#5 - Social Security in Crisis

Opponents of President Bush's plan to rescue and modernize Social Security increasingly are claiming "there is no crisis." But Social Security is pledged to pay out $25 trillion more by 2077 than it expects to have available.1 How can that not be a crisis?

* In 15 years we will need to use 25 percent of federal income tax revenues just to cover the funding needs of Social Security and Medicare. By 2030, we will need half.2

* Medicare and Social Security's combined unfunded liability is seven times the size of our economy.3

* The "Social Security Trust Fund" is essentially an IOU from the federal government. As such, from the taxpayers' perspective, the Trust Fund is nonexistent. When Social Security starts needing Trust Fund assets to pay benefits, taxpayers will be expected to pony up cash - $5 trillion worth4 - to restore funds spent from what many mistakenly believe is a genuine trust fund.

* Social Security will need to tap the "Trust Fund" in approximately 2018.5 But, because the federal government has gotten used to spending Social Security taxes as if they were general revenues, the Social Security cash crunch - the "crisis," if you will - actually begins in 2009, the year the Social Security revenue surplus begins to shrink.6

* A December 2004 Washington Post-ABC News poll found 63 percent of Americans do not think Social Security will have enough money to pay the benefits they are entitled to, while 74 percent believe Social Security faces either major problems or is in crisis.7

America's options to solve the crisis: Reduce benefits to seniors, or increase savings to avert the cash crunch. President Bush is choosing the latter option. Doesn't it make sense for critics to work with the White House to craft the best plan possible, rather than deny action is needed?

Footnotes:

1 David C. John, "Answering the Top 10 Myths About Social Security Reform," Heritage Foundation Backgrounder #1613, November 19, 2002, available online at http://www.heritage.org/Research/SocialSecurity/bg1613.cfm as of January 13, 2005.

2 Thomas R. Saving, Ph.D., How Will We Pay for Social Security and Medicare?, National Center for Policy Analysis Brief Analysis #490, October 13, 2004, available online at http://www.ncpa.org/pub/ba/ba490/ as of January 13, 2005.

3 Thomas R. Saving, Ph.D., How Will We Pay for Social Security and Medicare?, National Center for Policy Analysis Brief Analysis #490, October 13, 2004, available online at http://www.ncpa.org/pub/ba/ba490/ as of January 13, 2005.

4 Matt Moore, "Eliminating the Social Security Payroll Cap: A Bad Idea," National Center for Policy Analysis Brief Analysis #470, March 23, 2004, available online at http://www.ncpa.org/pub/ba/ba470/ as of January 13, 2005.

5 "Status of the Social Security and Medicare Programs: A Summary of the 2004 Annual Reports, Social Security and Medicare Boards of Trustees," U.S. Social Security Administration, available online at http://www.ssa.gov/OACT/TRSUM/trsummary.html as of January 13, 2005.

6 Donald Luskin, "The C-Word: Say It; The Social Security Crisis Begins in Just 5 Years, National Review Online, January 11, 2005, available online at http://www.nationalreview.com/nrof_luskin/luskin200501110842.asp as of January 13, 2005.

7 John F. Harris and Dana Milbank, "Details Cloud Support for Social Security Plan," Washington Post, December 22, 2004, available online at http://www.washingtonpost.com/wp-dyn/articles/A17151-2004Dec21.html as of January 13, 2005.

Issue date: January 20, 2005

 

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