Wednesday, September 9, 2009

Is the Social Security Problem Arriving Much Sooner Than Most Expect?

Is Social Security about to implode? Writes Bruce Krasting:
The Social Security Trust Fund reported an August net deficit of $5.865 Billion. This is the largest monthly deficit in nineteen years. Based on recent years data it was not surprising the Fund ran a deficit in August. But the magnitude of the shortfall was a surprise to me. This deficit is now the seventh in the past twelve months. That pace has never been seen before....This is not just a bad month. The net decline in the Funds assets for June/July/August comes to $7 billion. In 08 that period was in surplus by $5 billion, In 07 it was +$7b and in 06 it was +$13b.
SSI is not a year 2037 problem. I always saw 2016/2017 as the period most likely for problems to start to arise, but clearly if the recession has knocked the actuarial numbers askew, SSI could be a problem by 2012. That is, the fund would become a net liquidator of securities for the entire year, meaning SSI would be selling from its portfolio and putting added pressure on the bond market.

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