How is Social Security “going broke” with all the surpluses?
It’s often tough for people to comprehend, but while Social Security has been stockpiling worker payroll taxes since 1982, including a surplus of $3 billion in 2018, the good fortune turns around in 2020. The program was due to run a deficit this year, but the strong economy put that off a year. Simply put, the demographics are working against the program. The sheer number of Baby Boomers are reaching retirement age. Not only will this increase the number who draw retirement benefits, but it will also cause more people to leave the workforce than are entering, leading to fewer contributing Social Security payroll taxes.
Consider the number of covered workers (people paying in to Social Security) per beneficiary. As Matthew Frankel points out in this article, for most of the past few decades, this ratio has been well over three, meaning more than three people were paying into the system for every person drawing benefits. In 2018, this ratio was 2.8, just enough for the program to run a surplus. However, this ratio is forecast to steadily fall. By 2035, when Social Security is forecast to run out of money, the baby boomers will have mostly retired and only 2.2 workers will be paying in for each beneficiary. This implies that there will be about 21% less payroll tax coming in. Obviously, if the program is barely in the black right now, this won’t be sustainable.
When Social Security runs a deficit, funds from the program’s reserves are used to make up the difference. When reserves run out, benefits wouldn’t simply stop being paid. There would still be incoming revenue from payroll taxes and taxation of benefits but only enough to cover about 80% of scheduled benefits. Frankel discusses this in more depth and addressed ideas to reform the program. Read the full piece here.
The Association of Mature American Citizens (AMAC) advocates for a strengthening of Social Security and has developed a bipartisan compromise bill, titled “The Social Security Guarantee Act,” taking selected portions of bills introduced by Rep. Sam Johnson (R-TX) and Rep. John Larson (D-CT) and merging them with the Association’s original legislative framework to create the new Act. AMAC is resolute in its mission to get the attention of lawmakers in DC, meeting with a great many congressional offices and their legislative staffs over the past several years. Learn more about AMAC’s Social Security Guarantee here…