The Ponzi scheme known as Social Security will soon be broke and forced to borrow from the U.S. treasury to remain solvent. How soon? Without some kind of intervention, the Social Security "trust funds" will run out of money in the next decade. Some claim that 2033 is the "drop dead date" for Social Security. Others think it's 2035.
More than 50% of non-retired workers say they plan to rely on Social Security in retirement. That means that workers in their 50s may reach retirement age and either see benefits cut, or the current retirement age of 65 raised. Currently, 77% of retirees say they rely on Social Security for basic necessities.
“American workers have told us they feel behind on their retirement savings, and only about half say they believe they’ll be able to save as much as they’ll need. Social Security provides a vital backstop,” said Mark Hamrick, senior economic analyst at Bankrate, who conducted the survey.
This is not a state secret, nor is the coming shortfall in funding. Everyone knows it, but everyone is pretending it doesn't exist. It's like the national debt bomb that's ticking away while Congress and the American people party like there's no tomorrow.
There are precious few options to keep Social Security solvent. We can raise Social Security taxes, cut benefits, or raise the retirement age. We could also make it a means-tested welfare benefit, but that will never fly in Congress. Most likely, some combination of the first three will eventually be agreed to after the Democrats are finished accusing Republicans of wanting to murder old people and/or force them to eat dog food.
At this point, it's not a question of getting rid of Social Security. We're stuck with FDR's Ponzi scheme, as the former president pointed out when he was insisting that the payroll tax remains in the bill authorizing the program despite the perilous arithmetic.
I guess you're right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren't a matter of economics, they're straight politics.
The guy was elected president four times, so he knew a thing or two about politics. There has never been a serious effort to repeal Social Security.
But that doesn't mean it can't be reformed. And the longer Congress waits to get it done, the more painful the fix will be.
This month, Pew Research found "large majorities of Trump (77%) and Harris supporters (83%) opposed any reductions in the Social Security program." In February, a Redfield & Wilton Strategies survey revealed that 66 percent of Americans agree Social Security needs reforming, but "69 percent of respondents across all age groups opposed cutting benefits to those on Social Security, while 52 percent were against raising the retirement age and 44 percent opposed raising taxes on workers' income." What kind of reform they have in mind is anybody's guess.
Indeed, everyone wants the full ride while paying only half the fare. Beneficiaries retiring today have paid in about $350,000 in Social Security and Medicare (average worker) taxes over their lifetime but will take out almost half a million before they die. That's been true since the 1970s.
"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report," according to the most recent annual report from the Medicare and Social Security trustees. "At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits."
A lot of people will get very angry if 20% of the income they were expecting disappears.
Until 2010, Americans paid more in Social Security taxes than the program paid out in benefits. The extra money wasn't saved but passed on to be spent by the rest of the federal government in return for IOUs. That point passed as the ratio of workers to retirees dropped and seems unlikely to shift back given the country's declining birth rate and aging population. That means the difference between revenues and expenditures is now made up, as it is across the rest of the federal government, by borrowing. As Social Security cashes in those IOUs, the Treasury will borrow an estimated $4.1 trillion plus interest to fund the program between now and 2033. "It's like borrowing money to pay off credit cards," Boccia notes.
It's entirely possible that unless some sea change in our politics miraculously happens, the dysfunction and paralysis in government will prevent any "fix," no matter how modest, to Social Security.
That's when the blame game will begin. It promises to be prolonged and messy.
