Social Security is facing an ever-gloomier picture, having run a deficit of 4 percent last year and facing deeper deficits in the next 10 years, according to a Congressional Budget Office analysis Tuesday.
The report also said the combined Social Security trust funds, which cover both seniors' benefits and disability payments, will go bust in 2034, meaning payments will have to be trimmed for future retirees.
"Under current law, resources available to the Social Security program will become insufficient to pay full benefits in about 20 years," the analysts said.
Those born in the 1980s would only see about $19,000 a year after being slated to average about $22,000 a year in benefits when they retire in the middle of this century.
Those born last decade face an even bigger shortfall: They should have averaged $30,000 in their first year but will likely only get $23,000, the CBO said.
That works out to just 34 percent of a worker’s annual salary averaged across his or her lifetime.
The deficit projections are slightly worse than the CBO calculated just a year ago, with the agency saying long-term cost projections are rising faster than they had foreseen.
The CBO said Social Security ran in the red in 2010 and that deficit only deepened in 2011, with revenues covering only 96 percent of outlays. Those were the first two years the system has had a deficit since the 1983 deal to save the program.
Going forward, deficits are a fact of life, the agency said. The deficit will average 10 percent in the next decade, and will top 20 percent by 2030.
While Social Security is running a deficit, the system is able to continue to pay full benefits because it dips into the trust funds — though some analysts say that’s not much comfort since the trust funds are full of IOUs, after the government regularly transferred money out to cover other basic spending.
Social Security spending makes up a fifth of federal spending, and that percentage will increase as baby boomers retire and begin to collect benefits the law promises them.
But neither party is talking about changes to Social Security, instead choosing to focus on other entitlements such as Medicare.
The American Academy of Actuaries says there are some steps that can be taken to shore up Social Security.
"Social Security is not running out of money now, and many options exist to maintain the long-term solvency of the program," said Donald Fuerst, senior pension fellow at the nonpartisan academy. "But waiting too long to make these fixes will cause greater hardship to retirees and taxpayers."
Social Security is funded chiefly through payroll taxes collected on a worker’s earnings, up to a certain point. The tax is 12.4 percent, of which employers pay half and workers pay half. Self-employed persons pay the full 12.4 percent.
Options to shore up the system include raising the retirement age — something the academy supports — or raising the cap on income subject to Social Security payroll taxes, which would bring in more revenue and prevent benefits from having to be cut.
Raising taxes has proved to be a tough sell, however.
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