The Congressional Budget Office yesterday made a presentation to the Social Security Advisory Board regarding the recession-induced decline in the Social Security surplus. I don't believe the presentation is available online, but I've uploaded a copy here.
The viewer below shows the charts, which focus on tax revenues and costs, the total Social Security surplus (including interest) and the primary surplus (which does not include interest payments) and the trust fund balance. Each chart tells the same story in a different way: that Social Security's finances have received a pretty significant hit from the recession. Cash flow-wise, it puts the program three to four years behind where it otherwise would have been. The impact on trust fund solvency will depend upon a combination of these reduced cash flows and changes in interest rates going forward.
This is why we have needed a balanced or surplus budget for a long time. Inflation allows some deficit, and then when it falls too low, the budget runs an even nastier deficit than before.
If not for debt and deficits, the government would not have incentive to create more inflation than is necessary to keep people from stuffing currency in the mattress.
I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.
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This is why we have needed a balanced or surplus budget for a long time. Inflation allows some deficit, and then when it falls too low, the budget runs an even nastier deficit than before.
If not for debt and deficits, the government would not have incentive to create more inflation than is necessary to keep people from stuffing currency in the mattress.
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