matttyl
Footballguy
http://news.investors.com/politics/071514-708810-social-security-depleted-by-2030-cbo-says.htm
The $2.8 trillion Social Security Trust Fund is on track to be totally spent by 2030, the Congressional Budget Office said Tuesday.
That's one year earlier than projected in 2013 and a decade earlier than the CBO estimated as recently as 2011.
The CBO delivered the warning in a gloomy long-term budget outlook that shows federal debt reaching 106% of GDP in 25 years, up from 74% now.
The rising debt would come despite revenue rising by 1.8 percent as share of GDP (from 17.6% to 19.4%)from 2014 to 2039 and despite spending other than health entitlements, Social Security and debt service shrinking by 2.5% of GDP (9.3% to 6.8%).
The challenge: Health care spending will rise by 3.1 percent of GDP (4.9% to 8%) and Social Security 1.4 points of GDP (4.9% to 6.3%), which will in turn push interest on the debt up to 4.7% of GDP from 1.3%.
Social Security's cliff, now just 16 years away, is one that Washington would be crazy to approach. At that point, incoming revenue would be enough to pay less than 75% of scheduled benefits for all beneficiaries, whether just reaching retirement or 100 years old.
Up until the point of exhaustion, the trust fund provides legal authority — though no resources — for the government to pay all benefits despite Social Security's burgeoning cash-flow deficit, which the CBO expects to reach $320 billion in 2024 alone.
The rapid deterioration in Social Security's finances has a number of contributing factors. The drawn-out recovery from the deep recession and the extended period of low interest rates have sapped revenue and lowered the interest that Treasury pays to the trust fund based on program surpluses from 1984 to 2009.
On top of that, the CBO expects the underinvestment and long-term unemployment associated with the less-than-stellar recovery to have a lasting impact, boosting the natural rate of unemployment.
In February, the CBO significantly reined in its economic optimism, slashing its projection of the total amount of wages and salaries over the 2015-2023 period by about $3.2 trillion, or 3.6%.
Among the factors that the budget scorekeeper cited was ObamaCare's work-diminishing effect, which the CBO now estimates to be three times as large as it supposed in 2010.
The CBO said that ObamaCare would reduce employment by 2 million full-time-equivalent workers in 2017, rising to 2.5 million in 2014.
This reduction would result in a decline in aggregate employee compensation averaging 1% from 2017 through 2024, or $1.05 trillion.
An IBD analysis pegged the revenue hit to Social Security from ObamaCare work disincentives at about $120 billion through 2024.
The reduced payroll-tax contributions into Social Security would, over time, result in modestly lower benefits for those who choose less work, but the cost savings from reduced benefits would offset only a portion of the lost revenue.
The nature of Affordable Care Act subsidies — they rise as income falls and decline as income rises — will make work "less attractive" by "creating an implicit tax on additional earnings," the CBO said.
The work disincentive will lead some people to choose to work less, in part because subsidized health care will enable them to get by with less work.
In addition, the CBO expects ObamaCare to depress wages for lower earners when employers, over time, pass along the cost of the law's employer-insurance mandate by holding back on wage increases. Lower wages, in turn, will provide another reason for some people to opt for less work, the CBO says.
While the CBO expects compensation to be lower "almost entirely" because people will choose to supply less work, the CBO also expects that some employers "will respond to the penalty by hiring fewer people at or just above the minimum wage."
Another important factor clouding Social Security's future: A greater share of earnings goes to those with income above the maximum subject to payroll taxes ($117,000 in 2014).
As a result, while rising longevity and the retirement of baby boomers will make benefits grow faster than the economy, Social Security's tax revenue is expected only to keep pace with economic growth.
The $2.8 trillion Social Security Trust Fund is on track to be totally spent by 2030, the Congressional Budget Office said Tuesday.
That's one year earlier than projected in 2013 and a decade earlier than the CBO estimated as recently as 2011.
The CBO delivered the warning in a gloomy long-term budget outlook that shows federal debt reaching 106% of GDP in 25 years, up from 74% now.
The rising debt would come despite revenue rising by 1.8 percent as share of GDP (from 17.6% to 19.4%)from 2014 to 2039 and despite spending other than health entitlements, Social Security and debt service shrinking by 2.5% of GDP (9.3% to 6.8%).
The challenge: Health care spending will rise by 3.1 percent of GDP (4.9% to 8%) and Social Security 1.4 points of GDP (4.9% to 6.3%), which will in turn push interest on the debt up to 4.7% of GDP from 1.3%.
Social Security's cliff, now just 16 years away, is one that Washington would be crazy to approach. At that point, incoming revenue would be enough to pay less than 75% of scheduled benefits for all beneficiaries, whether just reaching retirement or 100 years old.
Up until the point of exhaustion, the trust fund provides legal authority — though no resources — for the government to pay all benefits despite Social Security's burgeoning cash-flow deficit, which the CBO expects to reach $320 billion in 2024 alone.
The rapid deterioration in Social Security's finances has a number of contributing factors. The drawn-out recovery from the deep recession and the extended period of low interest rates have sapped revenue and lowered the interest that Treasury pays to the trust fund based on program surpluses from 1984 to 2009.
On top of that, the CBO expects the underinvestment and long-term unemployment associated with the less-than-stellar recovery to have a lasting impact, boosting the natural rate of unemployment.
In February, the CBO significantly reined in its economic optimism, slashing its projection of the total amount of wages and salaries over the 2015-2023 period by about $3.2 trillion, or 3.6%.
Among the factors that the budget scorekeeper cited was ObamaCare's work-diminishing effect, which the CBO now estimates to be three times as large as it supposed in 2010.
The CBO said that ObamaCare would reduce employment by 2 million full-time-equivalent workers in 2017, rising to 2.5 million in 2014.
This reduction would result in a decline in aggregate employee compensation averaging 1% from 2017 through 2024, or $1.05 trillion.
An IBD analysis pegged the revenue hit to Social Security from ObamaCare work disincentives at about $120 billion through 2024.
The reduced payroll-tax contributions into Social Security would, over time, result in modestly lower benefits for those who choose less work, but the cost savings from reduced benefits would offset only a portion of the lost revenue.
The nature of Affordable Care Act subsidies — they rise as income falls and decline as income rises — will make work "less attractive" by "creating an implicit tax on additional earnings," the CBO said.
The work disincentive will lead some people to choose to work less, in part because subsidized health care will enable them to get by with less work.
In addition, the CBO expects ObamaCare to depress wages for lower earners when employers, over time, pass along the cost of the law's employer-insurance mandate by holding back on wage increases. Lower wages, in turn, will provide another reason for some people to opt for less work, the CBO says.
While the CBO expects compensation to be lower "almost entirely" because people will choose to supply less work, the CBO also expects that some employers "will respond to the penalty by hiring fewer people at or just above the minimum wage."
Another important factor clouding Social Security's future: A greater share of earnings goes to those with income above the maximum subject to payroll taxes ($117,000 in 2014).
As a result, while rising longevity and the retirement of baby boomers will make benefits grow faster than the economy, Social Security's tax revenue is expected only to keep pace with economic growth.
