I have argued for a long time that the Social Security problem was likely to intensify long before the 2037/2041 dates used by the government and many private economists. I originally put the date around 2017. A year or two back, that appeared to be the year that the Social Security Trust would become a net seller of Treasury securities (as opposed to being one of the largest buyers).
Earlier this year in September, I pointed to comments by Bruce Kasting that the gig might be up as soon as 2012, because the severity of the current recession is significantly lowering projected FICA contributions.
Now comes even more troubling news, Social Security will start impacting the online government budget next year. This is partly because of the decline in FICA, but also a result of revenue Social Security is recognizing as interest being paid by the Treasury. In the past, this phony accounting of interest didn't mean much, but as Gary North points out, starting next year its going to mean a lot. Why? Well in order to meet all the distributions Social Security will have to make, it will need to use some of the phony interest income. You can't pay out phony cash, so Social Security will have to sell back to the Treasury,or sell into the open market, Treasury securities) Either way it is going to mean additional sopping up of investment money by government from a new source, social security. After 2010 it will only get worse. This country is going down hill fast, very fast.
Social Security won't die next year, but it will be on life support. Any good doctor would say, though, that it is time to start getting "papers in order." SSI isn't coming out of the hospital alive.
Here's Gary North's great analysis of the situation.