Tuesday, February 02, 2010

Social Security will run a cash deficit this year: the "interest" is said to be phantom


Allan Sloan has a sensational column on the perils of Social Security today (Feb. 2) on p A13 of The Washington Post, in his “Deals” column. You have to thumb a few pages before the Editorials to see it. The link is here. The print title is “Next in line for a bailout: Social Security” and the online version is titled “Social Security could be next to need a bailout.”

Sloan’s point is that even in 2010 Social Security’s cash flow will be negative, because Social Security accounting incorporates phony “interest” which comprises IOU’s based on phantom zone (“Smallville”, yes) holdings of Treasury securities. You can play games with the accounting equation, or with chemistry 101 equations, it seems.

Benefit cuts? Means testing? Imagine the scenarios. Read it an weep. I’d love to hear Ben Stein comment on this piece.

1 comment:

Anonymous said...

When Social Security goes bankrupt (this year?) that is the biggest game changer in a life time - Its not if the Republicans take control of White house, senate, CONgress or that the Dems do that..is that all the promises based upon some one elses money finaly comes to its inevitable end.

I guess the short term solution is running the printing press at the FED to pay back the money the government owes the people (the Treasury notes/IOU's) in the government 'Lock Box'. What we the little people will see is the hidden tax of inflation.