Well the truth is - it’s not. The program has run a surplus for the past 25 years and can continue to pay out benefits at the current level for another 20 years at least.
Social Security does not contribute to the national debt but is totally funded through payroll deductions (FICA) that still generate a surplus. That surplus is placed in a special trust fund where it earns interest and currently has a net value of $2.8 Trillion. Social Security was set up this way with a trust fund excess specifically to fund the baby boomer generation retirement. As baby boomers retire, the trust fund will begin to be drawn down, as it has always been planned to do, but no one really knows when or if, it will actually be exhausted.
As Nobel Prize winning economist, Paul Krugman, points out:
"the program won’t have to turn to congress for help or cut benefits until or unless the trust fund is exhausted, which the program actuaries don’t expect to happen until 2037 – and there is a significant chance, according to their estimates, that that day will never come."
The Economist Magazine says:
"Social Security does face a shortfall in the coming decades, because of the population bulge of retiring baby boomers. Those costs are limited and, measured as a percentage of GDP, will flatten out. They can be absorbed through a modest, gradual increase in Social Security taxes and modest reductions in benefits for wealthier recipients.
Others,like John Irons of the Economic Policy Institute, say if the surplus trust fund is exhausted, the only action needed to fix it is to slightly raise the Social Security Cap. Currently only wage earnings up to $117,000 pay into Social Security (FICA). Wage earnings above that amount are exempt." Here is John Iron's reasoning:
"Due to growing income inequality, the share of earnings above the cap has risen from 10 percent in 1982 to over 16 percent in 2006. This is because incomes have grown strongly at the top while middle incomes have stagnated. This trend is expected to continue, meaning that a growing share of earnings will remain outside the tax base. The cap also means that higher-income individuals pay a smaller share of their income in Social Security taxes than middle-class employees. Including the employee and employer shares of Social Security and Medicare taxes, earners in the middle fifth of the income distribution pay an average effective payroll tax of about 11 percent. In contrast, the top 1 percent of earners pay just 1.5 percent on average.
That deserves restating: Middle income earners pay an average payroll tax of 11% while top 1% of earners pay only 1.5% But rather than correct this unfairness, Republicans would rather cut benefits or abolish Social Security all together.
Republicans never discuss the possibility of raising the cap, though it has been done several times in the past to keep the system solvent and prepare for the baby boomer bulge. Rather, Republicans insist we need to cut benefits to recipients now - because - at some point in the future - benefits might have to be cut. Do you follow that logic? Cut now because we might have to cut them in future. But they won't even talk about raising the cap.
There is another thing Republicans aren’t talking about - the Disability-Insurance rule change they made shortly after being sworn in 2015. House Republicans passed a parliamentary rules change that created a crisis in the Disability-Insurance portion of the Social Security system.
Paul Waldman ,a senior writer with the American Prospect magazine, explains how all that worked in an article titled; "Why the GOP is Going After Social Security." Social Security has two separate parts, Old Age and Survivors Insurance (OASI), and the much smaller Disability Insurance program (DI) which is facing a funding shortfall next year . This was never a surprise. It was known 20 years ago, that by 2016 the program would be in trouble if no action was taken. And - Guess What - No action was taken and because of that Republicans now want to cut Disability benefits.
With the Parliamentary rules change, Republicans quietly made it impossible to fix the Disability Insurance program without first cutting benefits or raising taxes. They intend to use this manufactured crisis to lever a re-negotiation of the entire Social Security System. Do you begin to see the pattern?
Republicans are playing a shell game and it's shameful. Nine Million Americans depend upon disabled-worker benefits as sole means of support. 1.8 million of them are children. There incomes will be cut by one fifth after January 2016 under the Republican's latest budget maneuver. Conservatives like to snear at the Disability Insurance program claiming these people are just slackers but the truth is that young workers, entering the workforce today, have a 30% probability of being disabled before reaching retirement age. The factors driving the growth of the Disability Insurance progam have also been well understood and predictable for decades. They are:
Read Paul Waldman's article here
Read The Center for Budget Policy Priorities article on the Disability Insurance Program here
For a more in depth summary of the Conservative war on Social Security read Dylan's Scott's article here