Despite repeated warnings every year, Congress and this Administration (and past Administrations of both parties) have done nothing to face the coming crisis in Social Security. The facts are presented to every American every year by the Trustees. Every year the Trustees warn of the consequences of inaction; every year they urge action by Congress … Every year they are ignored. Instead we have politicians who simply say there is no problem, others who claim we only need to tweak the system. And the majority are cowards, afraid of the AARP, senior voters or just voters in general. No one is able to or wants to explain the issues to Americans.
The point at which Social Security will be unable to pay full benefits is only eighteen years away. Most people turning 65 today will be alive eighteen years from now. As an American of any generation all this inaction, denial and political double-talk should have you hopping mad … unless you too prefer to simply look the other way. Write to your members of Congress and demand action.
Read what the Trustees said seven years ago and in 2014
🔴 2007 Social Security Trustees Report
“Over the full 75-year projection period the actuarial deficit estimated for the combined trust funds is 1.95 percent of taxable payroll-somewhat smaller than the 2.02 percent deficit projected in last year’s report. This deficit indicates that financial adequacy of the program for the next 75 years could be restored if increases were made equivalent to increasing the Social Security payroll tax immediately and permanently from its current level of 12.4 percent (for employees and employers combined) to 14.35 percent. Alternatively, changes could be made equivalent to reducing all current and future benefits by about 13 percent. Other ways of reducing the deficit include making transfers from general revenues or adopting some combination of approaches.
If no action were taken until the combined trust funds become exhausted in 2041, then the effects of changes would be more concentrated on fewer years:
For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2041. In this case, the payroll tax would be increased to 16.41 percent at the point of trust fund exhaustion in 2041 and continue rising to 17.60 percent in 2081.
Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in each year beginning in 2041. Under this scenario, benefits would be reduced 25 percent at the point of trust fund exhaustion in 2041, with reductions reaching 30 percent in 2081.
The projected trust fund deficits should be addressed in a timely way to allow for a gradual phasing in of the necessary changes and to provide advance notice to workers. Making adjustments sooner will allow them to be spread over more generations. Social Security plays a critical role in the lives of this year’s 50 million beneficiaries, and 163 million covered workers and their families. With informed discussion, creative thinking, and timely legislative action, we will work with Congress and others to ensure that Social Security continues to protect future generations.”
🔵 2014 Social Security Trustees Report
The projected OASDI annual cost rate increases from 13.95 percent of tax- able payroll for 2014 to 17.09 percent for 2035 and to 18.19 percent for 2088, a level that is 4.90 percent of taxable payroll more than the projected income rate (the ratio of program income to taxable payroll) for 2088. For last year’s report, the Trustees estimated the OASDI cost for 2088 at 18.07 percent, or 4.82 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost rises from 4.9 percent of GDP for 2014 to about 6.2 percent by 2035, then declines to 6.0 percent by 2050, and then remains between 6.0 and 6.1 percent through 2088.
For the 75-year projection period, the actuarial deficit is 2.88 percent of tax- able payroll, 0.16 percentage point larger than in last year’s report. The open group unfunded obligation for OASDI over the 75-year period is $10.6 trillion in present value and is $1.0 trillion more than the measured level of $9.6 trillion a year ago. If the assumptions, methods, starting values, and the law had all remained unchanged, the actuarial deficit would have increased to 2.78 percent of taxable payroll and the unfunded obligation would have risen to about $10.1 trillion due to the change in the valuation date. The remaining increase in the actuarial deficit and the unfunded obliga- tion is primarily due to changes in methods, assumptions, and starting values.
Under the intermediate assumptions, the Trustees project that annual cost for the OASDI program will exceed non-interest income in 2014 and remain higher throughout the remainder of the long-range period. The projected theoretical combined OASI and DI Trust Fund asset reserves increase through 2019, begin to decline in 2020, and become depleted and unable to pay scheduled benefits in full on a timely basis in 2033. At the time of reserve depletion, continuing income to the combined trust funds would be sufficient to pay 77 percent of scheduled benefits. However, the DI Trust Fund reserves become depleted in 2016, at which time continuing income to the DI Trust Fund would be sufficient to pay 81 percent of DI benefits.
Therefore, legislative action is needed as soon as possible to address the DI program’s finan- cial imbalance. Lawmakers may consider responding to the impending DI Trust Fund reserve depletion as they did in 1994, solely by reallocating the payroll tax rate between OASI and DI. Such a response might serve to delay DI reforms and much needed corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short-run.
For the combined OASI and DI Trust Funds to remain solvent throughout the 75-year projection period: (1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.83 percentage points1 (from its current level of 12.40 percent to 15.23 percent; a relative increase of 22.8 percent); (2) scheduled benefits during the period would have to be reduced by an amount equivalent to an immediate and permanent reduction of 17.4 percent applied to all current and future beneficiaries, or 20.8 percent if the reductions were applied only to those who become initially eligible for benefits in 2014 or later; or (3) some combination of these approaches would have to be adopted.
The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes soon would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 59 million beneficiaries and 165 million covered workers and their families in 2014. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.