S OCIAL S ECURITY Origins: New Deal Contributors Employee: 6.2% Employer: 6.2% Taxable Maximum:...
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Transcript of S OCIAL S ECURITY Origins: New Deal Contributors Employee: 6.2% Employer: 6.2% Taxable Maximum:...
SOCIAL SECURITY Origins:
New Deal Contributors
Employee: 6.2% Employer: 6.2%
Taxable Maximum: $90,000
Contribute for 10 years to receive benefits
HOW DOES IT WORK? “Pay as you go” system
WHO GETS IT?
Recipients: 62.8% Retired 18.4% Survivor
Benefits 13% Disabled 5.8% Non working
spouses
SOCIAL SECURITY TRUST FUND
Surplus goes into the trust fund
2005: 1.7 trillion in trust fund 155 billion added in 2005
Government borrows 150 billion a year (IOUs in fund)
PROBLEMS
Baby Boomers
Living longer
Fewer childbirths
1945 42 workers/1 retiree
2010 3 workers/1 retiree
AMERICA’S POPULATION IS AGINGPOPULATION AGE 65 AND OVER
Source: Social Security and Medicare Trustees’ Report, April 2007
0%
5%
10%
15%
20%
25%
2007 2012 2017 2022 2027 2032 2037 2042 2047
Year
Per
cen
tage
of
Pop
ula
tion
Age
d 6
5 an
d O
ver
AMERICANS ARE LIVING LONGER AND HAVING FEWER CHILDREN
Consequently, fewer workers are available to support each Social Security recipient
1960: 5.1 to 1 Today: 3.3 to 1 2040: 2.1 to 1
Source: Social Security Administration, April 2007
PROBLEM
2015 Payouts exceed income Need to tap into the trust fund Govt. borrows $150 billion a year
2037/2052: Trust Fund depleted
Annual collections only pay for 74% of benefits
SOCIAL SECURITY AND MEDICARE PART A CUMULATIVE CASH SURPLUSES AND DEFICITS
IN CONSTANT 2007 DOLLARS—2007 THROUGH 2080
-$3,000
-$2,500
-$2,000
-$1,500
-$1,000
-$500
$0
$500
In B
illion
s o
f C
on
sta
nt
20
07
D
ollars
2007 2010 2020 2030 2040 2050 2060 2070 2080
Calendar Year
Source: Social Security Trustees’ Report—April 2007 (Intermediate Projections)
$708 Billion: Cumulative Social Security Cash Surplus
-$26 Trillion: Cumulative Social Security Cash Deficits
-$46 Trillion: Cumulative Medicare Part A Cash Deficits
-72.3 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits
MEDICARE COSTS SOAR IN THE COMING DECADES
0
5
10
15
2006 2010 2020 2030 2040 2050 2060 2070 2080
Calendar Year
As a
Perc
en
tag
e o
f G
DP
General Revenues required to fund the program
Income from dedicated taxes, premiums, and state transfers
Source: Medicare Trustees’ Report, 2007
HEALTH CARE COSTS ARE RISING FASTER
THAN THE ECONOMY
Source: Congressional Budget Office, December 2005.
0
5
10
15
20
25
2007 2012 2017 2022 2027 2032 2037 2042 2047
Year
Per
cen
tage
of
GD
P
Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.)
Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—consistent with the assumption used by the Medicare Trustees.
All Federal RevenuesIn Fiscal Year 2006
All Federal SpendingIn Fiscal Year 2006
PROPOSED SOLUTIONS Raise Max level from $90,000 to $140,000
Lower shortfall by 43%
Raise tax by ½% Lower shortfall by 24%
Raise age 67-70 Lower shortfall by 38%
Reduce benefits by 5% Lowers shortfall by 26%
Lower benefits for high wage workers Lowers shortfall by 14%
Put estate tax into Social Security Fund Lowers shortfall by 75%