As the Labor Force Participation Rate Goes, So Goes Social Security

I should be shocked at another month of a stubbornly high unemployment rate. but since I have written about this in many other blog posts and it remains virtually unchanged, it is not my main focus today. 

However,

I did notice something that is rarely discussed…the Social Security Actuary’s trust fund data report.  What does this have to do with unemployment, one may ask?  Everything.  In 2009, inflows (including payroll taxes, Social Security benefit taxes and interest income) canadian pharm to the Social Security program totaled $807 billion.  Benefit payments (including retirement, Disability and S

upplemental Security Income) totaled $685 billion.   About $121.6 billion was left over to go into the “trust fund.” (I use this term loosely). 

Fast forward to 2011, the year when the 2 percentage point payroll tax cut took effect for workers and the labor force participation rate went from 65.7 percent in January 2009 to 64 percent in December 2011.  In 2011, inflows totaled $805,057 and benefit payments totaled $736,083.  Only $68.9 billion was left as surplus. 

The bottom line?  In just two years, the annual surplus was cut by more than 40 percent. 

Now the labor force participation rate is even lower at 63.7 percent.  The payroll tax cut continues and the total number of beneficiaries has grown by 2.8 million.   The entitlement situation will not get any better in the coming years - all the more reason for getting people back to work.

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Comments (3)

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  1. Kyle says:

    The trustees report mentions that if the Treasury had not reimbursed Social Security, the payroll tax cuts would have put the SSA more than 100 billion in the red.

    It’s like using one credit card to pay off another.

  2. Imrana Iqbal says:

    Clearly, the U.S. entitlement spending is outpacing the real economic growth in terms of per capita income and GDP. There is cause for concern.

  3. Jean H says:

    Treat bonuses as ordinary earnings for payroll tax purposes, and lift the earnings cap. (Sorry,Goldman-Sacs,et al., this would definitely circumvent phony salaries and HUGE bonuses.) Deposit all payroll tax funds into a real lock-box, remove the fungible attribute that Congress has fed upon. I rest my case.