Source: CBO “Combined OASDI Trust Funds; January 2011 Baseline” 26 Jan 2011.
Social Security has passed a tipping point. For years it generated more revenue than it consumed, holding down the overall federal deficit and allowing Congress to spend more freely for other things. But those days are gone. Rather than lessening the federal deficit, Social Security has at last — as long predicted — become a drag on the government’s overall finances.
As recently as October, CBO was projecting that it would be 2016 before outlays regularly exceed revenues. But Social Security’s fiscal troubles are more severe than was thought, and the latest projections show the permanent deficits started several years ahead of earlier predictions.
Don’t be confused by the fact that the trust funds are projected to continue growing for several more years. That’s because Treasury must still credit interest payments to the funds on the borrowings from earlier years. But unless taxes are increased or other spending is cut severely, the government will have to borrow from the public to pay the interest that it owes to the trust funds.
And don’t be misled by those who say the system can pay full benefits until about 2033 without making any changes to the law. That’s true, but does not change the fact that Social Security taxes no longer cover those benefits. The government is now borrowing money to pay them, and will do so every year for the foreseeable future. And keep in mind, if nothing is done, when those trust funds are exhausted, benefits would have to be cut by 22 percent in 2033, and more each year after that, according to the most recent report of the system’s trustees. By 2084, the system will generate only enough revenue to pay for 75 percent of promised benefit levels.
FYI: The SS DI Trust Fund will be exhausted by 2016--two years from now according to the latest SS Trustee Report.