CBO Projects Social Security Deficits in 2010

CBO recently published new projections for the revenues and outlays for Social Security (kudos to Andrew Biggs for pointing this out). The updated projections, show that outlays will exceed revenues in 2010 and 2011, followed by several years of small surpluses before deficits return for good in 2016. Chiefly because of the economic crisis, these numbers are considerably worse than those from a year ago.

Instead of projected a cumulative surplus of around $700 billion over the next decade, CBO is now projecting a surplus of only $19 billion.

 

The majority of the downward revision comes from decrease in expected revenues. CBO estimates payroll tax revenue to be $873 billion lower than previously projected, over the next ten years. And other revenues to be $31 billion lower.

This is mainly the result of higher unemployment rates (now 9.7%), which means fewer workers paying payroll taxes. Observed and projected real wage decreases also contribute.
 
Especially in light of social security’s funding situation, CRFB cautions lawmakers strongly against any proposals to implement an ad hoc COLA for Social Security benefits.  Since inflation has been negative, this year, even a 0% COLA has the effect of increasing the real value of Social Security benefits. A further increase would be both expensive and unfair.
 
Additionally, these numbers should serve as further reason for the Administration and Congress to take on Social Security reform.
 
CRFB and President Obama have said it before: “if we want to get serious about fiscal discipline, we have to get serious about entitlement reform.”
Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2008 Surplus Projections 80 86 95 95 88 80 68 54 38 19
2009 Surplus Projections 18 -10 -9 8 18 17 9 -6 -23 -41

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