Social Security on Facebook

[Jim Lane]

42. You're both right.

The answer to your true-or-false question is, AFAIK, "True."

What Yo_Mama wrote was: "SS current income from taxes is currently not covering outgo." That also is, AFAIK, true, even if you add in the transfer from the general fund that erases the impact of the payroll tax holiday.

As for the future, projections are always subject to some uncertainty, but I think there's no reasonable doubt about one fundamental point concerning the role of the Trust Fund: Barring a radical change in revenues or expenses, there will come a time within the next several years when current outgo exceeds all sources of revenue (revenue from payroll taxes plus interest payments from the Trust Fund plus any general-fund money transferred to make up for any future payroll tax holidays). That means that the Trust Fund will hit a peak size and will then start to decrease in size. This doesn't represent a problem; it's how the Trust Fund was designed to function, to enable the system to cope with the demographic bulge of the Baby Boom.

The question that's difficult to answer is whether the Trust Fund will be depleted down to zero before the system regains its year-to-year equilibrium (which occurs a few decades from now, when enough of us Baby Boomers have died off). That's where the different projections make a huge difference.

You're certainly right that there are reasons to question the pessimistic assumptions. Nevertheless, to me it makes sense to give those assumptions heavy weight in planning. If the weather forecast is for a 30% chance of rain, I stuff an umbrella into my backpack. That's one reason to favor raising or eliminating the cap on income subject to FICA taxation -- that step would improve the system's fiscal picture.

Of course, talk of Social Security going "bankrupt" is hype. There are Gen X'ers and Millennials who are convinced that they'll never see a dime of Social Security benefits, which is a completely wrong view. Even on the worst-case assumptions for the depletion of the Trust Fund, Social Security would still be able to pay about three-quarters of all benefits due under current law. Furthermore, I very strongly suspect that the political will would exist to fix the problem out of the general fund.