Here is what Krugman wrote in the NYT 8-17-15 in an article slamming Republicans on Social Security:
And no, Social Security does not face a financial crisis; its long-term funding shortfall could easily be closed with modest increases in revenue.
That “modest increase in revenue” is a 21% increase in payroll taxes on employee and employer. But forget that and the original structure and design of Social Security. Don’t look for a fair solution that crosses all generations, just raise taxes on higher income people by removing the cap on taxable wages, that solves a big chunk of the problem and in the process turns the program into welfare. FDR must be spinning in his grave.
The mere fact that many Americans buy into the Krugman philosophy and the tax only the wealthy game tells you how far we have fallen as a nation. We are willing to simply let someone else carry the burden. We want more for less and apparently we like the idea of no personal responsibility.
It amazes me how average Americans don’t see that the elite political left holds them in such low esteem. The rhetoric that there are no problems with Social Security coming in a steady stream from the left has convinced a lot of people and yet it all is contradictory to the Trustees reports and warnings of the last decade or more; in the last six years the warnings have come from Trustees who are members of the Obama Administration, but no one pays attention and uninformed voters go on their merry way and the left convinces voters Republicans want to destroy the program. Think about this. Which approach gets you more votes; tell people the truth or tell them what they want to hear … all is well if we just raise taxes on someone else. This is the same strategy the Democratic left uses when it comes to the crisis facing state pension funds.
Social Security is in a mess largely because of demographics -too many retirees-too few taxpayers, but also because over the years despite repeated warnings politicians have failed to address the issue and periodically adjust the taxes to cover changing benefits and the declining tax base. The same in happening with Medicare because the Part B premium was allow to remain unchanged and even decreased a few years and in 2016 they must play catchup (wait until 2017).
And here is what the Trustees wrote in their 2015 Report:
Under the intermediate assumptions, the Trustees project that annual cost for the OASDI program will exceed non-interest income in 2015 and remain higher throughout the remainder of the long-range period. The DI Trust Fund reserves become depleted in the fourth quarter of 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 financial imbalance.
Assuming as previously mentioned that the law were changed to permit the payment of currently scheduled benefits after DI’s current-law projected reserve depletion date of 2016 while leaving scheduled OASI benefits and combined OASDI scheduled revenues unchanged, then the projected theoretical combined OASI and DI Trust Fund asset reserves would increase through 2019, begin to decline in 2020, and become depleted and unable to pay scheduled benefits in full on a timely basis in 2034. At the time of depletion of these theoretical combined reserves, continuing income to the combined trust funds would be sufficient to pay 79 percent of scheduled benefits.
In 1994, when the DI Trust Fund reserves last came this close to depletion, the Trustees recommended a “reallocation of contribution rates between the OASI and DI Trust Funds”, and that “the Advisory Council on Social Security conduct an extensive review of Social Security financing issues and develop recommendations for restoring the long-range balance of the OASDI program.” Lawmakers responded later in 1994 to part of these recommendations by reallocating the payroll tax rate between OASI and DI. After this legislation and the subsequent release of the 1994-96 Advisory Council’s report of recommendations, the Trustees stated in their 1997 annual report, “we again urge that the long-range deficits of both the OASI and DI Trust Funds be addressed in a timely way” with particular attention to DI because “the DI Trust Fund is expected to be depleted several years earlier than the OASI Trust Fund, and because DI program growth has fluctuated widely in the past.”
Twenty years after the tax reallocation that was intended to create the time and opportunity for such reforms, the Trustees reiterate the call for legislation to achieve long-range financial stability, though there are fewer reform options available now than there were in the 1990s, when the projected date of reserve depletion was more distant. Given the short time now remaining before projected DI Trust Fund reserve depletion, such legislation may now need to include some reallocation of resources between the two trust funds.
Reallocation of resources in the absence of substantive reforms might, on the other hand, serve to delay DI reforms and much needed corrections for OASDI as a whole.
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 2.62 percentage points 1 (from its current level of 12.40 percent to 15.02 percent, a relative increase of 21.1 percent); (2) scheduled benefits during the period would have to be reduced by an amount equivalent to an immediate and permanent reduction of 16.4 percent applied to all current and future beneficiaries, or 19.6 percent if the reductions were applied only to those who become initially eligible for benefits in 2015 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 60 million beneficiaries and 168 million covered workers and their families in 2015. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.