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70 Soc. Sec. Bull. 111 (2010)
The Future Financial Status of the Social Security Program

handle is hein.journals/ssbul70 and id is 303 raw text is: THE FUTURE FINANCIAL STATUS OF THE SOCIAL SECURITY PROGRAM by Stephen C. Goss* The concepts ofsolvency, sustainability, and budget impact are common in discussions ofSocial Security, but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent ofscheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basisfor the foreseeable future. Finally as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits. Introduction As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.' At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76 percent of sched- uled benefits. Thus, the Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future. The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some com- bination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75 years. Since the inception of the Social Security program in 1935, scheduled benefits have always been paid on a timely basis through a series of modifications in the law that will continue. Social Security provides a basic level of monthly income to workers and their fami- lies after the workers have reached old age, become disabled, or died. The program now provides benefits to over 50 million people and is financed with the payroll taxes from over 150 million workers and their employers. Further modifications of the program are a certainty as the Congress continues to evolve and shape this program, reflecting the desires of each new generation. This article describes the financial status of the Social Security program, including an analysis of the concepts of solvency and sustainability and the relationship of Social Security to the overall federal unified budget. The future is uncertain in many respects, and based on new information, projections of the financial status of the Social Security program vary somewhat over time. What is virtually certain Selected Abbreviations * The author is the ChiefActuary of the Social Security Administration. Note: Contents oJthis publication are not copyrighted; any items may be reprinted, but citation oJ the Social Security Bulletin as the source is requested. To view the Bulletin online, visit our Web site at http 1w wsocia secu ity.gov policy. Thefindings and conclusions presented in the Bulletin aie' those ofthe authors and do not necessarily n rep ent the views ofthe Social Security Administration. Social Security Bulletin, Vol. 70, No. 3, 2010 111

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