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.
And, 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.