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We don’t change when we see the light. We change when we feel the heat. And this year, we begin to feel the Social Security heat.

To pay this year’s benefits, we must pay out all the payroll taxes we collect, interest we earn on our funds, and then some reserves, as well. And, according to the 2020 Trustees’ Report, this reserve will be depleted by 2035. So, it’s time to increase our payroll taxes, cut benefits or elongate eligibility. Either that or face a 21% slash in our checks within 10 years.

Used to be, most old people lived in poverty, then died. In 1932, only 15% of companies had pension plans. Other choices were panhandling, moving into poorhouses or simply dying impoverished, which was what half of all seniors did in the years immediately after the 1929 stock market crash.

And yes, many social security-like plans were proposed and tested prior to our adoption of 1934’s Social Security plan, including many private ones.

The Social Security Board of Trustees has been warning us for years that the program faces funding shortfalls, predicting the combined Old-Age and Survivor Insurance (OASI) and Disability Insurance (DI) Trust Funds will be depleted in 2035. And that was before the economy was hit with COVID-19. It’s surely earlier now.

The Penn Wharton Budget Model now thinks depletion could occur in 2034 or quicker, if our economic recovery takes longer. The Bipartisan Policy Center estimates depletion in 2030 by assuming an economic downturn that is equal in size to that of the 2008-09 recession, while accounting for today’s larger population.

According to the Social Security Actuary, if income is reduced by 15% in each of the next two years (2021 and 2022), the trust funds could deplete by late 2033. Finally, the Congressional Budget Office reduced its depletion estimates for the two trust funds to 2031 and 2026.

So, plenty are saying 2030-35 is the likely depletion date.

Although that will hamper Social Security, it won’t kill it. That’s because 79% of Social Security funding comes from yearly taxes. So, that will still be available for distribution. What won’t be available is the 21% provided by the “trust funds.”

Although Social Security was enacted in 1935, the first taxes weren’t collected until January 1937, the same month they gave a special one-time, lump-sum payment to each eligible beneficiary. However, regular ongoing monthly payments didn’t start until January 1940, three years later. So, three years of taxes first built up the “trust funds,” although they weren’t trust funds as such. They were more like the balance remaining in your checking account each month after you’ve paid your bills.

From 1937 through 2009, more than $13.8 trillion was paid into the trust funds and more than $11.3 trillion was paid out in benefits. Then, the difference kept narrowing until this year, when the amounts paid out will exceed the amount paid in. The balance will still last until about 2030-2035, when there won’t be a balance left and payments will have to be cut unless something is done.

Now, it is true that the Treasury also borrows the Social Security funds to finance our deficit, in addition to borrowing from the commercial market. Although, if that weren’t done, the Treasury would have to borrow that much more from the commercial market while allowing our Social Security cash to collect only nominal interest.

Therefore, overall, it costs the taxpayer less to borrow the available Social Security cash than to borrow the same amount on the commercial market, even though the government does pay itself interest.

So, the Treasury always uses cash on hand first to meet current obligations before borrowing commercially, saving some money. But now our choice is: Raise payroll taxes, reduce benefits, elongate eligibility or do nothing. Of the four, raising the cap on payroll tax collections will buy us time until we’re ready for tough decisions.

Tom Crouser is a business consultant living in Mink Shoals. Reach him at

tom@crouser.com and follow @TomCrouser on Twitter. Also connect via Facebook and LinkedIn.

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