The Social Security Challenge

The U.S. Treasury released a report yesterday called Social Security Reform: The Nature of the Problem. Here is the summary:

• Social Security faces a shortfall over the indefinite future of $13.6 trillion in present value terms, an amount equal to 3.5 percent of future taxable payrolls. Looking at the gap over a shorter horizon provides only limited information on the financial status of the program.
• Social Security can be made permanently solvent only by reducing the present value of scheduled benefits and/or increasing the present value of scheduled tax revenues. Other changes to the program might be desirable, but only these changes can restore solvency permanently.
• Delaying changes to Social Security reduces the number of cohorts over which the burden of reform can be spread. Not taking action is thus unfair to future generations. This is a significant cost of delay.
• By itself, faster economic growth will not solve Social Security’s financial imbalance—realistically, there is no way to “grow out of the problem.”