Wednesday, January 19, 2011

Social Security is in much worse shape than government admits, even in the short term

Charles Hugh Smith has a sobering article in “Daily Finance”, “Social Security Is in Far Worse Shape than You Think”, broadcast this morning to AOL users, link here.

His basic thesis is that Social Security badly missed even its deficit in 2010, let alone 2018. There was a $40 billion shortfall in fiscal 2010, about 8%. Congress dropped the FICA tax to help the middle class. Smith writes that that Social Security has borrowed money (with Treasury borrowing for it) to pay benefits for 15 of the last 25 months. That’s bound to pressure bonds and drive up interest rates and hurt the bond market soon (especially munis).

Does this argue for means testing soon?

Picture: Arlington County Fair, Aug. 2010

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