Social Security Reform
LIBRARY OF CONGRESS WASHINGTON DC CONGRESSIONAL RESEARCH SERVICE
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On February 2, 2005, President Bush highlighted Social Security reform during the State of the Union address as a top priority during his second term. The President did not present a detailed plan for reform. Rather, he put forth guidelines for Congress to consider in the development of legislation to create personal accounts within a program in need of wise and effective reform. The President also acknowledged that other changes would be needed to address the systems projected long-range funding shortfall. In recent years, reform ideas have ranged from relatively minor changes to the current pay-as-you-go social insurance system to a redesigned program based on personal savings and investments modeled after IRAs and 401ks. Currently, the Social Security system is generating surplus revenues. However, its board of trustees reports that, under its intermediate or mid-range projections, the trust funds would be depleted in 2041. At that point, an estimated 74 of benefits would be payable with incoming receipts. On average, over the next 75 years, the trustees project that the systems costs would be 14 higher than its income. By 2080, projected costs would be 43 higher than income. The primary reason is demographic the post-World War II baby boomers will begin retiring in 2008 and life expectancy is projected to increase. Between 2005 and 2025, the number of people age 65 and older is projected to grow by 69. In contrast, the number of workers supporting the system is projected to grow by 13. The trustees project that surplus Social Security revenues plus interest will cause the trust funds, comprised of federal bonds, to peak at 6.0 trillion in 2026. Thereafter, the systems outgo is projected to exceed income, and the trust funds would be drawn down until depletion in 2041. However, the trustees project that the systems tax revenue would fall below outgo beginning in 2017.
- Economics and Cost Analysis