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Social Security faces a test. To be more precise, Congress faces a test as to whether they will address a problem with Social Security. Just six years from now, the program for seniors will not have enough money to make full payments. From NPR's Planet Money podcast, Erika Beras tells us why the accounts are running low and what the potential fixes are.
ERIKA BERAS, BYLINE: The first reason Social Security is running out of money - the baby boomers. They are retiring, collecting their Social Security payments and living longer. And there are a lot of them, including Steve Goss, who for 52 years was an actuary for the Social Security Administration.
STEVE GOSS: Social Security is spending more on benefits now than it is taking in in revenue.
BERAS: That seems like a problem.
GOSS: That is definitely a problem.
BERAS: Social Security is like a checking account - all workers pay into it, and you need at least as much money coming in as going out. But we've been spending more than saving since 2010. And in six years, payments to retirees could be cut by 22%. But there are proposals for how to generate more money, like raising the payroll tax, you know, the money that comes out of your paycheck for Social Security. That alone would solve the whole problem. Now, Steve is impartial to any one specific idea. He's more like, sure, but it's up to the American people and obviously Congress. So we could raise the tax or do a combination of things, such as raising the retirement age.
How feasible would it be to actually implement this?
GOSS: Very feasible. I mean, Social Security is already receiving all the information it needs to be able to effect this if it were enacted.
BERAS: Or the way it works now, if you earn more than $184,500 a year, you don't pay Social Security payroll tax on any earnings above that annually. So why not tax those people more? That could help. Or with people having fewer babies, maybe more immigration - get more workers to pay into the program.
GOSS: Yes. Historically, no question that positive net immigration has been a plus for the United States. It's almost like having had a higher birth rate 25 or 30 years ago.
BERAS: Steve says the longer we wait to fix it, the worse the problem will be because this great economic experiment just doesn't have a quick-fix solution. But we, at Planet Money, had one last idea for an easy fix - Social Security still has a couple of trillion dollars left. Why not invest it in the stock market? As Steve says, the U.S. did talk about it a bunch in the 1990s. And back then, Canada actually did it.
GOSS: And as it happens, that investment fund has grown since the 1990s to the point now where I was just talking with the folks in Canada recently, their trust fund that has been built up with equities is now equal in size to 25% of their gross domestic product.
BERAS: Wow.
GOSS: So that was a wise move, and they have much benefited from it.
BERAS: But now if the U.S. were to do it, there actually wouldn't be enough benefit because the fund is so depleted. We are spending it down every single day. So too late for us, but happy for you, Canada.
Erika Beras, NPR News.
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