“We’ve had eight years of lost opportunity to make Social Security structurally sound,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), a nonpartisan nonprofit dedicated to educating the public on fiscal issues. And even after Obama leaves office, the funding problem will likely continue–neither of the presidential candidates has offered a detailed Social Security reform plan. The topic has been barely discussed this election cycle.
Social Security was designed as a pay-as-you-go program, in which taxes paid by current workers pay benefits to retirees and other recipients. But since 2010, it’s been running at a deficit, with tax revenues falling short of the benefits being paid out. Unless changes are made, a moment of reckoning will arrive in 2034, when the program’s trust fund is projected to run out of money, according to the latest Social Security trustees report. At that point, Social Security will be able to pay only about 80% of scheduled benefits.
Given that most Americans have little money saved for retirement, a 20% drop in benefits would further jeopardize the financial security of many seniors. Today some 60% of Americans age 65 or older rely on Social Security for 50% or more of their family income–the average payment is a modest $1,300 a month. For some 33% of families, the benefit makes up 90% to 100% of their income.
There’s a lot at stake for the overall federal budget as well, since entitlement programs are grabbing a larger and larger overall share of federal expenditures. Social Security alone accounts for $1 out of every $4 spent, and Medicare and Medicaid spending make up another 25%. Together these entitlement programs account for most of the future growth in spending, not including interest payments on debt, says MacGuineas.
