On the Road to Bankruptcy

Social Security was created in 1935 to protect workers from falling into poverty in their senior years. Currently, more than 30 million Americans depend on Social Security, with that number expected to balloon with the retirement of the Baby Boomer generation. Without significant reform the program is on the road to insolvency. The CBO predicts that future retirees will face benefit cuts by as much as 24% in less than 30 years.

This is not a future problem. This is a now problem. This year the Social Security system will pay out more in benefits than it receives in payroll taxes – a full 7 years earlier than the CBO predicted. To cover the deficit the program will begin eating into its “trust fund” which currently has a balance of about $2.5 trillion.

Despite the cushion, Social Security’s finances are dire. The latest projects show that its funds will be exhausted by 2040 and its projected budget shortfall over the next 65 years is $20 trillion. Since the founding of this nation, the government, with all of its wars, entitlements, and programs has only managed to amass a $12 trillion dollar debt. But Social Security alone will nearly double 234 years worth of our nation’s spending.

Even the Social Security “trust fund” is an illusion. Although contributions are supposed to be set aside from payroll tax revenues into the trust fund, the reality is much different. As Congressman Ron Paul explained: “Over decades Congress found itself simply unable to sit on a big pile of money, so it began treating Social Security contributions as general revenues to fund the ever-growing federal government. Today your Social Security account is nothing more than a ledger filled with IOUs.”

In other words, through a slick budgetary move designed to make their bottom line look better, the government takes the Social Security “trust fund,” spends the money to fund government programs, while not counting the borrowed money against the deficit. Yet another example of a Washington culture designed to reward spending money today while ignoring the strain of debt and deficits of tomorrow.

Of course not everyone is willing to admit there is a problem. House Majority Leader Harry Reid, when faced with the Trustees report that showed Social Security beginning to run deficits, stated: “Today’s report confirms that the so-called Social Security crisis exists in only one place — the minds of Republicans. In reality, the program is on solid ground for decades to come.”

Young adults know better. A recent Zogby poll, which asked if people believed that Social Security would be around for you or your children found that on 18% of those aged 18-29 years old believe Social Security will be around for them.

Without acknowledging there is a problem and working to fix it our generation runs the risk of losing its ability to retire with a sense of financial stability. We have the most to lose. We must be the ones to act.