CBO Analysis of Social Security

In addition to the Social Security Trustees annual report, the Congressional Budget Office (CBO) does its own assessment of the state of Social Security.

Following are a few excerpts from the CBO report. Make no mistake about it, despite the naive dribble from Old Bernie, Social Security needs to be fixed before there can be any talk of increasing benefits. There needs to be a multigenerational solution meaning not just the working generation but those collecting benefits must carry some of the cost.

IMG_2864And, we must decide, will Social Security remain as originally intended or will it be turned into another welfare program where the benefits paid are not in proportion to the taxes an individual pays into the system.

The measure of actuarial balance used here is known as the 75-year open-group unfunded obligation because, with no change in law, the program would continue to be open to new participants. Those new participants would pay much more in taxes over the next 75 years than they would receive in benefits during that period.

An alternative measure—sometimes called the closed- group unfunded obligation—shows the shortfall in the system that would occur if the law was changed to close Social Security to anyone currently younger than age 15, thereby encompassing future taxes paid and benefits received only by people who are now age 15 or older. (Similar assessments are made of the financial outlook for private pension plans.) CBO estimates that, when measured as a percentage of the taxable payroll, the 75-year closed-group shortfall as of 2015 is about two-thirds larger than the 75-year open-group shortfall.

Another commonly used measure of Social Security’s sustainability is the trust funds’ date of exhaustion. Under CBO’s extended baseline, the DI trust fund will be exhausted in fiscal year 2017 and the OASI trust fund will be exhausted in calendar year 2031. It is a common analytical convention, however, to consider the DI and OASI trust funds as combined, although legally they are separate. Therefore, this report focuses on the combined trust funds. In CBO’s extended baseline, the combined OASDI trust funds are projected to be exhausted in calendar year 2029.

If a trust fund’s balance declined to zero and current revenues were insufficient to cover benefits specified in law, the Social Security Administration would no longer have legal authority to pay full benefits when they were due. In the years after a trust fund’s exhaustion, annual outlays therefore could not exceed annual revenues. Under those circumstances, all receipts to the trust fund would be used and the trust fund balance would remain essentially at zero.  

This is exactly where we are headed in only fifteen years or so unless something is done soon. While politicians talk about all the “free” stuff they will give you, they don’t mention what they must take from you to fulfill those promises. 


5 replies »

  1. The main problem with government taking over so many formerly private functions (student loans, home loans, health insurance, etc) is not that they manage all of these terribly which they do — but that they make all kinds of financially stupid decisions to benefit various groups in order to buy votes.


  2. Social Security is already a welfare program — the one who earns the maximum gets about 1/2 as much as a percentage of his wages as do those at the lowest end of earnings (26% versus 53% See: ) The government can’t resist favoring some people over others whenever they provice some “service”. They forgive student loans after students attend expensive colleges and chose majors with little earning potential. They forgive housing loands after home buyers take out a loan higher than they can afford. They lower rates on coastal properties that are subject to flooding so that other taxpayers have to make up for the coastal property owners foolish decisions. And I could go on and on and on — welfare for all – all the time — that’s government and while it is worse when their is a lawless Dem President like Obama it isn’t great with a Republican like G. W. Bush either (for example he went for a Medicare drug program that was unaffordable to the country but a boon for Big Pharma). But the Romans did the same thing 2000 plus years ago — they bought votes with favors (the circus and wheat for the masses) and enriched their friends by various means including stealing property from the owners (kind of like using eminent domain to build a mall or a housing development).


    • David. Looking at earnings vs social security payout only tells part of the story. Social Security was started so no one in retirement would have to live in poverty. It has always been a welfare program. We all pay different amounts of taxes based on income level. At 60 I pay property tax that funds schools, but I do not have any kids in school.

      Again looking at the data does not tell the whole story. A top wage earner that paid the max SS tax is in a better position to delay taking benefits until age 70, boosting his benefit to $38,834 per year. If he has a non working spouse, who never paid into SS, more likely with higher wage earners, his family benefit grows to$58,251 or $582,510, over 10 years. This covers over 50% of pre retirement income. The low wage benefit grows much slower, his family benefit grows to $22,017 or $220,170, over 10 years. Replacing about 80% of his pre retirement income. But which family is living better in our high cost economy?

      It may be time to rethink the spousal benefit, since additional taxes were not collected to cover these benefits.
      We need to fix SS now or future retirees will just go on welfare or benefits will be paid out of general tax revenues or deficit dollars. I do not see that working well for the average taxpayer.
      I for one would would rather see SS stay a pay as you go system with adjustments in taxes and benefits.
      Even if it means zero colas, some years or colas capped 1% below inflation.


  3. The politicians need to stop giving themselves bonuses..and give the money back to the people who need it..esp Social Security..they dont have to worry..about their golden years..they are set…but regular people..need this we need to get COLA raises and such..stop being so greedy with our money


  4. No, their promise is to take from others, out of others (unearned, undeserved) abundance, to give to you. It is why people will vote for democrats (and Republicans, like “W”) who promise more, and more, and more to get your vote today – despite the fact that they have no plan to pay for it, or with planned funding from those too young to vote, or generations as yet unborn.


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