Poor health for the Social Security Trust Funds

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On April 23,the Social Security Board of Trustees issued areport indicating financial poor health for the Social Security Trust Funds.            The trustees said in their report toCongressthat the combined assets of two trust funds (essentially, for retirees and thedisabled) will be exhausted in 2033, three years sooner than projected justlast year. At that time, according to projections, there will be sufficientnon-interest income coming into the funds to pay about 75 percent of scheduledbenefits.             The Disability Insurance (DI) TrustFund will be exhausted in 2016, two years earlier than estimated last year. TheOASI (Old-Age and Survivors Insurance) Trust Fund will be exhausted in 2035,three years earlier than previously projected. This situation is critical notonly to a SocialSecurity attorney or Social Security lawyer, but to allAmericans.              Trustees also project that theprogram costs will exceed non-interest income this year, and will remain higherthroughout the remainder of the 75-year projection period, and that, over thatperiod, the Trust Funds need the equivalent of an additional $8.6 trillion intoday’s dollars to pay all scheduled costs.             Michael J. Astrue, commissioner ofSocial Security, said in a press release about the report, “This year’sTrustees Report contains troubling, but not unexpected, projections aboutSocial Security’s finances. It once again emphasizes that Congress needs to actto ensure the long-term solvency of this important program, and needs to actwithin four years to avoid automatic cuts to people receiving disabilitybenefits.”            The report summarized that:•           In 2011, costs continued to exceedincome (both tax and non-interest income). The size of the deficits is “largelydue to a temporary reduction in the Social Security payroll tax for 2011 and2012,” in which the employee portion of the tax was reduced from 6.2 to 4.2percent. •           For the combined OASI and DI TrustFunds to remain solvent throughout the 75-year projection period, lawmakerscould: (1) increase the combined payroll tax rate for the period in a mannerequivalent to an immediate and permanent increase of 2.61 percentage points(from its current level of 12.40 percent to 15.01 percent);1 (2) reducescheduled benefits for the period in a manner equivalent to an immediate andpermanent reduction of 16.2 percent; (3) draw on alternative sources ofrevenue; or (4) adopt some combination of these approaches. Lawmakers wouldhave to make significantly larger changes for future beneficiaries if theydecide to avoid changes for current beneficiaries and those close to retirementage.            The Trustees recommend thatlawmakers address the projected trust fund shortfalls in a timely way in orderto phase in necessary changes and give workers and beneficiaries time to adjustto them. Implementing changes soon would allow more generations to share in theneeded revenue increases or reductions in scheduled benefits.             The report pointed out that “SocialSecurity will play a critical role in the lives of 56 million beneficiaries and159 million covered workers and their families in 2012. With informeddiscussion, creative thinking, and timely legislative action, Social Securitycan continue to protect future generations.”