"Tweaks" Can Fix $5.3T Social Security Shortfall

Social Security faces a $5.3 trillion shortfall over the next 75 years, but a new congressional report says the massive gap could be erased with only modest changes to payroll taxes and benefits.

Some of the options are politically dangerous, such as increasing payroll taxes or reducing annual cost-of-living increases for Social Security recipients. Others, such as gradually raising the age when retirees qualify for full benefits, wouldn't be felt for years but would affect millions.

Many wouldn't affect current recipients, according to the report by the Senate Special Committee on Aging. Sen. Herb Kohl, chairman of the committee, said small "tweaks" are all that is needed to bolster Social Security's finances for future generations of retirees.

Currently, 53 million Americans get Social Security benefits averaging $1,067 a month. In 75 years, 122 million, or one-fourth of the population, will be drawing benefits.

On its current path, Social Security is projected to run out of money by 2037, largely because of aging baby boomers reaching retirement. For the first time since the 1980s, Social Security will pay out more money in benefits this year than it collects in payroll taxes. The longer action is delayed, the harder it will get to address the program's finances.

"Modest changes can be made over time that will keep the program in surplus," Kohl, D-Wis., told The Associated Press. "They are not draconian, as the report points out, and they can be done and will be done."

The committee is scheduled to release its report Tuesday. The report, obtained by the Associated Press, lays out options for fixing Social Security, but doesn't endorse any of them.

Kohl said lawmakers will probably combine several options to ease their impact. No action is expected this year, with midterm congressional elections looming in November. Lawmakers have said they hope to take up the issue next year.

Social Security is financed by a 6.2 percent payroll tax on wages below $106,800. The tax is paid by workers and matched by employers. Older Americans can apply for early retirement benefits, starting at age 62. They qualify for full benefits if they wait until they turn 66, a threshold that is gradually increasing to 67 for people born in 1960 or later.

The entire $5.3 trillion shortfall over the next 75 years would be wiped out if payroll taxes were increased by 1.1 percentage points for both workers and employers. It would also disappear if Congress started taxing all wages, not just those below $106,800, said the Senate report, citing projections by the actuaries at the Social Security Administration.

On the benefits side, more than three-fourths of the shortfall would vanish if Congress reduced annual cost-of-living increases by 1 percentage point each year. Social Security recipients get annual increases based on inflation. This January, for the first time since automatic adjustments were adopted in 1975, there was no increase because prices decreased last year.

About 23 percent of the shortfall would be gone if Congress gradually increased the age when retirees qualify for full benefits from 67 to 68. Nearly a third of the shortfall would disappear if the full retirement age were gradually increased to 70.

The Social Security trust funds have built up a $2.5 trillion surplus over the past 25 years. But the federal government has borrowed that money over the years to spend on other programs. The government must now start borrowing money from public debt markets - adding to annual budget deficits - to repay Social Security.

The Senate panel's report will be presented to President Barack Obama's deficit reduction commission, which is expected to review all entitlement programs in the search for savings.

Many of the options sound simple, but most would have widespread ramifications, said Barbara Kennelly, president and CEO of the National Committee to Preserve Social Security and Medicare.

"If you raise the retirement age and you don't do anything about the pension law or anything about retraining, and there's been no discussion on that, where are the jobs?" asked Kennelly, a former Democratic congresswoman from Connecticut. "It's not so simple."

One expert cautioned that adjustments designed to fully fund Social Security for only 75 years will almost certainly have to be revisited well before then.

Here's why: In 15 or 20 years, the Social Security trustees will be looking at a new 75-year window, one that includes future shortfalls beyond the current 75-year horizon. Those shortfalls will have to be addressed years in advance to avoid dramatic tax increases or significant benefit cuts, said Kent Smetters, a professor at the University of Pennsylvania's Wharton business school.

"If you only fix it for 75 years at a time, the same problem suddenly reappears every 15 to 20 years," Smetters said.

[christoph415]

Well - remembering the large SURPLUS of money that Bill Clinton's presidency left to King GWB, Social Security's problem possibly could have been solved (or at least improved) but King George found it more important to bribe the American public and to pay his rich boy's back with this surplus.

[ianlou]

CBS:It would also disappear if Congress started taxing all wages, not just those below $106,800, said the Senate report.
*********************************************
Hillary Lost my vote when she said she would not raise this limit because it would affect Middle Class of Manhattan.

Obama, You got my vote when you said you would FICA Tax all income.
WHAT ARE YOU WAITING FOR, MR. PRESIDENT?

[us_1776]

I don't think he is waiting. It's just that one man can only manage just so many disasters occurring at one time. Putting the FICA tax up to double or even on all income would certainly help. And it would place a small burden on those who can most afford to pay it, so it is fair.

[fortuenti]

Social Security is the ultimate, and legal Ponzi scam yet nowhere in The Constitution was the government ever granted authority to force the "little people" to pay in while politicians, bureaucrats, etc. don't yet enjoy an overgenerous and safer retirement plan.

[roach9703]

This payroll tax is deeply regressive. It is very hard on the self employed.
Raising the taxable wage limit makes the most sense. Further, not taxing the first 30,000 of self employed wages as a deferral to be paid back by raising the taxable wage limit for the individual makes even more sense.
A .025% increase per employee / employer is the most one can expect.
Social security is only retirement old age plan for the working poor. Thus, the program must be preserved.

[random_radar]

The government is already implementing the final solution to the social security problem. They are nationalizing health care and will stop treating old people and letting them die. You are stupid if you think they will continue the system of keeping retirees alive when the nation is bankrupt.

Your "friends" in government already know what is going to happen, but they don't want you to figure it out until it is too late, just like the Nazis did with the holocaust. The names change, but governments all work the same.

[fortuenti]

"The Social Security trust funds have built up a $2.5 trillion surplus over the past 25 years. But the federal government has borrowed that money over the years to spend on other programs."

And why? Because the complacent American JELLYFISH [no backbones, they just go with the flow] have, for decades, accepted politicians' misdeeds, over-promising, broken-promising, lying, etc. behaviors as normal and by not actively [write/call their Members of Congress] to express their opposition to these policies they are effectively giving stamp of approval.

This needs to be a MAJOR campaign issue so it's easier to oust the looters of S.S. trust funds.

[inketolstoy]

It angers me that our political "representatives" can look at us after looting the social securtiy coffers for decades and say, without smiling, that we just need to "tweak" the system and we can cover a five trillion deficit. It's like a pedophile telling his victim that you need a little "therapy" and we can be friends again. Why do we keep getting in the van, America?

[fortuenti]

Because the complacent American JELLYFISH [no backbones, they just go with the flow]

And since millions don't even vote and those that do won't take the time to write/call their Members of Congress because "it won't make any difference, so why bother?" So they don't which makes it 100% certain they won't make a difference but if ten of millions of people did at the same time we just might. So the question is, what must we do to inspire our fellow citizens to stand up not only for themselves but for their children and subsequent generations?

[us_1776]

The entire issue was caused, not by Social Security, but by previous administrations and congresses that improperly RAIDED the Social Security trust fund and stole the money for other purposes. Social Security in and of itself would have been 100% secure and solvent and even had a massive surplus to the tune of trillions of dollars. It was the misappropriation of the Social Security trust fund that has caused all of the problem. And now the government must find a way to "pay back" to Social Security the money that was inappropriately misdirected out of the trust fund.

And while we're at it, we should prosecute and jail all those in congress and administrations who did this misappropriation of funds. They violated a sovereign trust that was given by the government to the citizens of the United States with regard to Social Security.

[fortuenti]

AMEN. Problem is though, since they're the law-makers they're not going to make laws that makes it a crime to lie, cheat, and steal from us. These people don't care, they've bought votes with all these mega-spending entitlement programs and many are dead, retired living off huge pension, and will be dead by the time things REALLY melt down so it doesn't matter to them. Massive debt and likely default is their legacy.

[ricscore]

The only tweak needed is getting the illegals off the payroll you dump butt liberals.

[Wolf1944]

The illegals pay income tax and FICA but can't file for an IRS return or SS benefits because they're illegal.

They're subsidizing us legal folks.

[bcpats]

And we are supposed to believe this story?????????

They can tell us anything....... we have no option but to think they know what they are talking about - - we do not have all the facts, much less the TRUTH about anything that whatever commission is appointed to tell us whatever. The only CHANGE we may be lucky enough to have, is the little left in our pockets by the time the obamanation is finished (hopefully in 3 years).

[ampsanne]

This has been a pet peeve of mine. I know of people that have paid into Social Security and never collected because they died before they ever had a chance to collect. To me Social Security gains on that one. With their "tweak" of not giving cost of living how are seniors suppose to survive with the cost of everything that keeps rising in price? Obama and the senators and such will never have to worry about that in their old age. They don't think about how the average Joe is going to survive. Why should they when they can live high on the hog?