SOCIAL SECURITY TSUNAMI
July 20, 2004
We have the largest problem in American economic history coming our way. Most of it will happen over the next 25 years, says Scott Burns.
The problem is simple: With government debt growing by $500 billion a year, will Social Security be able to redeem its hoard of Treasury IOUs when benefit payments again exceed payroll tax collections?
According to a recent paper for the National Center for Policy Analysis, co-written by former Social Security trustee Thomas R. Saving:
- Funding the elderly will consume 3.6 percent of federal income taxes this year, twice that in five years and twice that again in 10 years.
- By 2019, a quarter of all federal income tax dollars will go to elder benefits.
- By 2030, elder benefits will take half of all income taxes; this is in addition to the dedicated employment tax.
Elder benefits will crowd out all other government spending, says Burns.
All that assumes healthy economic growth. Similar estimates, measured in percentage of gross domestic product or percentage of payroll, are available from the Social Security trustees and the Congressional Budget Office. The issue isn't whether a fiscal crisis is coming. The question is when.
The real crunch will hit earlier than 2019 and 2042, says Burns.
Source: Scott Burns, "Social Security's fate is crystal clear Or so say the numbers in our primer on the fund's crisis," Dallas Morning News, July 20, 2004; and Andrew Rettenmaier and Thomas R. Saving, "The 2004 Medicare and Social Security Trustees Reports," NCPA Study No. 266, June 4, 2004, National Center for Policy Analysis.
For NCPA study http://www.ncpa.org/pub/st266/
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