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02-04-2010 04:23 PM  8 years agoPost 1
Texas1

rrNovice

Tyler, Texas

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When the last administration tried to tackle this issue. The theme was there was no need plenty of cash to float the Frederal Budget and SS payouts. Well now for the first time it will be cash negative on intake. Also a nice link to why at the time we did not need to fix it.

http://articles.latimes.com/2009/fe...ss/fi-hiltzik12
http://www.politico.com/news/stories/0209/18636.html

Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

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.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

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.

Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.

But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

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.
Copyrighted, Fortune. All rights reserved

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02-04-2010 04:45 PM  8 years agoPost 2
Justin Stuart (RIP)

rrMaster

Plano, Texas

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Maybe we could cut defense spending just a little bit?

Avant RC
Scorpion Power Systems
Thunder Power RC
Kontronik Drives

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02-04-2010 08:13 PM  8 years agoPost 3
SSN Pru

rrElite Veteran

Taxachusetts

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maybe we could cut ALL pet projects and entitlements?

That'll produce one HELL of a cash surplus.

Stupidity can be cured. Ignorance is for life!

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02-04-2010 09:51 PM  8 years agoPost 4
dilberteinstein

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texas - USA

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SSN Pru
maybe we could cut ALL pet projects and entitlements?

That'll produce one HELL of a cash surplus.
You silly rabbit...that would be: "Government by the People for the People" and everybody knows Abraham Lincoln was not a Democrat.

Remember the Socialists Creed: "We'll spend until all your money's gone, and then we'll borrow from China."

90% of life is "showing up"

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02-05-2010 01:26 AM  8 years agoPost 5
baby uh1

rrVeteran

St. James, Mo.

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Our government spends money like a teen who just went off to school with Daddy's credit cards!
Costs are no concern until the cards a rejected!

Anything is possible if you don't know what you are talking about!

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02-05-2010 04:18 AM  8 years agoPost 6
debogus

rrApprentice

Beauklahoma,peoples republic of mexifornia,USSA

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No problem, he just threatens you and takes your card and your kids card and their kids...

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02-05-2010 05:06 AM  8 years agoPost 7
Aaron29

rrProfessor

USA

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Maybe we could cut defense spending just a little bit?
Maybe we could, but defense spending is only 23% of the total budget and only 4.7% of our GDP.

Even GIGANTIC cuts on defense spending would amount to very little. You could HALF the defense spending and only get like 10% the total budget changed.

Obviously HALVING the defense spending would be ridiculous. Look at the F-22, cancelled. Look at Russia, just wheeled out the T-50. Look at where we are in the world with respect to military capabilities. We are dominant but the other guys are catching up quick and we will see our position shrink in the world. That will lead to changes in trade markets, alliances, etc, as our legitimacy decreases.

Military strength is a key thing that gets ignored. Show me a great historical society that had a weak military. Great Britian? Byzantine? Greek? Roman? Egyptian? Babylonian? Nope. None of em had a weak military, and neither should we.

And if they did lose wars, it turned out to be their end.

Don't lose sight of reality. Weak military=weak country. None of this other stuff will matter if we get overrun. If you think we're broke now, wait until we are so weak comparatively that other countries have more legitimacy for markets and trade agreements. Imagine being weak enough where a country could put crippling sanctions on you.

Don't get so used to being a superpower and enjoying the perks that you forget that superpowers in history weren't permanent things! If you think it's bad now...

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02-05-2010 05:13 AM  8 years agoPost 8
Dennis (RIP)

rrApprentice

Oregon

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Don't lose sight of reality. Weak military=weak country. None of this other stuff will matter if we get overrun.
There definatley seems to be an intention of the far left to make us weaker. No doubt in my mind of that.

If they want us to be overrun? I certainly hope not. But, that could be a result if those clowns stay in power. Seems they would be smart enough to know that.

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02-05-2010 12:23 PM  8 years agoPost 9
SSN Pru

rrElite Veteran

Taxachusetts

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aaron,

You're right about military superiority.

Dead on, in fact.

Stupidity can be cured. Ignorance is for life!

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02-05-2010 12:51 PM  8 years agoPost 10
baby uh1

rrVeteran

St. James, Mo.

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Like everything else about America, the left is embarrased by our military strength. They think that it scares our "friends" just like they are scared to own a weapon for self defence.
We are totally over run by people who have been brought up to not be able to fend or think for thenselves.

We need more John Wayne and less Jon Stewart!

Anything is possible if you don't know what you are talking about!

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