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Thursday, March 25, 2010

The Social Security Tipping Point?

The NY Times reports:

The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.

The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.
It is important to note that there is still an overall surplus due to the interest received on the fund, thus the overall balance continues to grow, but we are getting closer and closer to the tipping point unless growth surprises to the upside or changes are made to the current structure.

Source: CBO