Social Security

Veronique de Rugy | 10.17.2024 4:15 PM

The United States is at a crossroads. You may have heard that Social Security is politically impossible to reform. But that belief will be hard to sustain. In a few years, the Social Security Trust Fund will be exhausted. When that happens, Social Security benefits will be cut across the board by 21 percent—that is, unless Congress changes the law. Either way, changes are coming.

The question that remains is which change we will go for. That choice will have long-lasting consequences.

But first, let's review how we got where we are. Social Security is facing a permanent cash-flow deficit that started in 2010. Every year since, the payroll tax revenue has not been enough to cover all the benefits paid to current retirees. To make up this difference, the program has been relying on trust-fund assets that once accumulated as a surplus.

Between the Social Security reform of the 1980s and 2010, the payroll tax collected more revenue than necessary to pay for benefits. That extra revenue, the surplus mentioned above, was handed out to the Department........

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