When we
started writing about Social Security nearly 40 years ago, the long-term
financial crisis of the program was in the next century.
But today we are in the next century, the baby boom’s retirement has begun and the impending bankruptcy of Social Security is here, Social Security’s actuaries report.
The latest Annual Report of the Social Security Board of Trustees projects that Social Security will run short of funds to pay promised benefits as soon as 12 years from now, in 2028.
Indeed, Social Security’s disability insurance is running out of funds to pay promised benefits this year, assumed to survive only by borrowing from the rest of Social Security.
Most seniors retiring today will still be alive in 2028, when Social Security will be able to pay only 71% of promised benefits, and declining, under so-called pessimistic assumptions.
But studies last year from researchers at Harvard and Dartmouth showed that Social Security’s actuaries routinely underestimate the program’s financial problems. So-called pessimistic projections often turn out closer to reality than “intermediate” projections.
Nevertheless, even under intermediate projections, Social Security would run out of funds to pay promised benefits by 2034, just 18 years from now. The program then would only have funds to pay 79% of promised benefits, and declining.
Notably, Social Security’s actuaries do not assume a single recession before its financial collapse, even under “pessimistic” assumptions.
The recession and the long-term economic slow-growth under President Obama’s economic policies, with sustained subnormal economic growth of 2%, and declining labor force participation, has already worsened Social Security’s financial problems.
Obamanomics has still failed to achieve any normal recovery from the last recession.
Compared to recoveries from the 11 other recessions since the Great Depression, Obama’s recovery is the worst in those last 75 years, measured by job creation, wage and income growth, economic growth, poverty, even inequality.
Labor force participation declined from 65.8% in December 2008, the month before Obama was inaugurated, to 62.7% in January 2016, exactly the same as February 1978. That reduced payroll tax revenues by 3.1% compared to previously higher work rates, which will persist until the decline is reversed.
This lower labor-force participation would cost Social Security $290 billion in lost revenue over the next 10 years, Trustees Report data indicate.
Unemployment, reflecting those in the workforce but not working, persisted under Obama above 8% for the longest period since the Great Depression – 43 months, from February 2009, when Obama’s nearly $1 trillion “stimulus” was passed, until August 2012.
It also persisted for the longest period since the Great Depression, with unemployment at 9% or above — 30 months, from April 2009 until September 2011.
In the 11 previous recessions since the Great Depression, the economy recovered all jobs lost during the recession after an average of 27 months from when the recession began, which was December 2007.
The slow recovery and above-normal extended unemployment caused Social Security to lose roughly $100 billion per year, persisting until higher employment and wage growth restores payroll to its previous long-term trend-line.
Slow growth and fewer people working is the best way to bankrupt Social Security. So Obama’s failed economic revival policies have drilled a big hole in the future of Social Security that could mean that insolvency will only come sooner.
Remember that the next time — probably this election season — you hear Democrats say Republicans have a secret plan to destroy Social Security.
Moore is an economic consultant with Freedom Works. Ferrara is senior fellow for budget policy and entitlement reform at the Heartland Institute and the National Tax Limitation Foundation.
But today we are in the next century, the baby boom’s retirement has begun and the impending bankruptcy of Social Security is here, Social Security’s actuaries report.
The latest Annual Report of the Social Security Board of Trustees projects that Social Security will run short of funds to pay promised benefits as soon as 12 years from now, in 2028.
Indeed, Social Security’s disability insurance is running out of funds to pay promised benefits this year, assumed to survive only by borrowing from the rest of Social Security.
Most seniors retiring today will still be alive in 2028, when Social Security will be able to pay only 71% of promised benefits, and declining, under so-called pessimistic assumptions.
But studies last year from researchers at Harvard and Dartmouth showed that Social Security’s actuaries routinely underestimate the program’s financial problems. So-called pessimistic projections often turn out closer to reality than “intermediate” projections.
Nevertheless, even under intermediate projections, Social Security would run out of funds to pay promised benefits by 2034, just 18 years from now. The program then would only have funds to pay 79% of promised benefits, and declining.
Notably, Social Security’s actuaries do not assume a single recession before its financial collapse, even under “pessimistic” assumptions.
The recession and the long-term economic slow-growth under President Obama’s economic policies, with sustained subnormal economic growth of 2%, and declining labor force participation, has already worsened Social Security’s financial problems.
Obamanomics has still failed to achieve any normal recovery from the last recession.
Compared to recoveries from the 11 other recessions since the Great Depression, Obama’s recovery is the worst in those last 75 years, measured by job creation, wage and income growth, economic growth, poverty, even inequality.
Labor force participation declined from 65.8% in December 2008, the month before Obama was inaugurated, to 62.7% in January 2016, exactly the same as February 1978. That reduced payroll tax revenues by 3.1% compared to previously higher work rates, which will persist until the decline is reversed.
This lower labor-force participation would cost Social Security $290 billion in lost revenue over the next 10 years, Trustees Report data indicate.
Unemployment, reflecting those in the workforce but not working, persisted under Obama above 8% for the longest period since the Great Depression – 43 months, from February 2009, when Obama’s nearly $1 trillion “stimulus” was passed, until August 2012.
It also persisted for the longest period since the Great Depression, with unemployment at 9% or above — 30 months, from April 2009 until September 2011.
In the 11 previous recessions since the Great Depression, the economy recovered all jobs lost during the recession after an average of 27 months from when the recession began, which was December 2007.
The slow recovery and above-normal extended unemployment caused Social Security to lose roughly $100 billion per year, persisting until higher employment and wage growth restores payroll to its previous long-term trend-line.
Slow growth and fewer people working is the best way to bankrupt Social Security. So Obama’s failed economic revival policies have drilled a big hole in the future of Social Security that could mean that insolvency will only come sooner.
Remember that the next time — probably this election season — you hear Democrats say Republicans have a secret plan to destroy Social Security.
Moore is an economic consultant with Freedom Works. Ferrara is senior fellow for budget policy and entitlement reform at the Heartland Institute and the National Tax Limitation Foundation.
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