Social security trustees estimate that the social security trust fund could be insolvent as early as 2016. That means that at that time, the program will have exhausted its trust fund and will not be able to pay out the full benefits that recipients are currently receiving. Trustees of the fund project that beneficiaries will only receive 79% of their promised benefit, based on what incoming payroll tax revenue would cover. If this trust fund becomes insolvent, some 11 million Americans will be affected. The number of applications has nearly doubled over the past decade, from 1.5 million applicants in 2001 to more than 2.8 million in 2012. So why aren’t politicians worried about this program? With such a short timeline to solve this potential problem, why isn’t anything being done about it? Neither Democrats nor Republicans are focused on solving this problem. Why?
The answer may very well be that neither side wants to look responsible when automatic cuts to the program kick in at the point of insolvency. The program is not able to run on a deficit, therefore, benefits would have to be cut to match the incoming revenue. These are key points: 1) it is based on payroll tax revenue and 2) it is barred from paying out more than revenues generated. For obvious balanced-budget reasons, this aspect makes sense; however, it does not offer much hope for continued benefits levels to program recipients. Since it is based on payroll taxes, it is tied to jobs and workers. With a large number of baby boomers aging and becoming disabled and the continued high unemployment, the balance is tipping in the direction of too many recipients and not enough workers. Aging population is only part of the growing number of recipients though; the rising costs are also a result of the economy’s troubles. When people can’t find work and deplete their jobless benefits, many turn to disability benefits for assistance.
“They’re desperate. Some who are marginal and struggling to have a low-paying job now literally have no options… they figure, ‘I do have trouble working, and I’m going to apply and see if I’m eligible.’ ” said Ken Nibali, a retired associate commissioner of the program.
The answer to this problem is either going to come in the form of raising taxes or creating jobs. We have already seen a tax increase: two percent increase in payroll taxes as of January 1, 2013. Hopefully, we will see some legislation enacted that will actually create a climate of job creation and business expansion. Creating more jobs and having a larger pool of workers contributing to the fund may not only lead to a reduced number of disability applications, but will also create more revenue, which will ensure the continued solvency of the program further into the future.