I wish I were debt-free until 2043!

A recent New York Times (3/24/10) article (“Social Security to See Payout Exceed Pay-In This Year”) presents a somewhat misleading impression of the status of this critical social insurance plan. While it is true that this year Social Security will take in less in revenue from payroll taxes than it pays out in benefits, this hardly merits a front-page headline in of the of the nation’s leading newspapers.

The reason for this imbalance is that with unemployment so high, and fewer people working, Social Security is taking in less in revenue (which is based on payroll taxes). The article fails to mention that interest on the funds Social Security loans to the government and other income offsets this shortfall. In reality, it will be several years before Social Security needs to rely on the Trust Fund to meet its obligations.

The larger issue, which the article acknowledges, is that the “system…has a balance of about $2.5 trillion that will take decades [until 2037 according to the Social Security Trustees] to deplete.” The Congressional Budget Office (CBO), the historically recognized arbiter of budgetary matters, estimates that the Social Security Trust will not run out until 2043.

What is not widely understood is that the exhaustion of the Trust Fund will not mean the end of Social Security. According to the CBO, after 2043 the system will still take in enough in taxes to meet 83 percent of its obligations. This does not mean that we should not address the potential shortfall but only that that the problem is a manageable one. Assuming, as seems likely, that this shortfall is closed, “on average, future Social Security beneficiaries are likely to receive higher first-year annual benefits than today’s beneficiaries (adjusted for projected inflation)."

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