About the Problem
Social Security is running out of money. Current projections indicate that benefit payments will surpass tax revenues beginning in 2017 (Board of Trustees OASDI 2008). Because Social Security payroll taxes have exceeded program needs for the past 25 years, the system has built up a trust fund that can be used to cover scheduled benefits until about 2041. However, these funds are now used to help finance other federal government priorities. Once these funds are needed to cover Social Security checks, policymakers will have to raise taxes or cut other government services. When the trust fund is depleted in 2041, the program will only be able to pay about 78 percent of scheduled benefits.
Social Security is being squeezed largely because the nation is growing older. Americans are living longer but having fewer children to work, pay taxes, and finance their retirement.
- There will only be 2.1 workers for every Social Security beneficiary in 2035, compared with 3.2 in 1980.
Social Security is forecast to absorb an ever-increasing share of economic resources in coming decades, consuming 6.0 percent of all the goods and services the nation produces in 2030 (figure 1).
- We would have to set aside about $4.3 trillion dollars today—more than $14,000 by every man, woman and child—to cover Social Security’s expected deficit for the next 75 years.
- Congress could meet this obligation by immediately raising the combined employer-employee payroll tax for Social Security by 1.70 percentage points or immediately reducing benefits by 11.5 percent (Board of Trustees OASDI 2008). Additional adjustments would be needed to extend solvency beyond the 75-year horizon.
Source: Board of Trustees OASDI (2008).
References
Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance [OASDI] Trust Funds. 2008. “2008 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” Washington, DC.
Current Policy Debates
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