Social Security Not Sustainable for the Long Term
The Social Security Board of Trustees today declared that the Social
Security program is not sustainable over the long term. The 2003
Social Security Trustees Report does extend the projected solvency
of the trust funds by one year.
In the 2003 Annual Report to Congress, the Trustees announced:
- The projected point at which tax revenues will fall below program
costs comes in 2018 -- one year later than the estimate in last
- The projected point at which the trust funds will be exhausted
comes in 2042 -- one year later than the estimate in last year’s
- The projected actuarial deficit of taxable payroll over the
75-year long-range period is 1.92 percent -- larger than the 1.87
percent projected in last year’s report;
- The Trust Funds would require another $3.5 trillion in today’s
dollars, earning interest at Treasury rates, to pay all scheduled
benefits over the next 75 years. This obligation grew $200 billion
from last year.
"This report is yet another reminder of what we have known for
some time: Social Security's long-term financing problems are very
serious, and will not be fixed by wishful thinking alone,"
said Jo Anne Barnhart, Commissioner of Social Security.
"I want to assure those already receiving Social Security
benefits – as well as those who are close to retirement – that your
benefits are secure. But doing nothing will have serious consequences
for our children and grandchildren.
"The release of this report is a good time to remind people
how the Social Security program works. Social Security taxes pay
the benefits of today's retirees. Money in excess of what is needed
to pay today's benefits is invested in special issue, interest-bearing
Treasury bonds. This system works well when there is a relatively
high ratio of workers to beneficiaries. For instance, in 1965, there
were 4 workers for every Social Security recipient.
"But the demographics are changing. People are living longer.
The first baby boomers are just five years from retirement and the
birth rate is low. Today, there are 3.3 workers paying Social Security
payroll taxes for every one person collecting Social Security benefits.
That number will drop to 2 to 1 in less than 40 years. At this ratio
there will not be enough workers to pay scheduled benefits at current
"As stated in the Trustees Report, the sooner we address the
problem, the less abrupt the changes will have to be.
"Earlier today, Secretary Snow and I met with the President.
We share the President’s strong hope that the national debate about
Social Security will lead to a bipartisan solution.
"Social Security’s retirement, disability and survivors’ components
touch the lives of nearly every American family. For the sake of
our children and grandchildren, we must come together to meet the
challenges facing this vitally important program."
Other highlights of the Trustees Report include:
- Income to the combined Old-Age and Survivors, and Disability
Insurance (OASDI) Trust Funds amounted to $627 billion in 2002.
- The Trust Funds paid benefits of approximately $453.8 billion
in calendar year 2002. There were 46 million beneficiaries at
the end of the calendar year.
- The cost of $4.2 billion to administer the program continues
to be a very low 0.7 percent of total income.
- Total expenditures from the combined OASDI Trust Funds amounted
to $461.7 billion in 2002.
- The assets of the combined OASDI Trust Funds increased by $165
billion in 2002 to a total of $1.378 trillion.
- Interest earned on the invested assets of the combined Trust
Funds was $80.4 billion in 2002. The combined trust fund assets
earned interest at an effective annual rate of 6.4 percent.
The Board of Trustees is comprised of six members. Four serve by
virtue of their positions with the federal government: John W. Snow,
Secretary of the Treasury and Managing Trustee; Jo Anne Barnhart,
Commissioner of Social Security; Tommy G. Thompson, Secretary of
Health and Human Services; and Elaine L. Chao, Secretary of Labor.
The other two members, appointed by the President and confirmed
by the Senate, are John L. Palmer and Thomas R. Saving.
The 2003 Trustees Report will be posted at www.socialsecurity.gov/OACT/TR/TR03
by Monday evening.
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