Last week, I was invited to Washington, D.C. to participate in a panel on the future of retirement savings, a discussion sponsored by the Aspen Institute. One highly respected expert started talking about investments and savings, noting that along with Social Security, they were the basis of boomer retirement income.

I could barely control my reaction as I waved my hand to comment:

"If you believe in the Social Security "Trust Fund," you must also believe in the Tooth Fairy!" I said.

There was stunned silence. I suggested that if we were to come up with solutions, we'd have to start from the truth.

And the truth is, this recession has brought the Social Security crisis even closer to the brink. The recent rise in unemployment translates into a sharp drop in payroll "contributions." The problem of the future is now in the present.

Since the late 1980s, the government budget has been combining the "accounting surplus" in the so-called Social Security "trust fund" with the continuing requirements of government spending.

Thus, this year's $1.8-trillion budget deficit -- or whatever it turns out to be -- is consuming almost every bit of that "surplus" that was supposed to be accumulating to pay baby boomers' retirement benefits!

Open that "shoebox in Maryland" (if you don't understand that expression, you are so young you will get (SET ITAL) nothing (END ITAL) from Social Security!) and all you'll find are paper IOU's from the federal government.

A year ago, the CBO projected there would be $703 billion in Social Security surpluses from 2009-2018. Recently, they have revised those estimates downward to be only $83 billion -- a pretty thin cushion in an era of trillions! And those assumptions include a return to economic growth next year, as well as (SET ITAL) no (END ITAL) cost-of-living increases for recipients over the next three years.

In reality, it's likely that the projected SS surplus -- (SET ITAL) our (END ITAL) benefits -- will turn to a deficit that will deepen in the next few years.

"Fixing Social Security"

As soon as Congress "fixes" the banking, housing and automobile crises, they'll be forced to turn their attention to Social Security. Most likely, Social Security will become a "needs-based" payout to low-income, elderly recipients-- not a return of the "investments" you made with all those FICA deductions from your paycheck every month over your working career.

Let's get this straight. For years, the actuarial surpluses in the Social Security "Trust Fund" have been used to offset the annual budget deficits. Now we've reached the point where the federal budget deficit will be nearly $2 trillion this year -- enough to soak up just about all of the "trust fund."

It is now truly a "Trust US" fund! Continued...