Since it was established in 1935, Social Security has been the centerpiece of our nation financial security plan, an assurance to provide at least a subsistence income to the most vulnerable of citizens. It is the most universal and the most popular government entitlement plan consisting of more than 20% of the federal budget,
In May 2011 the Social Security Administration projected that under current law the program’s trust funds will be gone by 2036, and that $6.5 trillion in additional funds will be needed over a 75-year period, approximately $87 billion per year, to pay all scheduled benefits.
The Social Security Administration reported in 2009 approximately 51 million Americans received $672 billion in Social Security benefits. The recipients consist of retirees and their dependents, under-age survivors of deceased workers and the disabled, among others.
The money for the benefits came from payroll taxes (known as Federal Insurance Contributions Act taxes) on current workers and on their employers.
The chief question hanging over social security is the question of how demographics will shape its finances. In 1982, a bipartisan committee came up with a plan that prevented an impending shortfall through a tax increase that also generated a significant surplus.
This leftover amount was placed into an off-budget account known as the Social Security trust fund and loaned to the federal government. Repayment of the loans would provide a cushion for the day when the retirement of the Baby Book generation meant that the system was paying out more than it was taking in.
The New York Times reported that threshold was reached in 2010, six years sooner than expected, as tax receipts fell during the recession that began in 2007.
In July, President Obama offered to put Social Security together with Medicare and Medicaid on the table in discussions over a long-term deficit-reduction plan. The idea worried some Democrats, but Republicans backed down from the idea of a sweeping deal because of President Obama’s persistence that spending cuts would be grouped with revenue increases.
The long-term costs of Social Security present further problems for politicians, who are already struggling over how to reduce the nation’s debt. We can only hope this problem is solved quickly and efficiently.
