Will Social Security Survive the Recession?

Oct 06

I received some interesting statistics in an e-mail from New York Times best selling author Dr. Jerome Corsi that I wanted to share. Incidentally, we are working on an interview with Dr. Corsi on his new book. AMERICA FOR SALE: Fighting the New World Order, Surviving a Global Depression, and Preserving USA Sovereignty. This should air sometime in the next two weeks on The Prudent Money Radio Show.

These are pretty sobering statistics…(from the e-mail)

Will Social Security survive the recession?

Unemployment resulting in lower tax revenues and a spike in early retirement claims two consequences of the continuing U.S. recession are the culprits in this crunch.

The result is that Social Security is about to go into the red, paying out more in benefits than it takes in taxes during the next two years, the first time that has happened since the 1980s, according to the Associated Press.

Applications for Social Security retirement benefits are 23 percent higher this year, while disability claims have increased by 20 percent.

Nearly 2.2 million people applied for Social Security retirement benefits from the start of the budget year in October through July, compared with 1.8 million in the same period last year, according to the AP report.

While Social Security is supposed to have $2.5 trillion in trust funds to cover such shortfalls, Congress has spent the Social Security trust fund reserve on other underfunded government programs, placing government IOUs in the trust fund to replace the otherwise absconded cash. The AP reported that 43 million retirees and their dependents receive Social Security benefits, with an additional 9.5 million receiving Social Security disability benefits.

The average monthly Social Security check is currently paying around $1,100, while the average disability benefit is about $920 a month.

Social Security early retirement benefits can be paid out beginning at age 62.

The U.S. economic downturn has caused the loss of approximately 7 million jobs, reducing the payroll base on which Social Security taxes derive revenue, while putting pressure on those 62 or older who have lost jobs.

Social Security woes do not end there.

For 2009, Social Security beneficiaries got an unusually large 5.8 percent increase in benefits, primarily because of the 2008 spike in oil prices, according to the Wall Street Journal.

Typically, Social Security cost-of-living adjustments result in a 2 to 3 percent increase in benefits. This year, however, will be different. No cost-of-living increase is expected in 2010 for the first time in 35 years, largely because inflation has not increased during the economic downturn.

How bad is the Social Security revenue shortfall? Rep. Jason Chaffetz, R-Utah, has written that when debts to various government trust funds are added to the anticipated 2010 budget deficit, the U.S. debt burden will reach nearly 100 percent of gross domestic product in 2010. Moreover, Rep. Chaffetz estimates that when unfunded liabilities of more than $100 trillion from Social Security, Medicare and government employee pensions are included, our national debt is several times larger than GDP.

“In 2010, nearly $200 billion will be spent on interest payments, almost half of which will be going overseas,” Chaffetz wrote. “Interest payments are forecast to skyrocket to $829 billion by 2019.”

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