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![handle is hein.taxfoundation/iretcgadv0076 and id is 1 raw text is: At
April 9, 1999 No. 79
SOCIAL SECURITY STILL NEEDS
FIXING
The slightly improved outlook in the 1999
Social Security Trustees Report does not change the
fact that the Social Security
retirement and disability
programs still need to be The slightly ill
fixed. 1999 Social Sec
Thanks largely to recent does not change
strength in the economy, the Security retirei
Social Security Old Age and Programs still /I
Survivors Insurance and
Disability Insurance
programs
surpluses
r~ove,
urIity
the fa
nent
,ed to
(OASDI) are projected to run operating
- taxes in excess of outlays - through
2014, a year longer than in
last year's Report. The
deficit spending authority lIn 2035] OASD
given by the system's trust taxes and taxa
funds is expected to cover
subsequent deficits until coer onl 73%
2034, two years longer than s
in last year's Report. At that payments on tim
point, how-ever, OASDI
revenue from payroll taxes
and taxing benefits will cover only 73% of benefits,
and the system will not be able to make its
payments on time.
Long term, the annual It is not tre, as
OASDI shortfalls are a2percentagep
projected to grow very large. tax wouldfix th
The deficits will exceed 5
I reve
tio n
o b
be a
e.
some
oint h
e' systt
percent of taxable payroll by 2035, after the baby
boom has retired, and over 6.5 percent of taxable
payroll by the end of the 75 year planning period.
Ultimately, either the payroll tax will have to be
boosted by more than 6.5 percentage points, or
benefit growth will have to be trimmed, or some
other tax revenue will have to be diverted to
OASDI. (Add in the deficits projected for
Medicare's Hospital Insurance program, and the
increase would have to exceed 10 percentage
points.)
It is not true, as some may claim, that a 2
percentage point hike in the payroll tax would fix
the system. The OASDI system is sometimes
(unfortunately) summarized by its 75 year average
annual surplus or deficit. The 75 year balance is
now a negative 2.07 percent
of payroll, less of a shortfall
Ioutlook in the than the negative 2.19
TiuisteeRep~ort percent of payroll in last
Truste Rort year's Report. In past years,
at teSoil advocates of the status quo
afor Social Security have
be fixed. claimed that the 75 year
average deficit indicates that
the system is not in serious
trouble, and that an immediate but (in their opinion)
modest hike in the payroll tax of a bit over 2
percentage points would fix
the system for the long
nuefrom payroll term. This is misleading.
of benefits will The 75 year balance
enefits, and the adds together the current
ble, to make its trust funds, projected short
run surpluses, and never-
ending deficits thereafter (cut
off at 75 years, with a target
end of period trust fund balance), and expresses the
result as a percent of taxable payroll. The trust
funds (past OASDI surpluses
plus interest) are only a
may claim, that record of money that the
ike in the payroll government has spent on
iother federal programs. The
projected near-term surpluses
Institute for
Research on the
Economics of
Taxation
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