Dan Lee: Bipartisan solution to address Social Security now less likely
In his state of the union address,
The damage, however, has been done and when
(Because of space limitations, I will set aside the Medicare part of the equation and focus attention on the funding problems related to
A bit of history is in order here. As established by the Social Security Act of 1935,
An implicit promise accompanied this fundamental change — namely if taxes on current workers financed benefits for those who were retired, those working when these workers retired would finance the benefits for them.
The revenues generated by the payroll tax are channeled through the
All of this is fine, except there is a huge problem coming down the tracks at us like a train out of control: the cost of the benefits currently being paid exceeds the revenues generated by the
Federal law requires that each year, the trustees of the fund issue a report indicating the actuarial status of the fund and when the temporary surplus will be depleted. The most recent report, which was released last June, projects that the temporary surplus in the fund will be depleted by 2035, at which time the revenues coming in from the payroll tax will only be sufficient to pay about 80 percent of scheduled benefits.
When that happens, there will basically be three options:
Cut scheduled benefits by 20%.Raise the payroll tax or other taxes to generate sufficient revenues to pay all of the benefits that retirees have been promised.Cover the shortfall by running up the national debt.
None of these are likely to be popular options.
This is not the first time that the
The time has come for another
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