3. Social Security Has Now Been in the Red for More Than a Decade. Last year marked the 11th straight year that Social Security has been in the red, with the program paying out $96 billion more in benefits than it collected in payroll taxes. The only reason why the program is still considered solvent is that it is cashing in on IOUs that were previously issued to the program in exchange for using some of the payroll taxes that most people think are being set aside to fund their future benefits to finance other government spending. Cashing in those IOUs requires the Treasury to issue more publicly held debt.
5. The Costs of Congressional Inaction Are Exponential. Each year that policymakers ignore Social Security’s shortfalls results in ever-higher costs and consequences for workers and retirees. Between just 2010 and 2020, Social Security’s combined retirement and disability programs’ unfunded obligations tripled, from $6.5 trillion to $19.8 trillion, and the size of immediate tax increases needed to maintain the programs’ solvency jumped from a 2.15 percentage-point increase to a 3.36 percentage-point increase. A 15.76 percent payroll tax, compared to the current 12.4 percent, would mean a $7,880 social security tax bill for someone making $50,000 per year. Not only would those taxes mean lower incomes during workers’ careers, but also lower incomes in retirement. A Heritage Foundation analysis found that even if politicians coupled tax increases with higher benefits, workers across all income levels would be worse off.
