The American Spectator : The Spectacle Blog : Social Insecurity

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The Washington Post has a story out today on what I believe is one of the most overlooked aspects of the economic crisis -- that rising unemployment is pinching payroll tax revenue. For years, the government has collected more in Social Security taxes than it pays out, which has allowed it to use the surplus to fund other government operations. But now, the CBO estimates that the surplus is expected to virtually disappear next year, reaching just $3 billion, and that by 2017 it will start running deficits. Sure, there's a "trust fund" that isn't projected to run out until 2041, but that is only comforting to those who pretend that the money doesn't ultimately come from the same piggy bank.

And then there's this:

"This is not a problem for Social Security, it's a problem for fiscal responsibility," said Christian Waller, a public policy professor at the University of Massachusetts at Boston and a senior fellow at the Center for American Progress. He said the new estimates would force President Obama and his budget director, Peter Orszag, "to stay on track in what they have set out to do, and that is rein in deficits."

Yeah, and they're doing a good job of it, too -- so good, in fact, that the projected cumulative deficits over the next decade are only $9.3 trillion (as opposed to $4.4 trillion they would be under current law).

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JP| 3.31.09 @ 10:19AM

Much will depend on what the Baby Boomers do. The first Boomer to retire was a California school teacher. I think the AP did a story on her -that was back in 2007 when things were not so critical.

Those Boomers who had much of thier portfolio tied up in 401k(s), mutual funds, and stocks are probably putting off retirement until they can get some of thier owner equity back. Those Boomers between the ages of 58 and 64 are in the worst shape. They are at the high end of the income bracket as far as salaries are concerned and would be the most likely to be "downsized". This wouldn't be a problem in 2005 or 2006 when they had hundreds of thousands of dollars if nor millions in vested accounts. But after the collapse in the equity markets, they'd be lucky to have 1/3rd of what they had three years ago. On top of that they have mortgages, 2nd mortgages, car payments and credit card debt. With the collapse of Wall St they simply cannot retire and enjoy the life style they've dreamnt about.

Either way, there will be a large bulge of people retiring starting this year and accelerating through the remainder of Obama's fisr (and hopefully last) term. In purely economic terms, they will be a huge drain on the economy.