According to US News Money Blog, both political parties plan to include Social Security in their deficit reduction proposals. It is inevitable that the program will face budget cuts and reform. Social Security is funded by payroll taxes, paid equally by employees and employers. The payroll 6.2 percent tax supports Old-Age, Survivors, and Social Security Disability Insurance.
The legislature raised payroll taxes in 1980s, as part of program reform, which allowed for big surpluses to accrue. By law, the SSA must place its surpluses in a U.S. Treasury fund, and the interest on those securities is added to Social Security revenue. The program also receives some credits from the tax revenues that the IRS receives from income taxes on Social Security benefit payments.
According to a detailed annual report on the program’s 2010 finances, Social Security will have enough surplus to pay all claims in full until 2037. After that, it will have enough to cover only 79 percent of its obligations for retirement and disability benefits.
The Social Security program is not broke, according to 2010 and 2011 program expenses it will exceed the amount of payroll taxes taken in. The accumulated surplus is projected to rise from $2.64 billion to $3.77 billion by 2019 and will continue to rise until 2025. The impact of retiring baby boomers is expected to exhaust all surpluses by the year 2037.
Many policy makers have developed proposals to address Social Security’s solvency problem. Whatever our legislators’ final decision on Social Security may be, it is important to find a way to continue paying disabled individuals Social Security Disability Insurance and Supplemental Security Income benefits.