Social Security's True Liabilities
May 8, 2003
This year, the report from the trustees for Social Security tells us that the true liabilities of Social Security are $7 trillion larger than conventionally reported. The executive summary tells us that benefit payments will exceed tax revenue by 2018. It also says that the estimated 75-year deficit has worsened slightly, from 1.87 to 1.92 percent of payroll.
Here are some ways to think about it.
- If the real shortfall is three times the traditional measure, which is 1.9 percent of payroll, then the true payroll tax shortfall is 5.7 percent of payroll.
- Assuring that our children and grandchildren will receive the same benefits as current retirees would require an immediate 46 percent increase in the portion of the payroll tax dedicated to retirement and disability income.
- A worker's share of the tax, currently 6.2 percent of the first $87,000 of earnings, would increase to 9.05 percent. Employers would experience the same increase.
Measured another way, the $7 trillion increase is about the same as our total home equity ($7.6 trillion). If we just surrender our homes to Washington today, they can make good on the promises that have been made. Toss in every dime we have in mutual funds, about $2.6 trillion, and we'll cover the entire $10.5 trillion shortfall.
The $7 trillion increase is greater than the so-called National Debt, the formal debt owed by the U.S. Treasury. As of April 24, the obligations of the U.S. Treasury totaled $6.46 trillion. Of the $6.46 trillion, $1.38 trillion was held in the Social Security Trust fund at the end of 2002.
Source: Scott Burns, "Social Security's Secret," Dallas Morning News, May 4, 2003.
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