Stuckness: Social Security
Social Security's Rising Deficits
Now to Social Security, formally known as Old Age, Survivors, and Disability Insurance, or OASDI. In the graph below, the light green bars represent Receipts IN. Given current law, these show Social Security's likely revenues all the way out to 2075.
The red bars represent total Benefits OUT.
By custom, all such forecasts are stated as percentages of Taxable Payroll. (Everything earned that's below a specified income cutoff point - presently $118,500 - counts as Taxable Payroll.) Social Security updates and reissues its long range forecasts annually; this chart is based on its 2015 update.
This chart shows us how America's "Senior Explosion" is likely to affect Social Security in the years to come. Benefits OUT are expected to rise to almost eighteen percent of Taxable Payroll. Back in the day when there were fewer seniors, relative to the working population, Social Security's Receipts IN were sufficient to cover Benefits OUT. No more.
On the other hand, Revenues IN level off at thirteen percent of Taxable Payroll. And, as the graph reminds us, this imbalance becomes a permanent feature of the program as now designed.
For today, and for a few years yet, Social Security will be able to cover its annual tax shortfalls by withdrawing money from the Social Security Trust Fund. But once the Trust Fund falls to zero, by law Social Security will be obligated to live within its means. To comply with the law, Social Security will be forced to cut benefits to all its retirees.
It’s quite a challenge. America's working age population pays the taxes that keep Social Security going, and this population is expanding only slowly. Meanwhile, the retiree population that receives benefits from Social Security is exploding in size. Has America figured out how to deal with this challenge? No. We’re in denial. And we’re stuck.