The annual Social Security cash surpluses that have long offset other federal expenses likely will peak in 2009, one year after the first baby boomers become be eligible for this retirement benefit. By 2017, the surplus will be gone and the federal government will be on the hook to find new funding for Social Security as more and more Baby Boomers age into the program.

Treasury Secretary Henry Paulson included estimates on the surplus in a report released yesterday, widely seen as his attempt at a Social Security wake-up call. The report reinforces the message sent by Social Security Trustees earlier this year — Congress will soon lose the annual Social Security surpluses that lawmakers have used to fund other government activities.

The annual Social Security cash surpluses likely will peak around $99 billion in 2009. About a decade after that, Social Security could have a deficit rivaling its peak surplus, according to a chart in the report.

"Everyone I talked with recognizes the seriousness of the problem, and most agreed on some of the principles and policies that must be part of the solution," Paulson said in a statement about Social Security yesterday.

Paulson said he is seeking to find common ground among the competing proposals for Social Security reform. The Social Security Web site lists more than two dozen reform plans offered by lawmakers, administration officials and researchers since 2001.

Social Security has since the mid1980s generated surpluses, which the federal government has used to offset other spending. The surpluses were the result of baby boomers paying more taxes than was needed to finance the retirement benefits for people older than them, the Treasury report said. Between the end of 1983 and the end of 2006, the inflation-adjusted trust fund balance rose from $50 billion to $2 trillion.

The oldest of the baby boomers — people born between 1946 and 1946 — will turn 62 in 2008. At that age, they can apply for early retirement benefits through Social Security. About 77 million people of the 302 million in the U.S. people are baby boomers, or about a quarter of the current population. As they retire, there will be fewer workers available to contribute toward Social Security. Last year, there were about 3.3 workers for every person getting Social Security, including the disabled and retirees, according to the 2007 Social Security Trustees Report. "The baby-boom generation will have largely retired by 2030, and the projected ratio of workers to beneficiaries will be only 2.2 at that time," the report said.

The Social Security trust fund now invests receipts not needed to pay benefits in Treasury securities, so its cash surplus reduces the amount the Treasury must borrow from the public. Come 2017, Social Security will need to redeem debt, putting more pressure on Treasury, which will put additional pressure on the Treasury. Social Security has three options for its future financing, according to GAO Chief David Walker, who, like Paulson, has been pushing for Social Security reform. The U.S. government will have to raise taxes, cut spending or borrow more from the public. "Treasury will honor those claims—the United States has never defaulted," Walker said in a January testimony to Congress. "But, there is no free money."