Social Security's Financial Outlook and Reforms: An Independent Evaluation

67 Pages Posted: 11 Mar 2013

Date Written: October 25, 2011

Abstract

Social Security is often described as a "foundational" element of the nation's social safety net. Almost all Americans are directly affected by the program and many millions primarily depend on its benefits for supporting themselves during retirement. But the program's financial condition has worsened considerably since the last recession, which began in 2007. In that year, the Social Security trustees estimated that the program's trust fund would be exhausted by 2042. The trustees' annual report for 2011 brings the trust fund exhaustion date forward to 2038. Indeed, the programs revenues fell short of its benefit expenditures in 2010 and it appears unlikely that significant surpluses will emerge again under the program's current rules. If the program's finances continue to worsen at this rate, it won’t be long before the debate on reforming the program assumes an urgency and intensity similar to that during 1982-83, when imminent insolvency forced lawmakers to implement payroll tax increases and scale back its benefits.

Keywords: privatizing social security, U.S. social security reform, American social security trust funds, impact of 2008 financial crisis, recession in United States, retirement benefits, federal government social safety net

JEL Classification: H50, H55

Suggested Citation

Gokhale, Jagadeesh, Social Security's Financial Outlook and Reforms: An Independent Evaluation (October 25, 2011). Cato Institute Working Paper, Available at SSRN: https://ssrn.com/abstract=2231661 or http://dx.doi.org/10.2139/ssrn.2231661

Jagadeesh Gokhale (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

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