The Indicator from Planet Money What happens when Social Security runs out of money?
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Oct 29, 2024 Jason Furman, an Economics professor at Harvard and former chair of the Council of Economic Advisers under Obama, discusses the looming Social Security crisis. He highlights the imbalance between incoming payroll taxes and payouts, predicting potential depletion by 2031. Furman also explores the political implications of proposed tax cuts and borrowing to sustain funding. He introduces a new indicator for assessing America's financial health, emphasizing the importance of addressing national debt and fostering bipartisan solutions to avert financial disaster for retirees.
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Social Security Funding Crisis
- Social Security represents over 20% of government spending, primarily funded by payroll taxes.
- Current revenue isn't keeping up with payouts, leading to projected fund depletion in roughly nine years.
Potential Social Security Outcomes
- If the Social Security fund depletes, automatic benefit cuts of nearly 20% could occur.
- Congress could also pass laws allowing borrowing to maintain full benefits, but this shifts the deficit elsewhere.
Past Social Security Compromises
- In the past, Congress has averted Social Security crises through bipartisan compromises.
- These included raising the retirement age and increasing payroll taxes.