Sunday, September 14, 2008

CBO says Social Security healthy and viable for decades to come

The Congressional Budget Office (CBO) released a report stating that Social Security is in good financial shape and will continue to be so for decades to come. The report, which forecasts out 75 years, finds that while the accumulating surpluses in the Social Security trust fund will be exhausted in 2049, ongoing revenues will still be sufficient to fund about 81% of promised benefits at the end of the 75-year period (in 2082). The reason given is that wages and Social Security revenues will continue to grow as the economy grows. The trust fund will cushion the large baby boom retirement, as it was designed to do, but most benefits will continue to be funded by direct transfers from workers to retirees, as they are now.

In a policy memo outlining the CBO’s findings, the Economic Policy Institute (EPI) think tank noted the report’s finding that “future Social Security beneficiaries will receive larger benefits in retirement...than current beneficiaries do, even after adjustments have been made for inflation.” According to the CBO projections, Social Security is in decent shape, because - without any changes at all - the projected long-term Social Security shortfall equals a mere 1% of taxable payroll. EPI further states that the biggest problem facing Social Security is not the boomer retirement, but growing income inequality, which increases the share of untaxed earnings above the taxable earnings cap (currently set at $102,000). “Social Security has been a great success for 73 years, and it will be a great success for the next seventy-five,” said Ruben Burks, Secretary-Treasurer of the Alliance of Retired Americans. “Of course, that is provided no one alters the core principles on which it is based by privatizing it.”