Social Security's Insolvency
July 30, 2003
"Social Security, as it is currently constituted, is insolvent," NCPA Senior Fellow Thomas R. Saving told the Special Committee on Aging of the U.S. Senate. On the other hand, Saving -- a public trustee of the Social Security Board of Trustees and an economist at Texas A & M University -- concludes that "Fundamental reform can revitalize Social Security while reducing government debt. Over the short term, reform is expensive. Over the long term, reform reduces taxes and restores Social Security to a sound fiscal position."
Although both Social Security and Medicare Hospital Insurance have trust funds, the balances in those funds has no affect on these programs' future demands on the federal budget -- and hence future taxpayers: Beginning in 2008 and in all subsequent years, these programs will become a drag on the federal budget.
- By 2010, in less than seven years, these programs will consume 1.5 percent of total federal income tax revenues in addition to payroll tax and premium revenues generated by the programs.
- By 2020, the two programs together will use 17.5 percent of all federal income tax revenues in addition to dedicated tax revenues.
- By 2025, Social Security and Medicare together will use up nearly 28 percent of all federal income tax revenues.
- The total transfer will grow to more than 36 percent (13 percent for Social Security and 23 percent for Medicare) of federal income tax revenues by 2030.
By 2042, transfers for Social Security alone will reach 15.5 percent of all federal income tax revenues, or $427 billion in today's dollars out of projected revenues of $2.76 trillion.
Today, Social Security and Medicare account for only 35 percent of federal expenditures.
By 2060, the two programs will require more than 71 percent of the federal budget.
Source: Thomas R. Saving, Statement before the Senate Special Committee on Aging, July 29, 2003.
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