Social Security is unraveling, and aligning its outlays to its income requires a new understanding of tough truths.
Social Security is imploding before our very eyes. As I laid out in The Fraud at the Heart of Social Security (January 17, 2011) and To Fix Social Security, First Ask Why It Is Deep in the Red (January 18, 2011), the system is already running massive deficits in 2010 that weren't supposed to occur until 2018, and the deficit in 2011 is transpiring 15 years earlier than the seers at the Social Security Administration (SSA) anticipated.
There is no mystery why the system's revenues are collapsing: 9 million jobs have vanished, and millions more have slipped from full-time to part-time or temporary. The Social Security payroll tax (including the Medicare sliver) is 15.3% of payroll. So as total payroll plummets, so does Social Security's revenue.
Roughly 8% of all private-sector jobs have vanished for good, despite what various cheerleaders project. Another 8% have slipped to "part-time for economic reasons," and another 15% are self-employed/free-lance/contract workers who have seen their incomes decline by 5%.
All of these factors have reduced taxable wages and income, cutting Social Security's tax receipts by $66 billion just from 2009 to 2010. As noted yesterday, The End of (Paying) Work (January 21, 2009) is not cyclical, it is structural, and the decline is far from playing out. SSA payroll tax receipts will not recover to 2009 levels, they will continue to decline.
Thursday, January 20, 2011
How to fix Security: A 4-Point Plan That Faces the Brutal Realities