The impact of the recession is likely to hit the giant retirement system even harder this year and next. The Congressional Budget Office had projected it would operate in the red in 2010 and 2011, but a deeper economic slump could make those losses larger than anticipated.
"Things are a little bit worse than had been expected," said Stephen Goss, chief actuary for the Social Security Administration. "Clearly, we're going to be negative for a year or two."
Since 1984, Social Security has raked in more in payroll taxes than it has paid in benefits, accumulating a $2.5 trillion trust fund. But —because the government uses the trust fund to pay for other programs — tax increases, spending cuts or new borrowing will be required to make up the difference between taxes collected and benefits owed.
Experts say the trend points to a more basic problem for Social Security: Looming retirements by baby boomers will create annual losses beginning in 2016 or 2017.
"The moment of truth has arrived," said Rep. Paul Ryan, R-Wis., top Republican on the House Budget Committee. "This is a wake-up call."
Social Security took in only $3 billion more in taxes last year than it paid out in benefits — a $60 billion decline from 2008, federal data show. The slide in revenue occurred sooner than Social Security actuaries expected, for three reasons:
• Payroll tax revenue, which was growing at a 4.5 percent average annual clip along with wages, flattened out in 2009 because of rising unemployment and pay raises that largely disappeared.
• The number of retired workers who began taking benefits rose by 20 percent; those taking disability jumped by 10 percent.
• Monthly benefits were raised 5.8 percent because of a spike in energy prices the year before.
Solvency projection slipsSocial Security was saved from bankruptcy in 1983 by a bipartisan deal that increased payroll taxes, taxed some benefits and gradually raised the retirement age to 67. That was supposed to keep the system solvent at least until 2058, but the projection has slipped to 2037.
The impact of the recession shows that "for all these projections, unexpected things happen," says Maya MacGuineas of the Committee for a Responsible Federal Budget. "Money has to be found to repay those trust funds."
President George W. Bush proposed voluntary private retirement accounts in 2005, but the bid stalled in Congress. President Barack Obama has proposed giving Social Security and other thorny fiscal issues to a bipartisan commission.
Washington Report: New BudgetRutherford wants fees, taxes reinstated
