Report: Social Security Fund Will Be Drained By 2037

By: Associated Press
By: Associated Press

WASHINGTON (AP) -- Social Security's finances are getting worse as the economy struggles to recover and millions of baby boomers stand at the brink of retirement.
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.
The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year, but the CBO said at the time that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.
The outlook, however, has grown bleaker as the nation struggles to recover from the worst economic crisis since Social Security was enacted during the Great Depression. In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising. In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.
The deficits add a sense of urgency to efforts to improve Social Security's finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs. Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.
"It means that Social Security is increasingly adding to our long-term fiscal problem, and it's happening now," said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.
It's a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.
A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security's finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.
Obama, however, has not embraced any of the panel's recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.
Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.
"I take the president at his word when he says he's eager to cooperate with us on doing all of it," McConnell said.
Social Security experts say news of permanent deficits should be a wake-up call for action.
"So long as Social Security was running surpluses, policymakers could put off the need to fix the program," said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute. "Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform."
More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.
The program has been supported by a 6.2 percent payroll tax paid by both workers and employers. In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.
Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 -- unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.
The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.
Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds.
"It's an IOU that is backed by Treasury bonds and the faith and credit of the United States government," said Sen. Bernie Sanders, I-Vt. "It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor."

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  • by Anonymous Location: kentucky on Feb 18, 2011 at 07:14 PM
    Listen for as long a I can rememeber all I ever heard social security going broke. well let me say this when Bill clinton left office the Budget was fine till me George w,Bush jr. got in office 9/11 hit .kept our country over in the middleeat the whole terms he was in office .it wasn;t Hussian.It was Ben Laden and isn't the ex president a oil tycone.when obama swear in to office he just didn't know the mess he was walking into.sorry to say this But.disabled and retired people souldn't have to keep worring over what little bit they get a month it should be there but these young 16 17 to 20 to 30 year old they need to checked again.send um back to school.god bless your heart mr presdent Obama you just didn't know what you where walking into .i trust you that you won't let a lockdown happen
  • by Anonymous on Jan 28, 2011 at 06:43 PM
    Time to bump the retirement age to 70 and 65 for early retirement. Like most social programs, they go bankrupt. They can not sustain the payments.
  • by Anonymous on Jan 28, 2011 at 01:49 PM
    What happened to all the money the Fed government has borrowed and keeps borrowing from Social Security. They sure the devil haven't paid back any of it. They said back in 82 that the program would be dead in 30 years. Well its 29 years later and Social Security is still here. we need to demand that the Feds start paying back the money with interest that they stole from us. Does anyone remember voting to allow the Federal Goverment to drain Social Security? I don't think so.
  • by Jim Location: Grand Ledge on Jan 27, 2011 at 04:52 PM
    Our goverment has been in the Red 47 out of the last 50 years. We need to cut spending across the board that mean cuts to social security, medicaid and medicare. We also need States to step up to the plate and get their own houses in order and stop getting money in the form of grants from uncle Sam ( The TAX PAYERS ).
  • by Anonymous on Jan 27, 2011 at 07:11 AM
    good plan obama ?? man get oour country back on track and stop going to war! that is the problem is the pentagon spending on war stop the madness
  • by Jake Location: Jackson on Jan 27, 2011 at 05:52 AM
    Can someone please explain to me how Social Security is any different than a ponzi scheme much like the one Bernie Madoff ran?
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