CBO reports cash shortfall for Social Security; seniors could face benefit cuts

Social Security will face a cash shortfall for the first time in decades next year, according to a little noticed report released late last month by the Congressional Budget Office (CBO).

As a result, seniors could face benefit cuts in as little as three years. Congress could instead raise taxes or authorize new borrowing to close the shortfall, but has never before addressed a Social Security deficit through long-term borrowing.

The annual summer CBO report reflects a quickly deteriorating economic climate, and is dramatically more pessimistic than a report issued just months ago. The CBO now predicts a cash shortfall of $10 billion for next year, significantly worse than the March report which forecast a surplus of $3 billion for next year, and the January report which forecast a $25 billion surplus.

The CBO report, entitled The Budget and Economic Outlook: An Update, forecasts shortfalls for six of the next ten years.

“It’s no surprise to seniors that the economy has taken an already crippled Social Security system and brought it even closer to bankruptcy,” said Daniel O’Connell, chairman of The Senior Citizens League (TSCL). “Seniors are our most vulnerable citizens and desperately need their benefits to keep up with inflation.”

Almost 70 percent of beneficiaries depend on Social Security for 50 percent or more of their income. Social Security is the sole source of income for 15 percent of beneficiaries.

The 37 million Americans aged 65 and over who receive a Social Security check each month are forecast to receive no Cost of Living Adjustment in their Social Security checks until 2012. Seniors have never failed to receive an annual increase of less than 1.3 percent since the automatic COLA went into effect in 1975.

The Senior Citizens League is calling on Congress and the Administration to enact major Social Security reforms this year.