of 4.9 percent of GDP this year to 6.1 percent by 2030. Meanwhile, revenues are expected to be slightly higher than last year's projections, rising from 4.6 percent of GDP today, to 4.9 percent by 2020, and stabilizing at around that level through the 2030s before dropping down to 4.6 percent by 2080.

Over the next 75 years, on top of the $2.5 trillion in government bonds which are currently in the Social Security Trust Funds and which must eventually be repaid, the program still faces an average shortfall of 1.92 percent of taxable payroll-below last year's projected 2 percent shortfall, but a significant imbalance nonetheless.

(Source: Committee for a Responsible Federal Budget)

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