WASHINGTON -- Congress is working on extending the employee Social Security payroll tax cut for one more year, and possibly cut it for employers, too. But no one's talking about how much revenue this will drain from a fund that's already turned "cash negative."
This is the largely unspoken fiscal conundrum behind the payroll tax debate that's taking place this week on Capitol Hill, and we're talking real money here, folks.
Social Security's solvency issues do not get the news attention they deserve. But last year -- before the revenue-losing tax cuts were enacted -- the program was paying more money for benefits than it had coming in.
That's the first time this had happened since the early 1980s, when the nation fell into a deep recession and the nation's unemployment rate shot up to nearly 11 percent, sharply reducing Social Security's income.
Covering the loss of payroll revenue from this year's 2 percent tax cut means that the Treasury had to come up with an additional $105 billion. If the tax cut is extended for another year, as appears likely, the feds will need to pay an additional $267 billion to fully cover benefit payments in 2012.
Is the payroll tax cut, passed last year in a compromise budget deal to boost declining incomes, endangering the future of Social Security?
There were strong arguments why payroll tax cuts were needed to put additional money in worker paychecks to spend at a time when so many cash-strapped Americans were struggling to make ends meet.
It would increase consumer spending and demand for goods and services, and to some modest degree, it has done that.
At the same time, it further threatens the future solvency of Social Security on which 55 million American depend, and this isn't counting the tsunami that is coming soon when millions of baby boomers will be showing up at Social Security offices to sign up for promised benefits.
This is a long-term financing disaster that's waiting to happen. By 2035, Social Security will be supporting 91 million retires with significantly fewer workers contributing to its revenue fund. Right now, there are three workers paying into that fund for each retiree. That ratio drops to two by 2035 if not before.
Democrats have been criminally irresponsible about this looming insolvency, insisting everything's fine and talk of bankruptcy is nonsense.