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Unfunded Liabilities, the Lockbox, and Other Social Security Myths
Social Security: It’s the third rail of American politics. Its trustees warn it will be insolvent by 2033. Third-party studies warn the day of reckoning could come nearly a decade earlier. Pundits warn its $70 to $120 trillion in “unfunded liabilities” will bankrupt America. Congress recently held hearings on how to fix it. One Senator just tabled a bill to patch it with a high-income tax hike and expand benefits to battle what pundits call a “retirement crisis.” Two Connecticut Congressmen submitted legislation to hike Social Security taxes across the board….
So why the insolvency fears? According to the trustees, the Old Age and Survivors Insurance (OASI—what we commonly think of as Social Security) and Disability Insurance trusts’ combined outlays have exceeded non-interest income since 2010. For now, interest covers the shortfall, but those long-term forecasts project interest won’t be a big enough buffer from 2019 on, forcing the trusts to redeem those reserve bonds. Those are projected to run out in 2033, after which tax receipts will fund only 75% of scheduled payments through 2088. There are a couple ways to avoid this. Read More…
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