Social Security is $20.5 trillion in debt

Larry Kotlikoff has this warning in Sunday's New York Post:
Social Security’s trustees say the system needs only “modest changes.” In fact, the system is desperately broke. The proof is buried deep in the trustees’ own 2012 report in a complex table, numbered IV.B6. Table IV.B6 is a long-run balance sheet for Social Security. It shows that the system’s $88.9 trillion in liabilities exceed its $68.4 trillion in assets by $20.5 trillion. The $20.5 trillion fiscal gap separating Social Security’s liabilities and assets — its unfunded liability — is enormous; it is 1.4 times US gross domestic product and 34 times annual Social Security taxes. Because $20.5 trillion is equal to 31% of the projected taxes, the system is 31 percent underfunded. To pay all promised benefits would require immediately and permanently raising Social Security’s 12.4 percent payroll tax (split evenly between employer and employee) by 31%, or 3.9 percentage points. . . .
Will President Obama think differently about his temporary cut in Social Security taxes? Temporary tax cuts aren't particularly beneficial, and it would be better to cut income tax rates, but for about half the population their federal income tax rate is already zero.

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Blogger JoeTheEconomist said...


Kotlikoff uses data from the Social Security Administration which paints an optimistic view of the situation. What you need to look at is the assumptions on which that 20.5 trillion is based. We need to have a pretty good economy to make the liability as little as 20.5 trillion.

I work with Fix Social Security Now. I hope that you will visit our site : www.FixSSNow.Org to all of the alternatives available. If you think we have missed one, please let us know.


7/18/2012 6:34 PM  

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