Social Security: still a looming crash-and-burn, and still going unaddressed

Myra Adams at NRO takes a fresh look at the truly unsettling numbers. She begins by pointing out that official Social Security Statements include the warning that "by 2034, the payroll taxes collected will be enough only to pay about 77 percent of scheduled benefits."

It's a classic case of more going out than is coming in:

According to the Trustees of Social Security, the problem is fueled by two factors: First, from now until 2034, “the ratio of workers paying taxes to support each Social Security beneficiary will decline significantly from 3:1 to 2:1. In 1970, this ratio was nearly 4:1.” Second, by 2034 the total number of beneficiaries “is projected to reach 87 million — 41 percent more than the number in 2017.”

Of course, aging Baby Boomers born between 1946 and 1964 are central to the issue. Pew Researchreports that in 2019 there will be 72 million of us.

Unfortunately, time is running out for Social Security to be drastically reformed. Beginning in 2026 we’ll see what I call the Social Security “bulge years.” This is when all Boomers, including the youngest born in 1964, will have turned 62 and be eligible to collect retirement benefits.

Then, eight years later in 2034, when the 1964 crop celebrates their 70th birthdays and the oldest Boomers turn 88, the “bulge” is projected to burst, and only 77 percent of benefits can be paid. Sixteen years from now — if the problem is not properly addressed — such a drastic reduction has the potential to shake this nation to its very core.

Meanwhile, the cost of Social Security is staggering as displayed on the U.S. Debt Clock. (What I often refer to as the U.S. government’s “ticking time bomb.”)

Today, Social Security is the government’s second-largest annual budget expense at $967.5 billion. (It’s surpassed only by Medicare/Medicaid at $1.085 trillion.)

But in 2022, the Debt Clock’s furthest future year, the cost of Social Security is projected to be $1.166 trillion — the largest budget expense — surpassing Medicare/Medicaid at $1.138 trillion. Remember, 2022 is still four years from the beginning of the “bulge years” that start in 2026, when Social Security costs will significantly escalate.

Now get ready for some numbers that should spur Congress into action — but won’t.

Currently, per the Debt Clock, Social Security’s liability is $17 trillion, but that will grow to $24 trillion by 2022. Even worse by comparison is Medicare/Medicaid with its current liability at $27.8 trillion and slowly rising to $28.4 trillion by 2022. 

• Moreover, both Social Security and Medicare/Medicaid, along with federal-employee and veterans benefits and debt held by the public, feed into the “mother of all numbers” —  the U.S. government’s total unfunded liabilities. The cost of benefits that the U.S. government is obligated to pay its citizens now stands at $113 trillion, but increases to $140 trillion by 2022.

Contrast those immense unfunded liabilities with the U.S. Gross Domestic Product (GDP) and federal tax revenue: 

• GDP, now at $20 trillion, is projected to increase to only $22 trillion by 2022.
• Federal tax revenue, currently at $3.33 trillion, rises to $3.4 trillion by 2022.

It does not take a math genius to recognize that sitting in drab Washington, D.C., federal buildings are teams of budget analysts who know that Social Security retirement is not the only government benefit program that will be forced to cut smaller monthly checks in the ensuing decades. According to the Social Security Trustees, for example, “Without legislative action, approximately 11 million disabled people and their families could face across-the-board benefit cuts of 7 percent in 2028.” 

After all these years and all this indisputable data, "entitlements" remain a third rail.

Plus, compared to any other method of planning for one's sunset year's it has an abysmal rate of return.