Thursday, September 10, 2009

Social Security Trust Fund Shocker - $6B August Deficit

by Bruce Krasting

While there is a political case that we have to prioritize health care as an issue, it is wrong on a purely economic basis to ignore the exploding problems at the Fund. Every month that the status quo is allowed to continue makes the cost of the ‘fix’ that much larger. Based on the past twelve months performance I now estimate that the Net Present Value of future committed liabilities is in deficit by $7 trillion. To plug this sized hole would require a significant increase in payroll taxes. That isn’t going to happen. Raising payroll taxes by 4% would kill the economy. No White House economist would advocate that. The alternative of cutting benefits would be very unpopular. There are currently 52 million beneficiaries of the system. A lot of them vote. To shore up the fund would require across the board cuts greater than 20%. While that may not be a hardship for some it most certainly will be for others. The only way to address this inequity will be a means test.

SSTF Shocker - $6B August Deficit | zero hedge