Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) holds more than $2.9 trillion in special non-traded Treasury securities or 14.7% of the total debt.*
According to Speaker of the House, Paul Ryan**
Social Security provides vital financial support for more than 57 million beneficiaries, and there are 10,000 “Baby Boomers” turning 65 every day. Social Security also provides critical benefits to widows and those with disabilities.
Social Security is funded by the payroll taxes of current workers to pay the benefits of current retirees. Projected long run program costs are not sustainable under current program parameters. The Social Security Trustees project that the cash flow deficits that began in 2010 will continue permanently. That means that to pay full Social Security benefits, the government must cut spending, raise taxes, or borrow more money to finance pension payments.
A central factor in the looming financial crunch is the fact that our society is aging. The “Baby Boom” generation has already started to collect their Social Security retirement benefits. As a result, the number of retirees has grown more rapidly than the number of individuals whose taxes pay for future retirees’ benefits. There are currently two workers supporting each retiree compared to the 17 workers that supported each retiree at the time Social Security was created. Increasing life expectancy and the approaching retirement of more Baby Boomers continues to put increasing pressure on Social Security. According to a Congressional Budget Office report, the number of beneficiaries is expected to increase by nearly one-third from 59 million in 2014 to 78.2 million in 2025, an increase of 32.4 percent. Because of this, the number of workers supporting each Social Security recipient is projected to fall.
The Need for Reform
According to the most recent Social Security Trustees Report, beneficiaries will face a painful 21 percent benefit cut in 2034 when the Trust Funds are exhausted. At that time, even those who are currently on Social Security may experience indiscriminate cuts in benefits at a time when they are increasingly reliant on the program.
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*Paul Ryan, Speaker of the House, https://paulryan.house.gov/issues/issue/?issueid=12227.
**Drew Desilver, "5 Facts About the National Debt", August 17, 2017, http://www.pewresearch.org/fact-tank/2017/08/17/5-facts-about-the-national-debt-what-you-should-know/.