Social Security is running short on money and time
Published 8:45 am Wednesday, May 9, 2018
Good news for anyone who just finished filing their taxes for 2017: Next year, when we file our taxes for 2018, we’ll send less money to Washington.
Even better, the Treasury Department estimates that nine out of 10 Americans now have larger paychecks thanks to lower tax rates, a larger standard deduction and an increased child tax credit.
But trouble looms. Federal lawmakers still haven’t addressed their insatiable appetite for spending beyond their means. This year Americans will collectively send more than $3.3 trillion to the federal government. Yet despite all that tax revenue, the 2017 deficit was a whopping $665 billion.
So what does Uncle Sam spend your tax dollars on? Some believe most of it goes to welfare programs and foreign aid. Others believe defense and corporate subsidies dominate the budget.
In reality, health entitlements and Social Security are the largest programs. If Congress continues its current policies, these entitlements and interest on the debt are set to consume every dollar of taxes paid by 2027. That’s less than 10 years away. Major health entitlements. Medicare, Medicaid and Obamacare subsidies currently consume 28 cents out of every budget dollar. Federal health spending is projected to grow an unsustainable 6 percent annually over the next decade.
The single largest federal program, Social Security, accounts for roughly a quarter of all federal spending. Its trust funds already pay out more than they take in, and as more people retire, the system will face continued stress.
Right now, the program provides retirement and survivors’ benefits to some 50 million people. Every year since 2010, Social Security revenues, excluding interest earned, have been lower than payouts, and things promise to get worse.
A 2015 Gallup Poll found that 64 percent of millennials don’t think the program will be able to pay benefits when they retire. The doubts are similar among those in the 30-to-49 age range.
The problem is simple. Our leaders have been piling up unfunded liabilities. In Washington, politicians have been far more eager to channel benefits to retirees and disabled people than to impose taxes to pay for them.
The Social Security payroll tax rate has not increased since 1990. But in the interim, the giant baby boom generation has begun its mass migration into retirement. Because of rising lifespans, these retirees will be collecting checks for many more years than their parents and grandparents did.
The trajectory of the workforce — the taxpayers who finance the benefits — is not matching this growth. Quite the opposite. In 1990, there were 3.4 workers per retiree. Today, there are 2.8. By 2035 there will be about two.
By failing to take timely steps to balance resources and obligations, members of Congress and presidents have made solutions steadily harder. When the retirement fund is depleted, the chief alternative to smaller retirement checks will be big tax increases. Each year, the choices get worse.
The best time to address this looming crisis was long before now. The year 2034 is going to arrive whether Social Security is ready or not. But don’t bet on hearing about the crisis this year. It is an election year. So lawmakers simply bury their heads in the sand and pretend that the federal government’s massive unfunded liabilities will magically go away on their own.
Americans who depend on both programs must work furiously during the coming months to protect them. They’ll have to reject claims Washington politicians want to “save” Social Security for future generations by cutting benefits or raising the retirement age.