Featured # Markets | 2 years ago

Reports Show Alarming Numbers as Social Security’s Deficit Increases

The state of Social security can be analyzed by reviewing Medicare Boards of Trustees’ annual report. This officially released report presents some uncertain statistics. It is estimated that social security’s total income will exceed its total expenses and costs till 2019.Projections conclude that interest incomes and fortune from reserves would be required to diminish social security’s deficits from 2019 to 2034. If things remain unchanged by then, it is projected that payroll taxes would be enough to finance 75% of government’s spending on retirement benefits until 2090.

The social security also estimates a $700 Billion soar in their projected short fall for unfunded liabilities, making it $11.4 trillion by 2090.

Infinite Horizon is another way to inspect the condition of social Security.

Infinite Horizon also includes social security’s projected liabilities beyond the 75 year span that is traditionally used by social security analysts.

According to infinite Horizon, social security’s unfunded obligations would exceed $32 trillion by 2090. That is a $6.3 billion swell compared to previous year’s projection.

The key factor for increase in projected shortfall for unfunded liabilities was the use of 2.7 instead of 2.9 as the interest rate in calculations. A Boston university economist labeled infinite horizon’s projections as the most crucial section of trustee’s annual report. Kotlikoff also criticized the congress as he said: “We’re not broke in 20 years to 30 years, we’re broke now,” he further added: “You can’t hide the numbers under a bunch of malarkey,”.

Democratic Party’s vice president candidate Tim Kaine had a similar opinion in 2013 when he supported a legislation that would force the government to use infinite horizon’s projections for their calculations..

The major presidential candidates haven’t presented their comprehensive agenda to deal with the social security’s shortfall as yet. Clinton vows to preserve and expand the Social security program. Trump also has a similar opinion as he emphasized on strengthening the economy in order to preserve the program.

Nevertheless, a representative from Income and Benefits Policy Center proposes a rise in payroll taxes to solve the social security’s shortfall problem. His proposal looks promising as it was also acknowledged by some politicians.

 

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