• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Social Security’s Bleak Future Has Arrived

    For the last couple of decades, Social Security analysts, public trustees, and even both Republican and Democratic Presidents have warned that unless the program is fixed, it faces perpetual cash-flow deficits. And now, the Congressional Budget Office (CBO) says that those perpetual deficits have arrived.

    As a result, it is even more urgent that Social Security is fixed and placed on a firm fiscal footing. While the program will be able to pay the benefits that it has promised older Americans, younger workers can expect a 22 percent across-the-board benefit cut that will hit everyone, including those with the lowest incomes. The only way to avoid that scenario is to change the system.

    A few months ago, the Social Security Administration (SSA) reported that those permanent deficits would not arrive until 2016, but the new CBO budget estimates say that SSA was overly optimistic. The agency says that Social Security will pay out more than $600 billion more in benefits than it will receive from its payroll taxes and other revenues in just the next 10 years alone. Every year between now and 2021 will see deficits of between $28 billion and about $120 billion. (In order to get the CBO estimated cash flow situation for each year, subtract the non-cash paper interest payments from Social Security’s predicted revenues, and then compare that number to its predicted benefit payments.)

    SSA’s 2010 report showed that the program ran a cash flow deficit in 2010 and predicted another in 2011, both mainly due to the effects of the recession. Most of those deficits came from workers over the age of 62 who lost their jobs and had to claim Social Security benefits earlier than they had planned. The rest came from the way that high unemployment reduced SSA’s payroll tax collections. However, SSA expected the economy to bounce back faster than CBO now predicts. This slower recovery accounts for the additional cash-flow deficits.

    Fixing Social Security will not be easy, but it is certainly not impossible. One way to start the process would be to recognize that people are living longer and gradually increase Social Security’s retirement ages. Another would be to focus scarce revenues on those who need them by gradually reducing the benefits paid to upper income retirees. The worst outcome would be to do nothing and allow the coming automatic benefit cuts to hit the lowest-income retirees who would already be just barely able to meet their expenses.

    The CBO’s new estimates are the latest in a series of wake-up calls. The longer fixing Social Security is delayed, the more sacrifice will be needed.

    Posted in Economics [slideshow_deploy]

    9 Responses to Social Security’s Bleak Future Has Arrived

    1. George Colgrove, VA says:

      Government solutions never work and rob future generations. HHS(SS) was not being optimistic, they were simply lying.

      There are countless people who have been conned into this scam and it will take years of honest and transparent governance to clear up this mess. The first step in fixing this should be to close down HHS and then send the entire administration of this diabolical mess to the private sector where they have better tools, capacity, experience, and professionalism to handle this delicate task. The private sector can do this work with far less employees all of which cost less than federal employees. The private sector can provide far better transparency and because they will be exposed, their service to the recipients will be top notch rather than being shrouded in secrecy like the federal government is.

      Though I do agree that people with higher incomes may not get their entire “benefit” if they get anything at all, I do not agree with rising the retirement age. Sure, the average life expectancy has gone up, but that does not equate to better health needed for the workforce – especially for blue-collar work. We should not force older people to continue to work a few more years to solve the federal government incompetence. This is yet one more weight on society the feds have put upon us. We have sacrificed enough for this body and we need not any more.

      Taking a page out of the fed’s book, I think raiding the lucrative pensions of federal employees may be a way to fund the shortfall. Though I feel the feds should get their pension principal and some reasonable interest back (that is honesty), but the part funded by us taxpayers (8 to 10 times their “investment”) should go to shoring up social security. The feds are paid far too well and have many other lucrative investment vehicles most of us in the private sector simply do not have – espeially people who desperately need social security. We have limited public funds and I would rather see these public dollars go to people who really need it (the poor and the people conned by the federal workforce).

      Between now and 2021, rather then add to the already enourmous federal debt, we should be transistioning social security to a private sector income insurance program or retirment program – or both. To continue this as a government program will be practicing the level of insanity that Einstein warned us about:

      "Insanity: doing the same thing over and over again and expecting different results." – Albert Einstein

      In this case using the government to solve this problem when it has failed time and time again is insane!

    2. David Brunjes Lake F says:

      Why isn't there any talk on eliminating, or seriously raising, the cap on social security contributions? The, for those who "earn" $30million a year, the employee and the employer can pay (a combined) 10.4% into the fund. I personally don't favor the idea of reducing social security payments, and I can see the logic of raising the retirement ages, but it is somewhat unfair, unless done very slowly.

    3. Bobbie says:

      There is alot of fraud involved working in the department and recipients getting the funds. People who qualify and apply are denied. People who don't qualify but apply get it based on inside jobs. Pretty much like obamacare would be run.

      Since there have been decades of warnings, who's accountable for doing NOTHING!?

    4. tom7001 says:

      Peter Peterson, everyone's favorite Wall Street billionaire, has committed much of his fortune to gutting social security program. He is buying everything in sight to advance this goal. This includes setting up a new foundation, paying for scary anti-Social Security documentaries, setting up a fake news service (the "Fiscal Times"), sponsoring rigged public forums (America Speaks), and even playing silly games on the mall. Just google peter Peterson social security..

    5. tom7001 says:

      The treasury bonds in social security fund are backed by the full faith of the us government, and 58 trillion dollars in gold in reserves. Over 8 thousand tons. America is the richest nation in the world…Plus a massive amount of federal land. Raising the cap on social security above 106,000.oo would cure any problems in ss . But the need for a crisis demands taking it apart so the powers to be can steal it. Republicans like Boehner go on tv , and say we are BROKE. Wall street billionaires pay less in taxes than their secretaries. Our politicians are bought and paid for, the big tax extension for the wealthy left 51 million Americans on the lower bracket with a tax increase. Now they want to say social security is the problem?

    6. disinterested specta says:

      It's amazing how many articles follow the same formula. First, it is announced that Social Security is in trouble. Then every possible solution to the long-term fiscal problem is listed except the most obvious one: raising the payroll tax. Such a remedy would mean that workers would pay for the benefits they would ultimately receive. If you don't like that solution fine. But at least give your reasons for rejecting it.

    7. Pingback: » Financial News Update – 02/03/11 NoisyRoom.net: The Progressive Hunter

    8. West Texan says:

      George, the problem is federal involvement in social security and medicare. Social entitlements are states' business. If a state chooses to form a compact with other states to improve their options, that's where the U.S. Constitution's commerce clause comes into play. Congress must OK such an arrangement. Only congress, not the executive or judicial branches, has the constitutional authority to do this. The federal government's limited role is specifically national defense and foreign policy. We need to revive federalism as originally intended by our founding design. Only then can true prosperity be realized by all.

    9. Pingback: We Can’t Afford to “Leave Social Security Alone” | The Foundry: Conservative Policy News.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×