The inevitable collapse of Social Security has always been a problem for "the future" that "someone else" could deal with, but apparently the future of Social Security is now.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.
The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.
Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.
To elaborate on the last sentence, the Social Security fund has been earning huge amounts of interest for decades, but that interest hasn't been put back into the fund, it has been spent by Congress to pay for other things. Instead of that cash being put into the fund, Congress has put IOUs into the fund, and when Social Security goes cash-negative those IOUs will have to be repaid out of current taxes.
The net effect of this is that not only is my generation paying the payroll tax to fund Social Security for current retirees, we're also paying BACK the interest those retirees spent on themselves decades ago. It's a double-whammy of generational theft, and the retiree generation should be ashamed by the debt they're imposing on their children and grandchildren.