Beginning this year, Social Security expenditures will exceed total revenues—and that trend will hold for the rest of the 21st Century, according to an updated report by the Congressional Research Service (CRS).
In its most recent Social Security Primer, updated Sept. 15, 2021, the CRS reports that while the Social Security system maintained a total surplus from 2010 through 2020, the Social Security Board of Trustees project that in 2021 total revenues will exceed total costs. Further, they report, the trustees project that Social Security expenditures will exceed tax revenues each year through the end of the 75-year valuation period for which it now makes projections—through 2095.
The CRS report says that in 2020, the combined Social Security trust funds amounted to $1.118 trillion, expenditures came to $1.107 trillion and accumulated holdings (assets) amounted to about $2.9 trillion.
In 2021, the annual limit on taxable earnings is $142,800. As of July, there were approximately 65.0 million Social Security beneficiaries; 84.5% were retired workers and disabled workers.
Beneficiaries by the numbers:
||% of the Total
|Retired workers and family members
|Disabled workers and family members
|Survivors of deceased workers
The beneficiaries further broke down in this way:
|Category of Beneficiaries
||% of Beneficiary Population
||Average Monthly Benefit
|Family members of retired, disabled, or deceased workers
Status of the Social Security Trust Funds
Social Security maintained a total surplus from 2010 through 2020, the report notes. At the end of 2020, the report says, the trust funds were credited with asset reserves of about $2.9 trillion. And while the trustees project that total revenues will exceed total costs in 2021, the trust funds still will have a positive balance (asset reserves) until 2034.
This, the CRS says, will allow Social Security benefits scheduled under current law to be paid in full and on time until then. In the longer term, it says, the trustees project that the 75-year actuarial deficit for the trust funds will be equal to 3.54 % of taxable payroll. In other words, the trustees project that Social Security expenditures will exceed income by at least 20% over the next 75 years.
Beginning in 2021, the CRS notes, trustees project that the trust fund balance will begin to decline, until the asset reserves are depleted in 2034. The trust fund ratio—which represents trust fund assets at the beginning of a year as a percentage of cost for the year—is projected in 2021 to stand at 253%. However, the trustees project that the trust fund ratio will decline to 85% in 2030 and reach zero at the point of trust fund reserve depletion in 2034.
After that, says the report, the program would continue to operate with incoming Social Security receipts; those receipts are projected to be sufficient to pay 78% of benefits scheduled under current law in 2034, declining to 74% of scheduled benefits in 2095.
Addressing the Problem
Under current law, says the CRS, Social Security does not have authority to borrow from the general fund of the Treasury; therefore, it cannot draw upon general revenues to make up the difference between incoming receipts and benefit payments when the program no longer has asset reserves to draw upon.
Further, notes the CRS report, the Social Security Act does not specify what would happen to the payment of benefits scheduled under current law in the event of Social Security trust fund depletion. Two possible scenarios are: (1) the payment of full monthly benefits on a delayed basis; or (2) the payment of partial (reduced) monthly benefits on time.
Over the years, says the report, the debate over Social Security reform has reflected two fundamentally different approaches to reform:
1. The traditional approach would maintain the current structure of the program by making relatively modest changes, such as an increase in the retirement age or an increase in the taxable wage base. In general, the goal of this approach is to preserve the social insurance nature of the program.
2. The personal savings and investment approach would redesign the 1930s-era program to create a prefunded system in which benefits would be based partially or entirely on personal savings and investments.
More recently, says the CRS, “the Social Security debate has reflected a shift in focus among some lawmakers away from efforts to scale back the program toward proposals that would expand Social Security benefits to address concerns about the adequacy of benefits and, more broadly, retirement income security.”