Trustees of the Social Security system have long warned that as more and more baby boomers retired, Social Security would eventually start sending out more money in benefits than it was collecting from its payroll tax. At that point the government — unless it was prepared to cut benefits — would need to find additional money for Social Security elsewhere in the federal budget or borrow still more money year after year.
Well, we’re here. It now appears that Social Security will reach this troubling watershed this year – at least six years ahead of schedule. That’s according to Congressional Budget Office projections that Stephen Goss, chief actuary of the Social Security Administration, says will probably prove to be on target.
Goss told The New York Times that the country’s economic problems were responsible for the deteriorating situation. Job losses cut into Social Security’s revenue because the lost paychecks were no longer available for the government to tax. Meanwhile, the system started paying out more money than it had anticipated because many of the unemployed decided to start collecting Social Security benefits earlier than they had planned.
Even when the economy is stronger, however, Social Security will still face increasingly severe difficulties as more and more baby boomers retire and start drawing benefits. That’s why The Concord Coalition has been calling for fundamental reforms in the program since the early 1990s.
On paper, Social Security has a large amount of money in a trust fund. But this money is invested in government bonds; if Social Security needs to cash in some of those bonds, the federal government must still find the money somewhere else to pay them off.
The Social Security trustees are expected to issue their own projections in their annual report within the next few weeks. Those numbers, however, are not expected to differ greatly from those of the Congressional Budget Office.
The system’s deteriorating financial picture underscores the need for sweeping changes. The president’s new bipartisan fiscal commission is expected to study possible changes in the big federal entitlement programs, and some in Washington are speculating that the Obama administration could be planning to tackle Social Security reform within the next year.
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