Without reform, the Social Security trust fund is projected to run out of money in 16 years, at which time benefits will be cut by 21 percent.
Old-Age, Survivors, and Disability Insurance (OASDI), more commonly referred to as Social Security, is a program intended to provide assistance to retirees and disabled individuals. It was initially intended to be paid for via a payroll tax, but the portion of Social Security’s funding coming from this source has decreased. In 1957, 93 percent of all OASDI revenue came from the payroll tax, yet by 2017 this had fallen to 88 percent. The remainder is collected in the form of taxed benefits, reimbursements from the general fund, and interest on investments.
From the early 1980s until 2007, Social Security generally collected more and more revenue each year—and always more than it paid out in benefits. This pattern peaked in 2007. In two of the Social Security Administration’s (SSA) three projected scenarios, however, Social Security will start paying out more money than it takes in. The SSA’s different projections are based on low-, intermediate-, and high-cost assumptions about the program. In both the intermediate- and high-cost scenarios, SSA projects that benefits will be larger than revenue to the point of draining the trust fund entirely. Under the intermediate-cost scenario, the fund will reach zero in 2034, and in the high-cost scenario in 2030. The low-cost scenario is the only one in which SSA predicts the trust fund to be sustainable. Many don’t realize that if the trust fund runs out of money, benefit payments will either be reduced to an estimated 79 percent of current levels, or Congress will need to appropriate additional funds by raising taxes, borrowing more money each year, or both. In the past, some have called for addressing Social Security’s fiscal problems through reducing wasteful spending. But administrative expenses for OASDI have dropped as a proportion of its expenditures. In 1957, 2.2 percent of Social Security’s costs were administrative expenses, compared to 0.7 percent in 2017. This suggests that the fiscal problems in Social Security are not a result of waste, but are instead inherent to the system.