Social Security Blues: 2012 Shaping Up to Be a Third Consecutive Deficit Year

Financial blogger Bruce Krasting produced the above chart to go along with an article he wrote this past week entitled, "Social Security - January 2012 and Beyond," about the current account deficit in the Social Security program and what is likely in store for it in the next few years. Krasting's findings basically support exactly what I've written here several times, namely that the Social Security "trust fund" is nothing more than an accounting gimmick and that Obama's payroll tax holiday is hastening the program's ultimate demise.

Krasting thus concludes:

If we experience a recession in 2013, and the Fed maintains its low interest rate policies, it will be a very bad year for SS. The cash deficit would explode under these conditions. It could easily exceed $100b. The wheels will come off of SS’s cart. As we are seeing now, it is extremely difficult for SS to bounce back in good times. it will be impossible if we hit another economic slow patch.

This is precisely the scenario I’m anticipating for 2013. It will be a decisive year. If we end up going down an economic road as I have described, then SS will fall into full deficit (operating cash deficit + interest income). That would happen circa 2015. The Social Security Trust Fund is forecasting this event but it believes it will happen in 2021. When people realize that the Trust Fund has topped out, and the implications are understood, significant changes at SS will follow.

Krasting is somewhat less alarmist than I am, and being a big shot investor type he doesn't come right out and say what needs to be said: that anyone under the age of about 50 expecting Social Security to be there when they retire, or anyone older than that expecting Social Security to last much beyond another decade or so, needs to seriously reconsider their thinking.


Bonus: I would like to dedicate this song (and its REAL meaning) to the Social Security program