Social Security on Pace to be Drained by 2037
Social Security's finances are getting worse as the economy struggles to recover and millions of baby boomers stand at the brink of retirement.
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year, but the CBO said at the time that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.
The outlook, however, has grown bleaker as the nation struggles to recover from the worst economic crisis since Social Security was enacted during the Great Depression. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.
The deficits add a sense of urgency to efforts to improve Social Security's finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs. Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.
"It means that Social Security is increasingly adding to our long-term fiscal problem, and it's happening now," said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.
It's a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.
A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security's finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel's recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.
"I take the president at his word when he says he's eager to cooperate with us on doing all of it," McConnell said.
Social Security experts say news of permanent deficits should be a wake-up call for action.
"So long as Social Security was running surpluses, policymakers could put off the need to fix the program," said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute. "Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform."
More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.
The program has been supported by a 6.2 percent payroll tax paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 - unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.
Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds.
"It's an IOU that is backed by Treasury bonds and the faith and credit of the United States government," said Sen. Bernie Sanders, I-Vt. "It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor."
© 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year, but the CBO said at the time that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.
The outlook, however, has grown bleaker as the nation struggles to recover from the worst economic crisis since Social Security was enacted during the Great Depression. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.
The deficits add a sense of urgency to efforts to improve Social Security's finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs. Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.
"It means that Social Security is increasingly adding to our long-term fiscal problem, and it's happening now," said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.
It's a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.
A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security's finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel's recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.
"I take the president at his word when he says he's eager to cooperate with us on doing all of it," McConnell said.
Social Security experts say news of permanent deficits should be a wake-up call for action.
"So long as Social Security was running surpluses, policymakers could put off the need to fix the program," said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute. "Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform."
More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.
The program has been supported by a 6.2 percent payroll tax paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 - unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.
Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds.
"It's an IOU that is backed by Treasury bonds and the faith and credit of the United States government," said Sen. Bernie Sanders, I-Vt. "It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor."
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Lying and making facts up HURTS the conservative cause.
Social Security will be financially healthy IF we include all the Public Union Workers (e.g Teachers & other public union workers) who are getting extravagent Pensions Which are paid by ALL working Americans.
They retire at age 55 while all other working Americans might have to wait until age 68.
They have 28% of their pay put into their retirement funds.
We workers have only 7.5% put away every year into social security.
They work only 9 months out of a year (1,500 hours)
We workers have to work 12 months (2,000 hours)
Social Security IS NOT BROKE------Social Security just is not Universally required by ALL.
Not all government workers only work nine months of the year, teachers who do -- only get PAID for nine months of the year's work.
I am with you on the fact that we must reform the incredibly cushy system a lot of these workers have been able to negotiate. But you can't make this an issue about Social Security, which doesn't pay them the benefits.
"It's an IOU that is backed by...the faith and credit of the United States government,"
I'd like to see the US government's credit reports, please.
The National Socialist are obsessed with Palin. They blamer her for for being losers.
LOL!
What is Social Security?
Conservatives dont want to give welfare or entitlements to anyone! ...
------
Who passed and signed Medicare Part D (Prescription Drugs) almost entirely on the Credit Card in 2003? (Bush the Younger and REPUBLICAN MAJORITIES in both houses of Congress). Not to mention the RETURN OF MEDICARE PART D to the credit card (repeal of health care) by the Tea Party REPUBLICANS just this month.
Not a conservative president. We havent had one of those in quite awhile! Not even close!
Now, noloyalisti and his marxist posts lead usto believe that all corporations are doing something illegal.
A conservative wants what is his.
A liberal wants what is not his.