A University of Alabama Law School Clinical Program funded in part by West Alabama Regional Commission

7. Problems in the future.

Although the expected large numbers of elderly in the near future will place a strain on the system without some adjustments, Social Security is a great success story. It has, in fact, reduced the amount of poverty among the elderly, disabled workers, and their families. But with the anticipated surge in numbers of the elderly, at some point, changes need to be made in order to pay full planned benefits to tomorrow’s beneficiaries. Social Security is by no means "bankrupt", but unless reforms are instituted in the next few years, by 2037 or thereabouts it will be able to pay only about 3/4 of currently scheduled benefits.

There has been little real debate about this issue; there have only been arguments, often heated. . Commentary is often manipulative or outright untrue. It is critical, however, for voters to be fully informed about all aspects of the Social Security issue. This is a complex problem for which there is no quick or simple fix.

Anticipated surpluses in income over benefits paid declined during the recession. Surpluses are expected to cease in 2016, when benefits paid out begin to exceed taxes paid in, as baby boomers retire and there are fewer workers for each retiree. This was anticipated, which is why trust funds were initiated and why they have been accumulating surpluses. But Trust Funds are currently expected to run out in 2037. At that point funds will be able to pay about 3/4 of scheduled benefits through 2083.

Suggestions have been made from time to time. Unrest in the stock market over the last two years diminished but has not eliminated calls to allow younger workers to divert some of their employment taxes in private accounts. There have been proposals to invest some Social Security funds in the private market. One frequent suggestion is to raise the dollar amount of earnings that are subject to Social Security tax ($106,000 in 2009). The argument is that raising the cap would be in keeping with the upward direction of earnings. Raising the cap by $50,000 would probably help, but not as much as might first appear. When those high-income workers retire, they will have earned more benefits. Other suggestions are to adjust calculations of annual cost-of-living increases, or to slightly reduce benefits over time. There are many other proposals. (See Resources for a list of web sites presenting different views.)

Social Security's financing is not as immediately critical as that of Medicare and Medicaid, but the situation is so politicized that reasonable compromise seems unlikely . Cooler heads counsel that it would be wise to act while relatively minor changes could assure the financial stability of this basically strong program.

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