The potentially fatal flaw in social security has gone ignored for far too long but the crash could come sooner than you may think? For as long as I can remember I have been told that Social Security will be depleted before my generation meets the ever-rising retirement age. If the latest reports are accurate, complete failure could take place during the baby-boomer’s lifetime, unless a serious restructuring takes place- and soon! Take a look.
Since 2010, [Social Security] has been running at a cash-flow deficit – meaning that the Social Security payroll taxes the government collects aren’t enough to cover the benefits it’s obliged to pay out. That should have been a signal that the time had come to look at reform.
Instead, we’ve spent the last seven years ignoring the problem. To get by, the program started tapping into assets set aside beginning in the 1980s for rainy days. Prior to 2010, the program collected more in payroll taxes than was needed to collect benefits at the time. The leftovers were “invested” in Treasury bonds through the Old-Age Trust Fund, which is now being drawn down.
The 2010 mark for this cash-flow deficit didn’t occur willy-nilly. It could be argued that our government hastened, or at the very least exacerbated, this cash-flow deficit with its “payroll tax holiday,” a bipartisan effort instituted in late 2009 that persisted until 2013. This political maneuver slashed payroll taxes by roughly one third, from 6.2% to 4.2%. The uncollected 2% (not peanuts in a country the size of ours) happens to coincide with the moment in time in which the government’s payroll tax receipts couldn’t cover its Social Security liabilities…