By Brenton Smith
The trustees of the Social Security trust funds released their report July 28. The details of the report clearly show that the crisis in Social Security is not only deepening, but widening as well.
Most of the media coverage has largely bypassed this conclusion, because they follow only one fact about Social Security: the date on which the trust fund runs dry. That date remained 2033.
The weakness in this coverage is that it focuses on the length of the fuse rather than the size of the bomb. Every other measure of Social Security financial health worsened. The 2014 Trustees Report says that over the course of 2013, the crisis emerging in Social Security grew larger, targets more people, and will require greater resources to ameliorate.
This year’s report reveals that the unfunded liabilities in Social Security grew by $1.8 trillion during 2013. The growth means that in 2013, Social Security created more than $2 of empty promises for every dollar that it collected ($855 billion in 2013).
The consequences of these broken promises have a widening reach. Now, people 48 years old or younger expect to retire after the Trust Fund is exhausted. People turning 66 today, on average, expect to outlive the system’s ability to pay promised benefits (average life expectancy is 19.6 years).
Five years ago, a near majority of voting-aged Americans expected to be completely unaffected by the shortfall. Today, it is less than 20 percent, according to data from the U.S. Census. Moreover, more than 50 percent of voting-aged Americans expect to retire after the Trust Fund is exhausted.
Mind you, the trustees do not provide any guarantees that the system will last until 2033. In fact, The trustees project that there is only a 50 percent chance that the system will pay full benefits through 2032. For example, they equally forecast that in a less cooperative economy, the system would be depleted in 2027.
The cost to kick the can rose roughly $1 trillion over the past year. That means that the nation would need to divert roughly $10.6 trillion away from deficit reduction to make the Boomer’s problem a problem for their children.
Here is the cost of doing nothing in 2013. The 2014 report tells us that changing the valuation date from 2012 to 2013 created another $900 billion of broken promises. Another way to look at this problem is if we had diverted every penny spent on the military in 2013 to Social Security, the system would still have been worse off at the end of the year than it was at the beginning.
What you will hear is that Social Security is good for now, and we can make adjustments to it later. What this means is that we are making an agreement with ourselves that our children will be willing to pay the taxes that we won’t. This is no way to run a pension.
Brenton Smith works for Fix Social Security Now, online at www.fixssnow.org.
Posted Oct. 8, 2014