social security, one more time

The President isn't busy talking about how the Trust Fund doesn't exist, he worries about it going broke and the national catastrophe that will surely ensue due to all the broken promises. Policy wonks suggest raising the retirement age, but no one who works because they have to likes that idea. Every once in a while, we might want to ask what the fuss is all about.

The CBO makes that easy. By 2100 (the date of the largest gap in the table), social security will be spending 2% more of the GDP than it takes in. Revenues will be about 5% of GDP, and outlays will be about 7%, all substantial, perhaps worrisome sums.

But if a 2% SS deficit a hundred years from now should worry us, you'd think a 3.6% deficit today would worry us even more. After all, we don't really know what will happen in a hundred years. Today is real. Today, we're spending 3.6% more than we take in. If a potential future deficit of 2% is so ominous that we must act today, how come it is safe to delay action on our current deficit until tomorrow? Financing the 2% SS gap could be closed by raising revenues as a percent of GDP by 12% (16% to 18%) over the next hundred years, hardly a herculean task. Closing our current deficit would require raising our current revenues by 22% in a couple years. Which seems harder?

The CBO federal budget projection has some remarkable details. In 2012, for example, it shows us running a surplus. That requires a hefty increase in revenue, and I wondered where it would come from. In 2004, individual income taxes were 7% of GDP. In 2012, they're projected to be 10% of GDP, a whopping 40% increase. Corporate taxes relative to GDP drop over that period. It's hard to imagine such a scenario actually coming to pass.