This notable fact was listed under the “Highlight” section of the Monthly Treasury Statement for receipts and outlays through October 31, 2023. This month also happens to be the first month of the 2024 fiscal year.
Consistency is a virtue in many facets of life. It is representative of reliability and integrity. Dependable employees show up to work on time, rain or shine. Reliable tenants always pay their rent on the first of the month, without fail.
Consistency can also be a serious defect. For example, Richard Ramirez – the Night Stalker – was a consistent serial killer. His reliability was deadly.
In this regard, running deficits in October 70 times out of 70 years is representative of extreme government failure. That this ugly defect was listed as a highlight in the Treasury Statement is commendable.
For the month of October 2023, the government raked in $403 billion. Over half of this was from individual income taxes ($220 billion). Social Security taxes, which are also withheld from incomes, amounted to $114 billion. Corporate income taxes came in at $48 billion. Excise taxes, custom duties, estate and gift taxes, and miscellaneous, rounded out the haul.
Total receipts of $403 billion over a 31-day month is a significant sum. Most governments would be overwhelmed by such plenty and abundance. But in the USA, with both welfare and warfare running at full tilt, too much is never enough.
Social Security Shortfall
Regrettably, $403 billion was not nearly enough. On the debits side of the ledger, outlays in October came in at $470 billion.
The difference between outlays and receipts resulted in a monthly deficit of $67 billion. Once again, the U.S. government succeeded in achieving a 70-year tradition of spending more than it takes in October.
The difference, of course, was made up with debt. Moreover, via rack and stack, the $67 billion deficit racked up in October was stacked on top of the $33.8 trillion national debt.
Yet it could have been much, much worse. For the U.S. government, a monthly deficit of $67 billion is small potatoes. For the 2023 fiscal year, the total budget deficit was $1.7 trillion. That comes to a monthly average deficit of nearly $142 billion.
So, did Washington somehow turn over a new leaf of relative fiscal prudence to start off the new fiscal year?
Not according to Maya MacGuineas, president of the Committee for a Responsible Federal Budget, who offered the following insight:
“We’re a month into the fiscal year and we’ve already borrowed $67 billion. This is despite an infusion of revenue from delayed tax collection from California and other areas of the country that had tax payments pushed due to natural disasters. Our debt is rising out of control, and with interest rates this high it is only getting worse.”
What’s more, even with the infusion of revenue from California, the October deficit was troubling. Social Security, for example, paid out more than it took in. Receipts totaled $114 billion. Outlays totaled $117 billion.
Is this monthly deficit for Social Security an anomaly? Or is a structural breakdown occurring?
If you recall, the 2023 cost of living adjustment (COLA) was a 40 year high of 8.7 percent. The record COLA was needed to keep retiree’s level.
With consumer price inflation at a 40 year high because of mega issuances of confetti money in 2020-22, retirees were getting pinched. The record COLA didn’t make anyone wealthier. The extra money that has shown up in Social Security checks is more than consumed by higher prices.
Of course, the 8.7 percent COLA has to be accounted for. By this, it triggered a $134 billion increase in Social Security checks. In addition, the COLA for 2024 is another 3.2 percent.
To cover the gap, in 2024, the taxable maximum earnings subject to Social Security tax is being jacked up from $160,200 to $168,600. Perhaps this will keep Social Security in the black for another year or two.
Tactics like increasing the taxable maximum to capitalize on wage inflation don’t solve the program’s structural problems. Rather, they’re just temporary tricks so the government can continue to rob Peter to pay Paul.
At some point over the next decade, serious reform will be needed. The terms and conditions of the social contract will have to be modified.
Retirement age will have to be pushed back to 70 or higher. COLAs will have to be significantly moderated when compared to the rate of consumer price inflation. Social Security taxes will have to rise further.
Workers will have to pay more. Retirees will have to get less. In short, both workers and retirees will get the shaft.
Ultimately, this is how all government entitlement programs go that are based on Ponzi finance. Big promises are made when an economy is young and growing, and when the age demographic is represented by an equilateral pyramid.
Has Social Security Run Out of Suckers?
Over many decades Social Security recipients have been able to get out far more than they put it. Ida May Fuller, for example, was the first recipient of a Social Security check, drawing her first check on January 31, 1940. Here, at an official website of the United States government, the Social Security Administration elaborates on the advantages of being first into a new Ponzi scheme:
“Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.”
Good for Ms. Fuller, and her 92,380 percent return on investment! And good for the millions of other Americans who reaped the accidental benefits of being born at a certain time and place. They lived a magical life.
Alas, all Ponzi schemes – even coercive ones like Social Security – are doomed to fail. Over time, as the demographic ages and the pyramid becomes top heavy, more has to be paid out than can be taken in.
To keep the ruse going, more young suckers are needed. Rapid immigration may help for several decades. But this also compounds the problem and adds new problems. At this point, there’s no easy way out.
The best way to avoid the disasters of government sponsored Ponzi schemes is to never commence them in the first place. This was all predictable from the get-go.
In an article titled, “The Social Security ‘Reserve’ Swindle,” published in 1939 in Harper’s Magazine, before the first Social Security check was cut, journalist John T. Flynn predicted the program would be underwater by 1970 and insolvent by 1980.
Flynn was generally right. Reforms by The Greenspan Commission in the early 1980s successfully kicked the can of Social Security’s financing crisis down the road for several more decades. But it didn’t solve the problem.
Insolvency, as predicted by Flynn, is Social Security’s fate. There’s no way around it; this will come to a head before the decade concludes.
As Flynn discovered, no good deed goes unpunished. In return for warning of Social Security’s demise, and for opposing the massive growth of the state in the 1930s and 1940s, he was cancelled.
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for Economic Prism