The deficits — $10 billion in 2010 and $9 billion in 2011 — won't affect payments to retirees because Social Security has accumulated $2.5 trillion in surpluses from previous years. But they will add to the overall federal deficit.
Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement but didn't expect such a large increase.
Then the recession hit, and many older workers suddenly found themselves laid off with no place to turn but Social Security.
"A lot of people who in better times would have continued working are opting to retire," said Alan J. Auerbach, an economics and law professor at the University of California-Berkeley. "If they were younger, we would call them unemployed."
Nearly 2.2 million people applied for Social Security retirement benefits from the start of the budget year in October through July, compared with just under 1.8 million in year-earlier period.
Surplus predicted in 2012The increased early retirements are hurting Social Security's short-term finances, already strained from the loss of 6.9 million U.S. jobs. Social Security is funded through payroll taxes, which are down because of all the lost jobs.
The Congressional Budget Office projects that Social Security will start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.
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