Social Security: Slash Benefits or Raise Taxes?
July 30, 2003
Social Security benefits to retirees will have to be cut by nearly a third by 2039 if no changes are made to the system to keep it afloat, says the General Accounting Office, the investigative arm of Congress.
The GAO examined the current system and how it fares for future retirees in a report prepared for Sen. Larry Craig (R-Idaho), chairman of the Special Committee on Aging.
Other key findings:
- To avoid benefit cuts, payroll taxes would have to be raised 46 percent to restore financial solvency to the system, the report said.
- The sooner Congress addresses the inevitable decline in Social Security revenue when baby boomers begin retiring in five years, the easier it will be for future generations to keep the system afloat.
- Last year, Social Security paid nearly $454 billion in benefits to more than 46 million people.
- Beneficiaries are expected to grow to more than 68 million by 2020 as the large baby boom generation settles into retirement.
- Labor force growth will begin to slow after 2010, and by 2025 it is expected to be less than a third of what it is today.
Thus falling fertility rates threaten the system's financial future even further.
Source: Associated Press, "Retirees May Face Benefit Cuts If Social Security Isn't Changed," Wall Street Journal, July 29, 2003; David M. Walker, "Social Security Reform: Analysis of a Trust Fund Exhaustion Scenario," GAO-03-907, July 2003, General Accounting Office.
For GAO report
For report summary
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