Social Security is NOT broken!
Social Security is more financially sound today than it has been throughout most of its 69-year history. Current benefits could be maintained for 75 more years with only a 1% to 2% increase in payroll tax rate, if started now. Extending the payroll tax to higher incomes could make an even smaller rate increase possible.
The Social Security Trust Fund is financed by an estimated 154 million workers and their employers each paying a 7.65% tax on salaries (up to $87,900/year), from which Social Security benefits are paid. The surplus of payroll taxes over benefit expenses has grown considerably over the last twenty years.
In 2003, payroll tax income was $632 billion, and benefits paid was $471 billion, resulting in a $161 billion surplus, which was invested in US Treasury bonds that earned $85 billion in interest, a return of 6%. Trust Fund surpluses over the past two decades have have accumulated to over $1.5 trillion in January 2004. By 2013 these assets will have peaked at almost $3.6 trillion.
The Social Security Trust assets are invested in "Special Issue" US Treasury Bonds, which are used to finance other government operations and are to be repaid to the Social Security Trust, with interest. These obligations - or debt - owed to the Trust Fund are recognized by Congress as part of the national debt. So the government has borrowed, not stolen, the Social Security Trust Fund.
Every year, Social Security's actuaries estimate the program's long-term finances under a variety of economic assumptions for the next 75 years. The Trustees currently project that:
The Trustees estimate that over the next 75 years, the additional money needed to maintain current benefits could be supplied by just a 1.89% increase in payroll tax, starting now. This increase would be split between workers and employers and would be the equivalent of 0.70 percent of the Gross Domestic Product. (The payroll tax rate was increased over 3% in the last Social Security readjustment by the Greenspan commission in 1983.)
Even this low rate increase is an over-estimate, because simply raising the cap on taxable salaries from $87,900 to $110,000, it would supply approximately 1/3 of the additional money needed to keep full benefits for the next 75 years. (A $110,000 cap on taxable salaries would be today's equivalent of the cap set the last Social Security readjustment by the Greenspan commission in 1983.)
A recently-released Congressional Budget Office analysis was even more optimistic, projecting that an even smaller increase, 1%, in payroll tax, starting now, could keep Social Security benefits at their cur-rent level for the next 75 years. Even without that increase, benefits could be maintained at 80% of cur-rent level when the Trust Fund bonds are spent down in 2052. Moreover, raising the taxable salary cap to $110,000 could, by itself, generate almost enough revenue to keep benefits at their current level.
remember that these estimates are based on such pessimistic estimates
of growth in Gross National Product (less than 2%) that if they actually
occurred, the last place you would want your money is the stock market.