About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (December 10, 2024)

handle is hein.crs/goverpd0001 and id is 1 raw text is: Con res&on I Resedrch Se infor rig I Ie~ litive bake e 1914 S December 10, 2024 Social Security: Finances and Policy Options Back round Social Security is the federal government's largest program in terms of both the number of people affected (i.e., covered workers and beneficiaries) and its finances. In 2024, the program covered over 180 million workers and paid about $1.47 trillion in benefits to over 68 million beneficiaries. Social Security is composed of the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) programs, referred to collectively as OASDI. It protects insured workers and their family members against the loss of income due to old age, disability, or death. Most Social Security beneficiaries are retired or disabled workers whose monthly benefits depend primarily on their past earnings and claiming age. Benefits paid to workers' dependents and survivors are based on the earnings of the insured workers. Both OASI and DI use a trust fund accounting mechanism to track their respective revenues (i.e., tax revenues and earned interest) and costs (i.e., benefits and administrative expenses). The Social Security Act requires the Board of Trustees-managers of the trust funds-to report annually to Congress on the current status of the trust funds and their projected status over the next five fiscal years. In practice, the trustees report on the 75-year financial outlook for the trust funds, as this period generally covers the average future lifespan of all current workers and provides Congress a projection period long enough to illustrate the complete and mature effects of past amendments and potential future changes to the Social Security Act. The trustees' most recent intermediate (i.e., best) estimates reflect a current and projected imbalance between Social Security's revenues and costs. Without changes to current law, the trustees estimate that beneficiaries would receive a de facto reduction in benefits of about 20% in 2035 (the projected date of trust fund depletion). Because of the program's size and projected financial shortfall, there has long been congressional interest in ensuring that current and future Social Security benefits are paid in full. Social Security FHnandia Status: Past, Present, and Projected The ability to pay full scheduled benefits on time is determined by the financial status of the Social Security trust funds. At a basic level, the financial status of Social Security is simply the relationship among its revenues, costs, and holdings in the Social Security trust funds. The trust funds provide the program with a means to track revenues and costs. Additionally, the trust funds allow the program to hold accumulated assets-money not immediately needed to pay benefits-for the payment of future benefits. At the start of 2024, the trust fund balance was $2.78 trillion. This balance represents the accumulation of excess revenues and the interest earned on those excess revenues. * From the last major reform in 1983 (explained below) through 2009, Social Security operated with a cash surplus (i.e., tax revenues exceeded costs). As required by law, eachyear's cash surplus was invested in government securities and earned interest, resulting in increasing trust fund values. * Since 2010, Social Security has operated with cash deficits (i.e., costs exceeded tax revenues), and the trustees project this trend to continue. However, from 2010 through 2020, the program still ran annual surpluses when total revenues (tax revenues plus interest) exceeded costs. Thus, the trust fund values continued to increase during this period. * Since 2021, Social Security has operated with annual deficits (i.e., total costs exceeded total revenues). With annual deficits, trust fund assets are redeemed to help pay full scheduled benefits. Therefore, trust fund values have been decreasing since 2021. The projected rising costs of the program indicate that increasingly more trust fund assets will be redeemed each year until depletion. Under trustees' projections, the entirety of the trust funds balance ($2.78 trillion) will be redeemed by 2035. At that time, program revenues are estimated to support about 80% of scheduled payments. The projected shortfall is a result of rising costs relative to revenues. Social Security's future revenues and costs are determined by demographic (e.g., fertility, mortality, and immigration), economic (e.g., wage growth, price growth, and productivity), and program-specific factors (e.g., disability benefits claim rates). For example, these factors affect the number of covered workers and their levels of earnings, as well as the size and makeup of the beneficiary population and the level of monthly benefits. Most notably, declines in fertility and increases in longevity have resulted in a lower ratio of workers paying into the system relative to beneficiaries collecting from the system. Rising Costs Over the next 20 years, the worker-to-beneficiary ratio is projected to decline as the post-World War II baby boom generation moves into retirement and is replaced with workers from generations with lower birth rates. Although projected increases in life expectancy play a role, the trustees point to the shift in the population's age distribution due to lower birth rates as the dominant factor in increased program cost over the next 75 years.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most