Social Security’s tax revenues are falling short of its spending, according to recent analysis conducted by the Congressional Budget Office (CBO). For the first time since the enactment of the Social Security Amendments of 1983, Social Security spending has surpassed the system’s dedicated tax revenues.
In the study, the CBO projects that spending will exceed collected revenues in the next decade by about 10 percent. This data comes with the idea that as more members of the baby-boom generation enter retirement spending will increase as revenues remain at a constant share of the economy. That being said, the gap between Social Security’s spending and tax revenues will grow larger in the 2020s, exceeding 20 percent of revenues by 2030.
Under current laws and government regulations, the Disability Insurance (DI) trust fund will experience depletion by 2016, whereas the Old-Age and Survivor’s Insurance (OASI) trust fund will reach exhaustion in 2038. The CBO suggests that if legislation to shift resources between the two trusts follows through, as it has done so in the past, then the combined efforts from both trusts would be depleted by 2034.
“Over the next 75 years,” reports The CBO, “the resources dedicated to financing the program fall short of the benefits that will be owed to beneficiaries by 1.95 percent of taxable payroll–up from 1.58 percent a year ago.”
According to The CBO, the DI and OASI trust funds’ projected balance at the end of 2086 will equate the projected outlays for the following year in 2087, only if the Social Security payroll tax rate increased immediately and permanently by 1.95 percentage points–from 12.40% to 14.35%–or if scheduled benefits were reduced by an equivalent amount to that of the percentage increase.
The amount of taxes paid and benefits received will be greater for people in later age groups because naturally, they will have higher earnings over a lifetime than those in younger birth groups.
The data compiled by The CBO is based on 500 simulations in which most of the key demographic and economic factors in the study vary according to historical trends and patterns.
Written by Jason Olivas.