Is Social Security doomed?

In a sign of a looming retirement crisis, the Congressional Budget Office is forecasting that the Social Security system will pay more in benefits than it collects in payroll taxes this year. This watershed moment wasn't expected for another six years, but the recession has accelerated the timetable by putting millions of Americans out of work — meaning they've stopped paying into the system — and nudging many others into early retirement. What does the program's deficit mean for the financial security of the nation, and for retirees? Here are five key consequences:

1. Benefits won't change ...for now

Benefits won't be affected, at least not for the foreseeable future. Retirees will get the checks they expected in 2010, and, presumably, for years to come. Thanks to $2.5 trillion in surpluses from past years, Social Security won't run out of money — on paper, anyway — until 2037. But skeptics question whether the "accounting device" of the Social Security trust fund will hold up even for that long.

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2. Washington will feel the effects immediately

Since the 1980s, Social Security surpluses have helped presidents offset spending elsewhere on the federal balance sheet, reducing the size of each year's budget deficit. Starting with President Obama in his next budget, presidents no longer have that luxury.

3. Republicans will say, "We told you so"

Conservatives have been warning about this day for years, says Ed Morrissey in Hot Air. Remember "how Harry Reid and other Democrats insisted in 2005 that George Bush was scaremongering when he attempted to reform SSA"? It turns out the Republicans weren't "attempting to frighten seniors out of their benefits" — they were trying to confront a looming problem while Democrats looked the other way.

4. This is part of Obama's debt crisis

The federal debt is soaring, thanks to two wars and big spending to help banks, the housing market, and the economy. President Obama has already appointed a bipartisan commission to make recommendations on how to trim the nation’s debt — and put Social Security on sounder footing — by Dec. 1, right after this fall's midterm Congressional elections. This unexpected bad news from the CBO will only increase the pressure to shore up the system, fast.

5. Expect tough choices ahead

"Social Security's financial health is headed in only one direction: Down," says Henry Blodget in The Business Insider. "This will eventually force either a hike in taxes or a cut in benefits." But workers and businesses alike oppose a hike in payroll taxes or bumping the retirement age (a form of cutting benefits). The politicians have to come up with a fix, but none of the answers will be popular.