Saving Social Security

Edward Lane

Economics Working Paper Archive from Levy Economics Institute

Abstract: For more than 25 years, the Social Security Trust Fund was projected to run out of money in 2033 (give or take a few years), potentially causing benefits to be severely reduced in the absence of corrective legislative action. Today (February 2024), projections are made by the Social Security Administration that indicate that future benefits will need to be reduced by roughly 25 percent or taxes will need to be increased by about 33 percent, or some combination to avoid benefit curtailment. While Congress will most probably prevent benefits from being reduced for retirees and those nearing retirement, the longer Congress and the president take to address the shortfall, the more politically unpalatable (and possibly draconian) the solutions will be for all others. Dozens of proposals are being evaluated to address the long-term problem by mainstream benefits experts, economists, think tanks, politicians, and government agencies but, with rare exceptions from a few economists, none address the short-term problem of Trust Fund depletion, provide a workable roadmap for the long-term challenges, or consider fundamental financing differences between the federal government and the private sector. This paper aims to address these issues by suggesting legislative changes that will protect the Social Security system indefinitely, help ensure the adequacy of benefits for retirees and their survivors and dependents, and remove confusing and misleading legislative and administrative complexity. In making recommendations, this paper will demonstrate that the Social Security Trust Funds, while legally distinct, are essentially an artificial accounting contrivance within the US Treasury that have become a tool to force program changes that, for ideological reasons, will likely shift an increasing financial burden onto those who can least bear it. Finally, while the focus of this paper is on the Social Security system, it would be incomplete without also addressing, albeit in a limited way, the larger political issue of the nation's debt and deficit along with the implications for inflation.

Keywords: Social Security; FICA; Taxation; Taxes; Trust Fund; Trust Funds; OASI; OASDI; Medicare; Deficit; Inflation; Welfare; Treasury; Debt; Old-age (search for similar items in EconPapers)
JEL-codes: E62 H00 H21 H22 H23 H24 H31 H50 H51 H53 H55 H61 H62 H63 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-age and nep-pbe
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