Recession aids in Social Security losses
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Kai Ryssdal: You take a good look at the age demographics in this country, and the news about Social Security today was only a matter of time. The Congressional Budget Office told The New York Times today that this year — for the first time — the trust fund is going to pay out more than it’s bringing in from payroll taxes. That’s about five years earlier than even the best guesses. So what gives? Why, a little thing called the Great Recession, don’t you know?
From New York, Marketplace’s Alisa Roth has more.
ALISA ROTH: The basic concept of the Social Security system is simple: We pay in through payroll taxes. Retirees take the money out as benefits. For decades, we paid more in than we had to pay out. But the recession changed that.
Maya MacGuineas is director of fiscal policy at the New America Foundation. She says for one thing, less money is flowing into the system overall.
MAYA MacGuineas: Wages were dropping, with so many people out of work and not getting raises. So the trust funds were collecting much less money than we expected.
At the same time, we had to pay more money out.
MacGuineas: More people couldn’t find jobs so they were retiring earlier and going ahead and collecting Social Security benefits.
Analysts always knew there’d eventually be more retirees than workers. And that we’d need more cash than there would be in the system. But they predicted it would be at least 2016 before the balance tilted.
MacGuineas says the change is an important reminder that Social Security desperately needs an overhaul.
Henry Aaron is a policy analyst at the Brookings Institution. He says nothing fundamental about the system has changed.
HENRY AARON: The underlying facts are the same. Adjustments will need to be made, and they aren’t very large. Small reductions in benefits or small increases in taxes would restore balance to the Social Security system.
There’s no need for retirees to panic just yet. The Social Security Administration says benefits won’t change this year.
And in a few weeks, the agency will come out with its own projections about the state of the system.
I’m Alisa Roth for Marketplace.
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