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June 12, 2009

Social Security's future

Each year the Social Security trustees report on the future of this program, and that affects virtually every person in the country, either through paying Social Security taxes or receiving benefits. The 2009 report was just released. What did it say?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, it wasn't good. It said Social Security is headed for problems sooner than previously thought. First of all, the report said the system will begin paying out more money than it's taking in starting in the year 2016. Now the system does have reserves it can call on; however, the report said those reserves will be exhausted, and therefore, the system won't be able to make further payments by the year 2037. So those are two very important dates, and they are sooner; they are coming earlier than recent reports suggest. Now there are two caveats to these reports. First of all, it's based on the assumption there are going to be no changes to the program, and Congress may very well decide, well, there are big problems with Social Security, we're going to have to make some changes, like raising the retirement age. Also, a lot of economic assumptions have to be made in order to make these kinds of projections, assumptions about the birth rate, about inflation, about worker productivity and wage growth. The years I cited are based on what are called average assumptions about the economy. There are actually two other projections based on more pessimistic assumptions, which say that the bad years will come sooner for Social Security. And there's another projection based on optimistic assumptions, which actually says that Social Security won't have a problem at all this century. So you have to take these numbers with a grain of salt, yet there are certainly important benchmarks to compare and think about as we do look at potentially revising Social Security."

Posted by Dave at June 12, 2009 08:00 AM