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Social Security Will Not Be Able to Pay Promised Benefits by 2034

Social Security faces a fiscal cliff in 2034. Let's discuss what's happening and what will be done about it.
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Social Security Projects Shortfall in 2034

2034 Fiscal Cliff 

In its 276-page 2021 Annual Report, the Social Security Administrations projects a fiscal cliff starting in 2034.

The report dives into fertility assumptions, mortality assumptions, productivity assumptions, inflation assumption, tax contribution assumptions, etc.

Three Key Words

  1. Assumptions
  2. Shortfall 
  3. Hypothetical

Social Security Costs vs. Non-Interest Income

  • Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be higher than its total income in 2021 and all later years. Social Security’s cost has exceeded its non-interest income since 2010.
  • The reserves of the combined OASI and DI Trust Funds along with projected program income are sufficient to cover projected program cost over the next 10 years under the intermediate assumptions. However, the ratio of reserves to annual cost is projected to decline from 253 percent at the beginning of 2021 to 85 percent at the beginning of 2030.
  • Under the Trustees’ intermediate assumptions, OASDI cost is projected to exceed total income in 2021, and the dollar level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2034.

OASI is Social Security and DI is the Social Security Disability Fund. They are separate programs but typically merged in discussion. 

Magnitude of 75-Year Actuarial Shortfall 

To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period: 

  • (1) revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.36 percentage points to 15.76 percent; 
  • (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 21 percent applied to all current and future beneficiaries, or about 25 percent if the reductions were applied only to those who become initially eligible for benefits in 2021 or later; 
  • (3) some combination of these approaches would have to be adopted. 

Possible Changes to Address Shortfall 

  • A: Cost-of-Living Adjustment 
  • B: Level of Monthly Benefits (PIA) 
  • C: Retirement Age 
  • D: Benefits for Family Members 
  • E: Payroll Taxes (including maximum taxable)
  • F: Coverage of Employment or Earnings/Inclusion of Other Sources of Revenue
  • G: Investment in Marketable Securities
  • H: Taxation of Benefits
  • I: Individual Accounts

The above points discussed in Office of the Chief Actuary's Estimates of Individual Changes Modifying Social Security

Beneficiaries vs Contributors

Number of Covered Workers Per Beneficiary

From 1974 through 2008, there were between 3.2 and 3.4 workers per beneficiary. Boomers largely retire by 2035. At that time the projected ratio of workers to beneficiaries is expected to collapse to 2.3.

Trust Fund Depletion

Projected Maximum Trust Fund Ratios

Cumulative Scheduled OASDI Income

Cumulative Scheduled OASDI Income

Hypothetical Nonsense 

The last two charts and hundreds of pages of the doc are where it gets more than a little bit stupid. 

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No Trust Fund, No Trust

In reality, there is no trust fund. Nor is there any trust in the system (at least there shouldn't be). 

The alleged Trust Fund has already been spent and then some, and it's easy to prove.

Total Outstanding Debt

Total outstanding debt according to Treasury Direct is $28,427,317,184,527.64 as of August 31, 2021. 

It is absurd to believe there is some sort of Trust Fund that has not been spent when the government is in debt to the tune of $28 trillion, rising by trillions every year.

Democrats seek to add another $3.5 trillion to the debt pile this year. And that is on top of the $1 trillion infrastructure packages just approved but not in the $28 trillion listed above. 

What About Options A Through I? 

There are no realistic options and it silly to pretend that there are.

Neither Republicans nor Democrats will reduce benefits or tax them. It's the "third rail" in politics. Touch it and you get electrocuted right out of office. 

 G and I are humorous. They presume the stock market is a guaranteed winner. And even if that was the case, please take another look at the debt.

System is Insolvent

The entire system is insolvent if one factors in the $28 trillion in debt representing alleged Trust Fund savings that are already spent on something else, especially wars.

Sure, Congress can raise taxes. But for 2021 alone the US will be $4.5 trillion in the hole if Democrats get their way. 

And it's ridiculous to believe that even Democrats would opt for Item I: Raise payroll taxes from 3.36 percent to 15.76 percent. Heck, Democrats do not want to raise payroll taxes at all. 

The report wastes hundreds of pages addressing options that neither party will do. 

Three-Way Pretending

The only possible "solution" is to pretend. 

We have to pretend there is a Trust Fund collecting interest, pretend the system is solvent, and pretend that $28 trillion (and rising fast) debt does not matter at all.

Pretend it is. 

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