Social Security isn't doing all that well:
For years, opponents of Social Security reform have told us that there is no need to rush into changing the program because, after all, Social Security is running a surplus today. Well, according to a new report by the Congressional Budget Office, not so much.
CBO reports that the Social Security surplus, originally expected to be $80-90 billion this year and next will shrink to $16 billion this year and just $3 billion next year (essentially a rounding error) as a result of the recession and rising unemployment. And those estimates may be far too optimistic. In February of this year, for example, Social Security actually ran a deficit—spending more than it took in through taxes and interest combined.
And here's what Washington doesn't want you to know:
The evidence suggests that, even with recent market declines, private investment would still produce higher returns than Social Security. The new surplus numbers provide yet another lesson: if the economy is in such a mess that it hurts private investment, traditional Social Security isn’t going to be in any better shape.
The long term sustainability of Social Security is the elephant in the room. The program has a long term unfunded liability of $17 trillion, according to the 2008 Financial Report of the United States Government (p. 28).
While the Obama Administration says lifting the cap on payroll taxes is an answer, in fact it's only a short term fix that isn't worth pursuing because it would amount to a huge tax increase.
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