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Congressional Budget Office predicts a $1.5 trillion deficit for 2011
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STEVE CHIOTAKIS: We got this week the non-partisan Congressional Budget Office report of just how much the government’s budget deficits will add up to. That number? Nearly $1.5 trillion for fiscal 2011. The Associated Press did an analysis of what the CBO report entails, and looked at the Social Security program. The AP says Social Security will pay out more than it takes in this year, and will keep running deficits for the foreseeable future. The program was expected to show a surplus for at least the next few years.
Gene Steuerle is a former Treasury Department official and a senior fellow at the Urban Institute. He’s with us from Washington. Good morning.
GENE STEURLE: Good morning.
CHIOTAKIS: I thought these deficits weren’t expected at least for a few more years. Why is Social Security running out of money even now?
STEUERLE: Social security has always been basically a pay-as-you-go system. By pay-as-you-go what I mean is essentially the money that’s coming into the system has always pretty much been paid out. From about the mid-1980s until today, taxes were just slightly in excess of the spending. And that’s because mainly the baby boomers were fully into the working population and hadn’t yet retired. And now that we’ve moved into recession and revenues are down, the baby boomers are starting to retire. All of a sudden that parade of surpluses is gone by the wayside.
CHIOTAKIS: I’m forty years old right now, what does this mean for me and other who are my age or even younger, will there be social security around when I retire?
STEUERLE: Social security is going to be there fore everyone in the future. The only question is whether the growth rate stays built into it, and will continue. However you won’t get the promised benefits that you got under currently law because the current system basically has trouble supporting that. Our tax rates are going to have to go up a lot on you and your kids.
CHIOTAKIS: What does this mean for the budget deficit?
STEUERLE: In the short run we’ve been spending far beyond our means for some time. In social security we’ve never saved enough to deal with the long term issues with the baby boomers retiring as well as the continued growth in health costs, so issues have started merging. And meanwhile in the rest of the budget we’ve been collecting far fewer revenues then the amount of spending that we’re doing.
CHIOTAKIS: Gene Steurele, a senior fellow at the Urban Institute. Thank you so much.
STEUERLE: Thank you.
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