Problems Facing Social Security

Paper Summary:

The following paper discusses the practical and symbolic significance of Social Security. The writer argues that the main reason social security is facing long-term insolvency is because the population is aging. This paper examines studies that claim that by 2030 there will be exclusively two active workers for every one retiree. The writer discusses the fundamental demographic shift that will occur when fewer and fewer workers will be contributing payroll taxes to support more and more retired individuals.

From the Paper:

"To finance the current level of benefits, payroll taxes for the Old Age Survivors and Disability Insurance portion of the FICA tax would have to be increased from the current 12.4 percent to 18 percent. The long-term shortage in the OASDI trust fund is about 2 percent of payroll, which is approximately a $32 billion annual deficit in today's dollars. The Social Security trust funds have been building up surpluses in anticipation of baby boomers' retirement needs. These surpluses, however, help mask the true size of the federal deficit. In fact, the trust funds are projected to pay out $18.6 trillion in benefits over the next 75 years but collect only $9.8 trillion in income from taxes, leaving an unfunded liability of $8.8 trillion. Beginning in the year 2012, the trust funds will begin to experience negative cash flows. By 2029, OASDI will be insolvent; able to pay only 77 percent of promised benefits. "

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