In 2015, 65.1 million people received benefits from the Social Security Administration and this number is constantly increasing. As we’ve talked about in class, the current demographic challenges facing our nation are daunting. It is a fact that a dwindling workforce must continue to produce in order to provide income for the expanding dependent population. Because of the dangerous momentum affecting the proportion of workers to dependents, GDP growth needs to return early post-war levels in order to maintain current Social Security benefits. Of course, many scholars are highly skeptical that this will ever happen. Increasing the tax burden on a smaller workforce would be crippling. Decreasing Social Security benefits is another possibility, though the likelihood of this occurring seems slim as well. Despite the small monthly sum that Social Security represents, people are extremely dependent on this income. In 2014, 61% of beneficiaries received at least half of their income from the program.
Social Security primarily consists of two programs, Old-Age and Survivors and Disability Insurance program, and Supplemental Security Income program. The latter benefits the neediest, as well as the blind and disabled of all ages, and 8.3 million people received support in 2015. In 2015, the OASDI Trust Funds collected $920.2 billion in revenues. 86.4% was from taxed income, 3.4% came from taxed Social Security benefits, and the final 10.1% was from interest on government bonds held by the funds. In 2015, it was projected that there are 2.8 workers contributing to Social Security for each beneficiary of the program. This number will fall to 2.1 in 2037, a far cry from the level in 1955 which was a ratio above 8. This is a testament rate at which the population is aging. In fact, growth in payments to retirees have tripled that of disabled workers over the last 40 years.
As Professor Smitka mentioned in class, the current Social Security program is unsustainable in the long term. The Social Security Trust Fund, established in 1983, has been essential towards funding the program. Social Security’s income has surpassed its costs since the eighties, but will only do so until 2019. However, given the current tax rates and benefit plans, the trust fund will most likely be empty by 2034, and it is projected that only 79 cents for every dollar of today’s benefits will be available. Unless there is some sort of reform, this is the reality.
Data from: www.ssa.gov
The graphs accompanying this post had some issues when they were uploaded to the site. You can view them at:
It is clear from looking at the projections that this system is going to fail. You only need to understand population/demographic growth patterns as countries develop to understand that this system is unsustainable. As a country, we must figure this out now, not wait for the system to implode, leaving the elderly population penniless. I guess my question is, what would happen if we halted the system now? Is it possible? With the rising cost of healthcare and medical devices/assistance, aren’t the downsides of cancelling the system less now than they would be twenty-thirty years from now?
The system is not going to “fail” but rather will face large automatic cuts. Those who already have a hard time making ends meet may disagree with my choice of words. The system requires a modest increase in taxes in order to continue functioning as currently structured? A 1% of GDP increase in taxes would not be crippling to the economy, however unpopular it might be to a Republican Congress that ran for office on the basis of tax cuts (while they also mouth the importance of balanced budgets, which the roll call comes they’ve not been willing to make that a priority).
I wonder if the projections of how long social security will be sustainable include the effect of illegal immigration on the system? A study by the Social Security Administration Chief Actuary in 2013 estimated that illegal immigrants contributed $12 billion to the program in 2010, very few of whom reaped the benefits of the program themselves. However, this number is not absolute, as it is difficult to measure exactly the number of people here illegally and their individual contributions to society. Thus, I’m not sure if they would have included this in sustainability projections. However, if they did not, then the current projection could be underestimating the social security system’s longevity.
Yes, one more aspect of “exporting” immigrants is that in order to find jobs, they need a Social Security card. So the government collects taxes, including the automatic payroll deduction part of income taxes. That’s likely a few percent of total revenue, not to be sneezed at.
Echoing what we discussed in class, Social Security made more sense when the life expectancy of the population was around 60. Completely cutting the program doesn’t seem like a productive choice because we leave so many people behind, but using tax dollars for a program bound to fail also seems wasteful. As Baby Boomers continue to retire, our generation will shoulder their retirement. Unfortunately, the parties are so polarized that there is no reason to think that any bipartisan bill will be passed. Judging from the sloppily put-together executive orders of this administration, if President Trump has a plan for the future of Social Security it should be carefully scrutinized.
Again, “bound to fail” because it was set up with a silly structure. If the current generation doesn’t support the retirement of their elders, then you will never be able to yourselves retire – it’s an intergenerational social contract.
Furthermore, as I stressed in class, the numbers aren’t that big in the US. China, Japan, and other low-fertility countries face much bigger challenges.
I agree with Karen’s comments that the parties seem so polarized right now that I’m not sure what solution will pass and even if there is a solution? Not only in regards to social security, but also other programs such as Medicaid that the elderly population will continue to rely on. In terms of developed countries, the United States seems to be lagging further and further behind as time goes on – and I wonder what measures should be taken to ensure that we do not fall behind completely. It seems like the foundations that were set forth were not stable to begin with, and now we have to deal with the repercussions of what to do now. Katie’s point was interesting about the effect on illegal immigration contributions towards social security – I was not aware the number was so high, but given the current political climate, I’m not sure how much we can rely on this.
The “foundation” included taxes designed for a particular demographic projection, and to keep rates low there was no “plus alpha” as a safety margin. Fine in the short run, but over the span of decades fertility trended lower and mortality trended lower, so the age of the population as a whole rose more than expected. The solution should be a readjustment of rates every 10 years, in synch with the Census [but with a lag of a couple years to allow analysis to provide new projections]. We’ve tended for political reasons to have less frequent, larger changes – the last in 1984?
I think there are some reasonable solutions that hopefully will be implemented in the near future so that our generation is, (fingers crossed) at least allowed to retire. Raising the earnings cap, raising the retirement age, and increasing taxes in general would all help to solve this problem, would they not? Regardless of what Congress decides, what is certain is that a solution needs to be passed soon, very soon.
Ought to be passed now, needs to be passed only just in time. As long as Congress beats the date on which monthly pensions get reduced by even one day, it will be timely.
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