Back in November the LA Times ran a story supposedly debunking a Time Magazine article showing that Social Security was running a deficit. To support their position the LA Times uses the following table.
This is a perfect example of the short-sighted, naive liberal attitude. Such stories are misleading and insulting to Americans. It is hard (for me) to understand the purpose of such misinformation. The liberal view is like saying an airplane with ten minutes of fuel and the airport 1,000 miles away is still flying so why worry about a crash.
Did Social Security run a deficit in 2015? No, but so what?
Let’s look at the numbers. The payroll tax income was $679.5 billion. The benefits paid were $742.9 plus expenses so in real terms of payroll tax funding there is a deficit. However, when you add in other taxes and interest the total income was higher than benefits paid. No short-term deficit.
Now look at the trends, the net interest is declining, and so is the net increase in asset reserves while scheduled benefits are in increasing. So where are we headed?
Each year that goes by requires more use of the interest to pay benefits. In a few years that interest plus taxes will be insufficient and the treasury bonds that make up the asset reserves will be redeemed to make the payments to beneficiaries. As that happens the interest payments will decline more rapidly and eventually disappear.
When the bonds are all redeemed, the taxes paid to the trust will pay only about 76% of the benefits. That is a deficit. This is projected to happen around 2035. If salaries rise and payroll taxes increase, that date could be a bit later, but the fundamental problem is unchanged. Keep in mind that if pay rises so do future benefit payments.
The fact is that as currently funded Social Security is not solvent and more important is not sustainable… and that’s the truth. All projections have ranges and none are precise or static, but that is no excuse for ignoring the problem or misleading Americans.
Note: The chart below conveniently does not include the disability portion of Social Security which is in worse shape. Note also the limited time frame presented. The problem accelerates as you get closer to 2035.
Categories: Social Security