General Discussion
In reply to the discussion: If You Are A Baby Boomer - the real reason YOU SHOULD BE FURIOUS over CPI cuts: [View all]Yo_Mama
(8,303 posts)There are also taxes on benefits, but those won't make up the gap.
SS payroll taxes (even if they had been at the full amount) have been short for a few years - benefits paid out are already more than taxes paid in.
So that's basically the problem.
The second part of the issue is the trust fund(s) - those are records of excess deductions paid in by workers since 1983 that were supposed to "prefund" this period when the boomers would be retiring and payroll taxes wouldn't cover their benefits. There are two problems here - one is that there is no actual money in the trust fund. The excess deductions were given to the general fund and special Treasury Obligations were issued. This means that now as we run deficits, the general fund must make up the difference between income and outgo in the SS/DI programs, from other tax revenues. Since we don't have enough tax revenues, money is borrowed and public debt increases.
Even if we had money in the trust fund(s), the trust funds are set to be exhausted by sometime in the 2030s, which would mean a benefit cut for the boomers.
But in fact, given our current high deficits, the problem will occur earlier when we can no longer borrow to fund SS benefit payments.
So we must either raise taxes to pay for the program, or we must cut benefits. We're set to have a 100% debt to GDP ratio sometime in the 2020s, and that's when TSHTF.