Social Security Deficit Could Mean a 25 Percent Benefit Cut
October 8, 2012
The non-partisan Congressional Budget Office (CBO) reported recently that for the second consecutive year, the Social Security trust fund took in less in tax revenue than it paid out in benefits in 2011, says Eric Pianin, a former Washington Post editor and budget reporter.
- Last year, spending by the federal pension program exceeded dedicated tax revenue by 4 percent -- just as spending outpaced revenues the year before -- and that gap is growing fast, according to the report.
- Over the next decade, spending will exceed dedicated tax revenues, on average, by about 10 percent.
- The gap will grow larger in the 2020s and will exceed 20 percent of tax revenues by 2030.
- The Social Security Administration projects that Social Security will deplete its trust fund in 2033, and that after that, retirees would receive only 75 percent of promised benefits without changes to the system.
There is widespread consensus among policy experts that the long term problem could be fixed relatively easily by tweaking the program in any number of ways, such as boosting the percent of wages covered by the Social Security tax from 83 percent to its formal level of 90 percent, or raising the Social Security tax rate by two percentage points.
But tampering with Social Security is a high risk political venture certain to rile older Americans and seniors' advocacy groups including AARP.
Source: Eric Pianin, "Social Security Deficit Could Mean a 25% Benefit Cut," Fiscal Times, October 3, 2012. "As the Population Ages, Social Security's Spending Is Projected to Outpace Its Tax Revenues," Congressional Budget Office, October 2, 2012.
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