Last Updated Sep 30, 2009 10:41 AM EDT
As a practical matter, you won't notice. Because of the trust fund , the system will be able to pay all its checks on time.
But that doesn't mean it doesn't matter. For the first time Social Security will start to add to the deficit rather than subtracting from it. And while adding $19 billion over two years to the federal debt doesn't sound like much in this era of $787 bailouts, it's just the first trickle of a red ink flash flood that starts in earnest in 2016. This is a big deal.
Remember, the trust fund isn't like a pile of money in a bank vault that Social Security can just open when it needs cash. It's actually just a stack of IOUs from Uncle Sam. It means, in essence, that Social Security has the authority to order the Treasury to pay beneficiaries. Where the Treasury gets the money-by raising taxes, cutting benefits elsewhere in government or borrowing more from the Chinese-is up to Congress.
After a while, we're going to get tired of this. Social Security's authority to boss the Treasury around doesn't run out until the trust fund is exhausted decades from now. Way before then we will have to face the fact that Social Security's costs are unsustainable. Some combination of tax hikes or benefit cuts are going to have to be put in place. And the longer we wait to face reality on Social Security, the more painful those measures will be. Obama has said that fixing Social Security is on his agenda for next year. Let's hope so.
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