This is the second of two pieces on the annual Social Security and Medicare Trustees’ Reports. The first, published by e21 on May 23, focused on process, concepts and thematic findings. This one will summarize the reports’ quantitative projections.
Current Operations: Social Security is currently running a deficit of tax income relative to annual expenditures. One of the headline findings of this year’s report is that this deficit will be a permanent feature of program finances, growing enormously in the future under current law. (Technically the program can no longer run a deficit after its trust fund is ultimately exhausted, but the deficit is permanent in the sense that benefit obligations will forever exceed tax income). This operating deficit emerged last year. Total program costs were $713 billion while $664 billion in tax revenues were collected, for a total deficit of $49 billion.
This year, dedicated tax revenues will lag a full $151 billion behind payment obligations, meaning that Social Security’s operations will add $151 billion to the federal deficit. This is much bigger than last year’s shortfall primarily because the Social Security payroll tax has been temporarily reduced from 12.4% to 10.4%. That legislation that cut the payroll tax is also transferring $105 billion in (debt-financed) general revenues to the Trust Funds, making up part of the shortfall. The rest of the deficit will be made up with interest payments from the general fund to the Trust Fund.
(photo credit: Jon Fingas)