Who’s gonna pay for your Social Security?
Planet Money
The episode examines the looming insolvency of the U.S. Social Security program, projected to face significant funding gaps by 2032. Through
Key takeaways
- Social Security faces a potential 22% reduction in benefits as early as 2032 due to retiring Baby Boomers and higher life expectancy.
- R. Douglas Arnold proposes raising the payroll tax from 6.2% to 8.4% to ensure solvency for the next 75 years.
Main topics
- Social Security insolvency
- Payroll tax reform
Notable quotes
The math, it is not mathing.
Conclusion
There is no single 'silver bullet' to fix Social Security; rather, a c
Transcript preview
Speaker 2 (0:00) Public media is no longer federally funded, but the NPR network remains yours in service to and powered by you. Keep public media public with a donation today at donate.npr.org. And thank you. Speaker 1 (0:17) This is Planet Money from NPR. Speaker 1 (0:22) One of the greatest economic experiments in the history of the United States is in for its biggest test yet. It's an experiment that started nearly 100 years ago. Yeah. Speaker 4 (0:35) Picture this. The U.S. has rapidly industrialized. Millions of people have moved to cities for factory jobs. And all this change is leaving one group of Americans behind. Older Americans. By the 1930s, more than half of elderly Americans are living in poverty. The Speaker 1 (0:53) problem became particularly acute with the Great Depression. People were calling on the government for help. So President Franklin D. Roosevelt launched a way to give older Americans money every month until they died. Social security. Speaker 4 (1:08) Social security. This social security measure gives at least Speaker 8 (1:14) some protection. To 30 millions of our citizens. This Speaker 4 (1:20) social security experiment, it worked. It really, really worked. It rescued lots of older people from extreme poverty. And to this day, it is one of our most popular government programs. Speaker 1 (1:31) You probably know how it works. We all have a worker ID for our entire lives, our social security number. Every paycheck, we pay a tax that goes into the Social Security Trust Fund. Then pretty much immediately, that money that we paid in goes out to retired people, Social Security recipients. And then when we get older and retire, we become those recipients while the younger workers keep paying into the program. Speaker 4 (1:56) But... For the last half of its life, Social Security has kind of been in trouble. Speaker 8 (2:01) Social Security has been running cash deficits. For Speaker 4 (2:04) years, academics and think tankers and journalists and government actuaries have been sounding the alarm. Still, the alarm bells are being raised about the long-term viability. And Speaker 8 (2:14) I know we've been hearing this for years. The agency continues to face significant financing issues. Speaker 1 (2:20) And if you feel like you've heard this before, this right now is for real, for real troubles. Very soon. Social Security will actually not have enough money to make full payments to retirees. And the state of doom? It is as soon as 2032, just six years from now. And Speaker 4 (2:38) that is largely because of the baby boomers. The boomers are retiring. They are collecting their Social Security payments and facing a much higher life expectancy than the architects of Social Security imagined nearly a century ago. And there are a lot of them. Speaker 1 (2:53) One of those retired boomers is Steve Goss, a guy who used to work for the Social Security Administration himself. He started when he got out of graduate school. He studied math 53 years ago. Speaker 6 (3:05) There was a listing for Social Security Administration. They said actuary. And I asked the obvious guy, I said, what's an actuary? Speaker 1 (3:12) Ah, same question I asked. Speaker 4 (3:13) As it turned out, an actuary was the person who does the math for the administration. And Steve ended up doing that math for 52 years. The last half of those, he was chief actuary. And right now, Steve says, the math, it is not mathing. Speaker 6 (3:29) So Surety is spending more on benefits now than it is taking in revenue. That seems like a problem. That is definitely a problem. Speaker 1 (3:38) Think of Social Security as like a checking account. You need at least as much money going in as going out. When there's more money coming in than going out, like from all the money boomers paid in when they were working, that money sits in what's basically a savings account, the Social Security trust fund, to be used if and when we don't have enough to pay retirees. The Speaker 6 (4:02) trust fund is intended to be a bit of a cushion so that if we do hit a recession, we'll have money to tap into. Speaker 1 (4:08) And we did hit a recession. Speaker 6 (4:11) So we've been tapping into the trust fund reserve since 2010. Oh, Speaker 1 (4:15) my goodness. We're on borrowed time. Speaker 6 (4:17) We are. So we've got 16 years now we've been tapping in to the trust fund reserve. We've got a few more years available, but it's time that we have to really get moving on making changes to adjust the system. And Speaker 4 (4:29) if we don't, in six years, payments to retirees could be cut by 22 percent. Speaker 1 (4:35) 22 percent. That is huge. These are people who are older who might not have other income and need to pay for food and medical expenses and housing. Speaker 4 (4:45) Luckily, people are thinking of ways to solve this problem. There are a lot of proposals out there for how to generate more money for the fund. Speaker 1 (4:53) And as a longtime former chief actuary, Steve was the guy Congress would call to crunch the numbers on these proposals. Speaker 4 (5:02) Yeah. When it comes to Social Security, its numbers, its history, the demographics, Steve is like an encyclopedia met a calculator. And Speaker 1 (5:11) we at Planet Money love a looming deadline, 2032. So we thought. We could go out into the world of people who are proposing solutions to a Social Security bank account that is running out, collect the big ideas, and then come back to Steve. Because for a sober accounting, Steve seems like the perfect person. Speaker 6 (5:32) Well, I wouldn't say perfect, but hopefully I'm an adequate, okay person. Speaker 1 (5:37) Okay. Well, you are our adequate, okay person for this mission, then. Speaker 6 (5:41) Oh, Erica, I... I wish you not only luck. Oh, boy. I wish you skill. Speaker 1 (5:47) Hello and welcome to Planet Money. I'm Erika Barris. And Speaker 4 (5:51) I'm Jeff Guo. Today on the show, this grand economic experiment is in trouble. Speaker 1 (5:56) We're going to look at some of the most talked about possible solutions. Do they help? Do they hurt? And what it will take to refill Social Security's bank account before it all runs out. Because remember Gen X? Speaker 4 (6:08) Uh-oh. Speaker 1 (6:10) They're going to be retiring soon. And they... will need their checks. Speaker 8 (6:18) This election season, you can streamline your news intake with Up First. Our team of reporters and editors works overnight, so you can start every morning with three stories you need to know. In short episodes, 12-14 minutes long, to save you time and your sanity. Follow Up First on the NPR app or wherever you get your podcasts. Speaker 8 (6:40) Austin Tice is an American journalist who disappeared over a decade ago while reporting in Syria. And for years, we've been searching for him. Speaker 7 (6:49) This looks like a secret passage. I'm just Speaker 8 (6:52) pushing the door so you can get in. Go, go, go. Listen to Where Is Austin Tice from NPR's Embedded and BBC Radio 4 on the NPR app or wherever you get your podcasts. Speaker 4 (7:04) OK, look, the funny thing about Social Security is that we have known for years that it's going to be insolvent at some point in the very near future, that we need to reform it. So why haven't we done anything about it? Speaker 1 (7:19) That's because fixing Social Security isn't just a math problem. It's like hard math with soft skills. Every potential fix is a political third rail. The big sweeping solutions out there place the burden either on people paying into Social Security now, the workers, or on people who are getting their checks, the retirees. Are Speaker 3 (7:43) we more worried about really irritating Social Security beneficiaries with a 22 percent cut or somewhat irritating workers with a payroll tax increase? Speaker 4 (7:55) R. Douglas Arnold is retired from teaching at Princeton. And yes, Doug also collects Social Security. Speaker 3 (8:01) I am well over 70. Thank you. Speaker 4 (8:04) I'm Speaker 3 (8:04) six and a half years into it. Speaker 1 (8:06) All right. Well, congratulations. After Doug retired, he wrote a book called Fixing Social Security. And Doug's go-to idea for fixing Social Security would definitely put the burden on current workers, not retirees. Speaker 3 (8:19) Well, the simplest, most straightforward fix. is to