The outlook for Social Security is not improving and yet Congress does nothing and politicians talk nonsense – Sanders wants to improve benefits while in only thirteen years the trust funds will be exhausted. Every month that goes by makes solving the problem more difficult and more costly for those affected – which is all taxpayers.
This should have been a top priority of this Administration right behind growing the economy.
Social Security, which marked its 80th anniversary in 2015, is the largest single program in the federal government’s budget. About 72 percent of the roughly 60 million people who currently receive Social Security benefits are retired workers or their spouses and children, and another 10 percent are survivors of deceased workers; all of those beneficiaries receive payments through Old-Age and Survivors Insurance (OASI). The remaining 18 percent of beneficiaries are disabled workers or their spouses and children; they receive Disability Insurance (DI) benefits.
In fiscal year 2015, spending for Social Security benefits totaled $877 billion, or almost one-quarter of federal spending. OASI payments accounted for about 84 percent of those outlays, and DI payments made up about 16 percent.
Social Security is funded by dedicated tax revenues from two sources: payroll taxes and income taxes on benefits. Today, 96 percent of that tax revenue comes from the payroll tax—generally, 12.4 percent of people’s earnings that are subject to the Social Security tax. Workers and their employers each pay half; self-employed people pay the entire amount. Earnings up to a maximum annual amount—now $118,500—are subject to the payroll tax. The remaining share of tax revenues for the program—about 4 percent—is collected from income taxes on Social Security benefits. The tax revenues that funded the program totaled $786 billion in fiscal year 2015.
Social Security retirement and disability benefits and the program’s administrative costs are paid from two trust funds—one for the OASI program and one for the DI program. In addition to the tax revenues, the funds also receive intragovernmental interest payments on the Treasury securities they hold. In a given year, the receipts credited to a fund, including the interest credited on its balances, minus spending for benefits and administrative costs, constitute the trust fund’s surplus or deficit. Although the two trust funds are legally separate, in this report, CBO generally follows the common analytical convention of considering them as combined.
In 2010, for the first time since the enactment of the Social Security Amendments of 1983, annual outlays for the program exceeded annual revenues (excluding interest) credited to the combined OASDI trust funds. A gap between those amounts has persisted since then, and in fiscal year 2015, outlays exceeded noninterest income by almost 9 percent. As more people in the baby-boom generation retire over the next 10 years, CBO projects, that gap will widen. If current laws governing taxes and spending stayed generally the same—an assumption that underlies CBO’s extended baseline projections—outlays from the Social Security program would exceed revenues by almost 30 percent in 2025 and by more than 40 percent in 2040.
According to CBO’s extended baseline projections, the DI trust fund will be exhausted in fiscal year 2021, the OASI trust fund will be exhausted in calendar year 2030, and the combined OASDI trust funds will 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 be permitted to pay full benefits when they were due. In the years after a trust fund was exhausted, annual outlays would be limited to annual revenues: All receipts to the trust fund would be used, and the trust fund’s balance would remain essentially at zero.
The amount of Social Security taxes paid by various groups of people differs, as do the benefits that different groups receive. For example, people with higher earnings pay more in Social Security payroll taxes than do lower-earning participants, and they also receive benefits that are larger. Because Social Security’s benefit formula is progressive, replacement rates—annual benefits as a percentage of past earnings—are lower, on average, for workers who have had higher earnings. As another example, CBO projects that people who were born in more recent decades will pay more in taxes and receive more in benefits because they typically will earn more over a lifetime, even after an adjustment for inflation.
From CBO Summary report 12-16-15
Categories: Social Security