In 2009, Social Security began running in the red, as the amount of money the agency pays out in benefits each year began regularly exceeding the amount of money it takes in through taxes.
Fortunately for those Americans who rely on income from Social Security, there was no cut in the amount of their benefits, thanks largely to the agency’s trust fund, where the Social Security taxes that were collected in excess of the amount that actually needed to be collected to cover the cost of paying Social Security’s benefits for years were “loaned” to the U.S. government, which now is being forced to pay it back using money that it collects in regular income taxes or that it borrows.
And let’s be honest here, because the federal government has run up trillions of dollars in annual budget deficits in each year since 2009, it is borrowing money to pay today’s scheduled Social Security benefits, which means that it is progressively transforming “intragovernmental” debt (or so-called “money we owe to ourselves”) into “debt held by the public” in the process.
So what does the future hold if that situation keeps going on?
The Congressional Budget Office published its Long Term Projections for Social Security on December 17, 2013 – providing the following chart showing what they expect to happen between now and 2087.
What this chart shows is that Social Security’s trust fund should be able to pay out benefits at their “scheduled” level until 2033, just twenty years from now. At that time, the federal government will no longer have any legal obligation to sustain payments at that level, so the CBO anticipates that the program will go back to only paying out benefits equal in amount to what it collects through its dedicated taxes.
For Social Security beneficiaries who begin relying upon income from that program in the years before 2033, that will mean their benefits will be cut by nearly 25%. And because about half of today’s brand new Social Security’s beneficiaries can reasonably expect to live for at least another 20 years, that’s a problem they can reasonably expect to have to deal with in their lifetime.
At least, if U.S. politicians keep the promise they’ve written into the law.