Thursday, June 11, 2009

IBD: Social Security Math Understates Scope of Funding Problem

Jed Graham writes for Investors Business Daily that the costs of fixing Social Security may be higher than commonly understood, since it's likely that we'll borrow most of the money needed to repay the Social Security trust fund. In following years, we won't merely need to address Social Security's annual shortfalls – which themselves will be in the hundreds of billions of dollars – but the interest costs on debt accumulated up to that point.

Crunching the numbers in the 2009 trustees' report, including economic projections, shows that the extra interest costs from redeeming the trust fund bonds alone would average 1.6% of GDP from 2037 to 2083, assuming that interest payments are paid for with more borrowing.

If the government were to pay all unfunded benefit promises in 2037 and beyond while covering interest costs on the trust fund-related public debt, that would soak up 2.9% of GDP, on average, from 2037 to 2083.

Click here to read the full story.

1 comment:

James said...

And the interest on that debt could be considerably higher than today given our rapidly growing federal debt. Unfortunately, this aspect of the issue is never addressed in the SS debate, any more than the question of how shortfalls will be ACTUALLY be paid for when the country is confronted with so many other pressing fiscal problems.

At some point taxpayers - and not just high earners - are going to be presented with some very hefty tax hikes that will have them asking why something wasn't done sooner before the problem got so out-of-hand.

Yes, well . . .