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Long-Term Funding Gap for Social Security: $30 Trillion

A new study puts Social Security’s funding gap at $30 trillion dollars over the next 75 years. Meanwhile, the program has been paying out more than it’s been taking in since 2010. The Washington Post reports:

The projected shortfall in 2033 is $623 billion, according to the trustees’ latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security’s number crunchers because it covers the retirement years of just about everyone working today.

Add up 75 years’ worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars, or eight times the size of this year’s entire federal budget.

According to the Post, covering this shortfall would require an $8.6 trillion investment today with 2.9 percent returns above inflation—for the next 75 years.

There are well-documented reasons for this shortfall. The program is now supporting people for an average 25 years of old age rather than five, as it did originally. And while in 1960 there were 4.9 workers paying Social Security taxes for each beneficiary, that number has dropped to 2.8 today and is expected to drop to 1.9 in 2035.

If Social Security is to survive in some form without bankrupting the government or diverting needed funds from other priorities, it needs to be drastically reformed. There has been bipartisan consensus that the program needs better means-testing and a higher age of eligibility to reflect Americans’ longer lifespans.

Thus far, this hasn’t become a major issue in Washington or on the campaign trail. Hopefully this will change soon, particularly with Paul Ryan, as the vice presidential nominee, putting entitlement reform in the spotlight.

The longer we wait, the more expensive these changes will become.

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  • Jim.

    Means testing moves Social Security from a bipartisan “we’re all in this together” story to another IRS-enforced Leftist client-manufacturing handout.

    Once it loses its current egalitarian appeal, expect opposition to grow. If the rules are no longer “you’re American and you worked for a living, so you can take your share the same as everyone else”, expect it to get shut down.

    Handouts to the majority are beaten by arithmetic. Handouts to special interests are beaten by the majority.

    So dies Blue.

  • Senator Blutarsky

    To the extent that the incumbents fail to return current discourse to the gutter, I believe that the critical contribution of Paul Ryan to an otherwise largely innumerate debate is the implicit introduction of the concept of net present value. Shameless self-promotion alert: I expand on this idea in this post:

  • Eurydice

    What I haven’t heard anybody talking about is where the jobs will come from if people have to wait longer to retire.

  • Corlyss

    Remember when you hear some pol say “payroll tax holiday” that means “you don’t have to pay into the SS fund.” That’s a built in shortfall in the SS income.

  • Gerald

    At some point we must decide whether the “Social Security” program is a retirement program or a welfare “safety net” program. If is is retirement, then means testing is inappropriate – just give everyone back their contribution. If it is welfare, then only provide payments to those people who need it to be at or above the poverty level. As a current recipitent, I would have to live past the age of 90 to get simple payback of funds contributed, and 85% of my ss benefits are taxable, so it is already somewhat “means tested”. If the government wishes to state that it is only welfare, I will be happy to give it up altogether – but please stop the blather and decide what this program is.

  • Luke Lea

    “A new study puts Social Security’s funding gap at $30 trillion dollars over the next 75 years.”

    That’s nothing. You should see the figure for the next three hundred years!

    Or you might read what Dean Baker writes on the subject:

  • Eurydice

    @Gerald #5 – You’ve hit on the essential point. Back at the dawn of SS there wasn’t a culture of retirement – for the most part, people worked until they couldn’t anynore and then they became dependant on others. Now, when we think about the course of our lives, we all expect a time when we can live comfortably and independantly without working. Entire industries have been built up around this expectation.

    It’s not like our policy makers don’t know that the world has changed – every amendment to SS has included rafts of debate about the subject. But I don’t think the public really understands the issue – partly because it’s complicated and boring and partly because politicians find more use in treating SS as a political football.

  • Joe

    With Ryan onboard, there’s a chance that we’ll see some necessary, incremental changes: Raise federal retirement to 70, cut benefit levels, even (yes) means-test. Like Gerald says, we need to stop pretending that this is some sort of universal benefit.

    I’m 24, and I know damn well this program isn’t going to be around in 2053. SS is, and always will be, just another tax for me to pay. I’d prefer the system to go to its end gracefully instead of collapsing on everyone–my grandma’s only real income is SS–but now’s the time to do that, while there’s time to avert the collapse.

    In a few years, when my generation wakes up and figures out what’s taking place here, watch out. The conversation is going to get messier.

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