With some estimates having Social Security running out of money within 20 years, some people have suggested the senior retirement solution be raised as a patch to the system. But what are the other options?
In a related report by The Inquisitr, the Congressional Budget Office (CBO)has Social Security Disability running out of money by the year 2016, although it’s possible their estimate may be off by a year in either direction. The reasons for this deficit has had politicians debating the cause, with some Republicans claiming Social Security fraud, while other Democrats want a tax hike.
The CBO has been writing some pretty scary reports lately, with the latest long-term deficit and national debt projections forecasting enough doom and gloom that they say entitlement programs may need to altered. With the U.S. federal deficit for 2014 still in the hundreds of billions, the federal debt held by the public is projected to reach 100 percent of U.S. GDP by 2039, which coincidentally happens to be shortly after the time frame when Social Security runs out of money.
Joni Ernst is a Republican candidate running for the U.S. Senate in the 2014 mid-term elections and in a recent editorial she did not pull any punches in painting a dire picture of the situation.
“The undeniable fact is that if we do nothing, Social Security and Medicare will be insolvent before even Americans my age retire. According to both the Social Security trustees and the non-partisan Congressional Budget Office, the Social Security retirement trust fund will be exhausted in less than 20 years. That means a 25 percent cut in scheduled benefits. Yes, if we do nothing to strengthen Social Security, future retirees will face a 25 percent cut in benefits. Even more pressing is the fact that the disability trust fund within Social Security, a program that helps 11 million people, is scheduled to run out of money in just 2 years. This is not a problem we can kick down the road any longer.”
While Ernst says Congress should consider an option, the only one she wants off the table is increasing the senior retirement age for Social Security. But besides slashing benefits, what other options are there?
Under the current law, the Social Security Administration commissioner may not borrow money from another fund or transfer money from other Social Security funds. But Congress has reallocated funds in Social Security as a quick fix 11 times before, so it would not be surprising if the laws are rewritten, yet again. But, considering that increasing the federal debt may not be an option this time, there are other ways Congress may choose to deal with the problem.
The elephant in the room is increasing Social Security payroll taxes to the point that the program once again becomes self-sustaining as it was intended to be. But raising taxes for everyone right before a major election is a taboo subject for politicians, so if anything happens in this regard it will probably be pushed off until 2015.
Otherwise, the one major option on the table is upping the Social Security payroll tax cap, which in short would mean the rich would pay more than before. Social Security calls this the “annual limit the contribution and benefit base,” which is adjusted each year based upon the national average wage index. The reason why the rich would pay more is that the current cap is $117,000 in 2014, which means that a person making millions or billions per year would still only be taxed a percentage of the first $117k they make.
With Social Security running out of money, how do you think Congress should solve the problem?