Dry-up of Social Security Fund Could Trigger Large Benefit Reductions, Tax Increases

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Exhaustion of the Social Security trust fund — now expected to occur around 2035 — would require significant immediate reductions in benefits and/or increases in payroll taxes at that point, unless the law is changed to prevent that outcome, according to a spokesman. report to Congress.

The Congressional Research Service report is the latest of many warnings that the fund, built up over decades, is being spent because the ratio of those paying to those withdrawing is shrinking with the aging population. Since 2009, the fund pays out more than it takes in, excluding the interest credited by the Treasury on the bonds in which it is invested, and since 2020 when that interest is included.

“If a trust fund becomes depleted and current receipts are insufficient to meet current expenses, there would be a conflict between two federal laws. Under Social Security law, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending that exceeds available resources, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time,” it says.

Under current law, the difference cannot be offset by general revenue or loans, as Social Security is set up to fund itself, it added. The program would still collect money from payroll taxes — which are split equally between employers and employees — but that would be enough to cover only about 80 percent of current benefits at the time.

“Congress could restore balance by immediately cutting scheduled benefits by about 20%; the required reduction would gradually grow to 26% by 2096. An alternative could be for Congress to raise the Social Security payroll tax rate from 12.4% to 15.6% after exhaustion in 2035, then gradually raise it to 16, 7% by 2095,” it said. .

Also echoing many previous similar warnings from CRS and elsewhere, it adds this: “The sooner social security policy adjustments are made, the less abrupt the changes should be, as they could be spread over a longer period of time and therefore affect a larger number of employees and beneficiaries. In addition, an adjustment of social security policies sooner rather than later would give employees and beneficiaries more time to plan and adjust their working and saving behavior.”

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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