Here starts a mini-series of TGIF 2 Minutes editions.
The following is taken directly from the current Social Security website. The italics below are copied from the website and presumably are meant for emphasis. Underlines are mine.
The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.
Social Security is back in the news and is never a popular topic when the talk pertains to lack of sustainability for future payments to Americans. On the plus side, it is political dynamite for any lawmaker or US President to preside over a reduction or threat to Social Security. Therefore, the likelihood of Social Security being in huge jeopardy is low.
However, the numbers are the numbers, and the costs are rising. To keep this introductory post short, let’s simply review the statement above and get to the numbers later.
“…taxes will be enough to pay for only 75 percent of scheduled benefits.”
- This statement indicates that either taxes are going UP (likely) or Social Security will not pay out full benefits (somewhat unlikely).
“This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman.”
- This statement makes no sense and seemingly contradicts itself.
“…adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program…”
- This statement is another version of the need for taxes to go UP.
“Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt.”
- This statement indicates that future generations of ALL wealth and income levels, starting NOW, will be handed more heinous government debt.
“If trust fund assets are exhausted without reform, benefits will necessarily be lowered…”
- This statement indicates what could happen if there are no reforms to Social Security, which is unlikely.
Time to listen to “Buy Dirt” again and enjoy today and the current weekend on a best efforts basis!