The Social Security Trust Fund saw a tiny uptick in the amount of taxable payroll in 2012, but it was so miniscule it has had no effect on the date the trust fund is set to run out of money.
The 2013 Trustees Report found that there was really no change in the Trust Fund’s deficit.
According to a research brief by the Center for Retirement Research at Boston College, the recession had a major impact on the Social Security Trust Fund deficit but the “program faces a manageable shortfall over the next 75 years, which should be addressed soon to restore confidence in the nation’s major retirement program and to give people time to adjust to needed changes.”
The report also looked at the state of the Disability Insurance Trust, which is expected to be exhausted by 2016.
Much of the acceleration in the exhaustion date for Social Security has come from the Disability Insurance portion of the program.
“The actuaries have always anticipated higher rates of disability with the aging of the Baby Boom, but they did not foresee a significant increase in disability rates at young ages, and the impact of the economic recession,” the brief stated.
Social Security isn’t allowed to spend money it doesn’t have so it would have to cut benefits by about 20 percent to align with Disability Insurance payroll tax revenues. As the report’s author points out, Congress likely will step in and reallocate payroll tax revenues to make sure the program doesn’t run out of money.
Social Security overall is facing a long-term financial shortfall which now equals 0.9 percent of GDP. The changes required to fix the system are well within the bounds of fluctuation in spending on other programs, many agree. The report concluded that the only way to cut Social Security’s deficit is to put more money into the system or by cutting benefits.
“Despite the political challenge, stabilizing the system’s finances should be a high priority to restore confidence in our ability to manage our fiscal policy and to assure working Americans that they will receive the income they need in retirement,” the report concluded.