Scarey Numbers? Social Security, meet Fiscal Cliff!

Bruce Krasting makes quite a bit out of the fact that Social Security will pay out over $65 billion in benefits this month.  Writing in Business Insider yesterday, he makes the inevitable comparison to the GDPs of various countries and combinations of states. I found this comparison particularly interesting:

"The 2012 bill for SS will exceed the cost of the military, that’s the first time this has happened."

Like that's a bad thing?  To spend more on seniors, the disabled and survivors than on the military?

Now, it is a lot of money by any measure, and his larger point is to underscore the shortfall of income to cover the spending: while the shortfall last October was $6.7 billion, it rises this October to about $8 billion.  And, it will continue to rise as more and more Baby Boomers claim their benefits.  He characterizes this as a slow and steady erosion of the program, like sand from a beach. 

Although the "erosion" is gradual, it is well understood by the actuaries at the Social Security Administration who understand with considerable precision how the funds will flow over the coming decades.  Most importantly, the fixes are well understood, can be implemented gradually and we have two decades to work with.  Not so scarey really. 

Contrast this with the fiscal cliff arriving in three months when the Bush tax cuts and the payroll tax holiday will expire raising everyone's taxes as much as $536 billion according to this article at CNN.com.  Couple this with the $1 trillion over 10 years of automatic cuts negotiated in the debt ceiling bill last year and you have a formula for sucking what little energy there is out of an economy that is barely limping along.  Pretty scarey!  Of course, there's nothing like a fiscal cliff to focus the mind, whether Republican or Democrat.  Hopefully they will reach a compromise that all the politicians hate.  This is usually good news for the middle of the roaders.