Money Facts Archive Get the real facts that will shape your future by having them delivered to your Inbox!

"Social Security to start cashing Uncle Sam's IOUs" by Stephen Ohlemacher, Associated Press Writer (March 15,2010 posted at YAHOO! Finance):

"PARKERSBURG, W.Va. - The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits - billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes - nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs - in the form of Treasury bonds - which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security's shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program's finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits.

'This is not just a wake-up call, this is it. We're here,' said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. 'We are not going to be able to put it off any more.'

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

Remember Al Gore's 'lockbox,' the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on 'Saturday Night Live.'

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War..."

You can read more at:

http://news.yahoo.com/s/ap/us_social_security_ious

The following information makes one wonder if the Social Security Program, given that the average benefit for retirees is under $1200 per month, should be re-named to the "Social Survival Program:"

Department of Health and Human Services 2009 Poverty Guidelines

Persons in Family or Household / 48 Contiguous States and D.C.

...................1 ...........................................$10,830..................
...................2 .............................................14,570..................

Source: U.S. Department of Health and Human Services, 2009 Poverty Guidelines, released February 28, 2009.

- Ed Smith, Publisher
The EHS Letter Manual