Celebrating 78 Years of Social Security
It's August 14 and that means it is Social Security's birthday! The program has been around for 78 years, providing retirement security to the elderly and support for the disabled. But the demographics have changed over the past 78 years and financial projections clearly show that reforms will be needed to ensure the program can continue to provide those benefits.
As we discussed in our analysis of the latest Social Security Trustees Report, the combined trust fund is due to become insolvent as early as 2033. At this time, benefits will need to be cut by 23 percent to match revenues. This year's projections were similar to last year's, with a 75-year actuarial shortfall now at 2.72 percent of payroll (0.98 percent of GDP) from the 2.67 percent of payroll (0.96 percent of GDP) mark in last year's report. However, another lost year gives us less time to slowly phase-in the changes need to restore solvency for the program.
While the gap needed to be made up is significant, there are many options that lawmakers could consider that could make the program solvent. CRFB has developed a useful tool, The Reformer, which allows users to select from a variety of revenue and benefit options will the goal making the program sustainably solvent, closing the gap between revenue and spending over 75 years and in the 75th year. We've even used the Reformer to show the effects of Social Security reform plans from Simpson-Bowles, Domenici-Rivlin, the National Academy of Social Insurance, Rep. Jason Chaffetz (R-UT), and Rep. Gwen Moore (D-WI).
Social Security is one of the most important programs in the federal government. But each passing year forfeits an opportunity to enact phased-in, gradual changes that allow beneficiaries and taxpayers time to adjust. With the Disability Insurance portion of the program due to become insolvent by 2016, Washington will need to make some decisions about the future of Social Security. Try The Reformer and develop your own plan to make the program sustainable for generations to come.