The Social Security Board of Trustees has declared that the Social Security program is not sustainable over the long term. The 2003 Social Security Trustees Report does extend the projected solvency of the trust funds by one year.
In the 2003 Annual Report to Congress, the Trustees announced:
- The projected point at which tax revenues will fall below program costs comes in 2018 -- one year later than the estimate in last year’s report;
- The projected point at which the trust funds will be exhausted comes in 2042 -- one year later than the estimate in last year’s report;
- The projected actuarial deficit of taxable payroll over the 75-year long-range period is 1.92 percent -- larger than the 1.87 percent projected in last year’s report;
- The Trust Funds would require another $3.5 trillion in today’s dollars, earning interest at Treasury rates, to pay all scheduled benefits over the next 75 years. This obligation grew $200 billion from last year.
"This report is yet another reminder of what we have known for some time: Social Security's long-term financing problems are very serious, and will not be fixed by wishful thinking alone," said Jo Anne Barnhart, Commissioner of Social Security.
"I want to assure those already receiving Social Security benefits – as well as those who are close to retirement – that your benefits are secure. But doing nothing will have serious consequences for our children and grandchildren.
"The release of this report is a good time to remind people how the Social Security program works. Social Security taxes pay the benefits of today's retirees. Money in excess of what is needed to pay today's benefits is invested in special issue, interest-bearing Treasury bonds. This system works well when there is a relatively high ratio of workers to beneficiaries. For instance, in 1965, there were 4 workers for every Social Security recipient.
"But the demographics are changing. People are living longer. The first baby boomers are just five years from retirement and the birth rate is low. Today, there are 3.3 workers paying Social Security payroll taxes for every one person collecting Social Security benefits. That number will drop to 2 to 1 in less than 40 years. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.
"As stated in the Trustees Report, the sooner we address the problem, the less abrupt the changes will have to be.
"Earlier today, Secretary Snow and I met with the President. We share the President’s strong hope that the national debate about Social Security will lead to a bipartisan solution.
"Social Security’s retirement, disability and survivors’ components touch the lives of nearly every American family. For the sake of our children and grandchildren, we must come together to meet the challenges facing this vitally important program."
Other highlights of the Trustees Report include:
- Income to the combined Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $627 billion in 2002.
- The Trust Funds paid benefits of approximately $453.8 billion in calendar year 2002. There were 46 million beneficiaries at the end of the calendar year.
- The cost of $4.2 billion to administer the program continues to be a very low 0.7 percent of total income.
- Total expenditures from the combined OASDI Trust Funds amounted to $461.7 billion in 2002.
- The assets of the combined OASDI Trust Funds increased by $165 billion in 2002 to a total of $1.378 trillion.
- Interest earned on the invested assets of the combined Trust Funds was $80.4 billion in 2002. The combined trust fund assets earned interest at an effective annual rate of 6.4 percent.
The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: John W. Snow, Secretary of the Treasury and Managing Trustee; Jo Anne Barnhart, Commissioner of Social Security; Tommy G. Thompson, Secretary of Health and Human Services; and Elaine L. Chao, Secretary of Labor. The other two members, appointed by the President and confirmed by the Senate, are John L. Palmer and Thomas R. Saving.