The Congressional Budget Office (CBO) released its’ report on the state of the Social Security program on October 2, 2012. In the report, the CBO shows that the Social Security program had more expenditures than tax revenue in 2011, the result of two years of a payroll tax cut included in a negotiated deal on tax policy between President Obama and congressional Republicans.
The shortfall, as stated by trustees of the Social Security program, does not take into account the interest earned by Social Security assets (special issue U.S. Treasury securities). When including accrued interest, income exceeded expenditures by $69 billion. The main concern is the ever increasing number of retiring baby boomers who will burden the system to the point of exceeding tax revenues by 20% in 2030.
Given the findings, the pressure is on to extend the payroll tax cut for an additional year. However, how wise was it to negotiate the cut in the first place? Presumably, the original intention of the tax cut was to boost consumer spending in an effort to stimulate a sluggish economy and increase GDP. If the tax cuts are extended, GDP is forecast to grow by 1%. If the tax cuts are not extended and the fiscal cliff is allowed to occur without congressional action, GDP is forecast to increase by a dismal .5%, theoretically throwing the country into recession. Should the Social Security program tolerate another year of cuts? You do the math.
Article by:
Joan Villazon, C.F.O
Consumer Debt Solutions, Inc.
www.consumerdebtsolutions.net
No comments:
Post a Comment