Assuming the Trustees’ intermediate assumptions are realized, the deficit of 1.92 percent of payroll indicates that financial adequacy of the program for the next 75 years could be restored if the Social Security payroll tax were immediately and permanently increased from its current level of 12.4 percent (combined employee-employer shares) to 14.32 percent.
Put this in people terms. Assuming we hiked taxes to that level, a young person making $30,000 today would have to pay an extra $288 a year, and his or her employer an extra $288. That’s a bit of a chafe, and many would prefer not to lose that money to taxes (count me as one), but it’s hardly the sort of thing that cripples an entire economy. Indeed, odds are Congress wouldn’t even need to hike taxes by that much. For starters, there’s good reason to think that Social Security’s 75-year outlook is less bleak than the report thinks. Moreover, we could fix the slight imbalance through a combination of tax hikes and progressive benefit cuts for high-earners. Or we could decide not to raise the tax rate but instead levy payroll taxes on income above $90,000. Or we could boost immigration to improve the system’s fiscal health. So in the end, maybe that young person would have to pay an extra $200, or $100, or less, to keep Grandma from eating garbage. Some catastrophe.
Keep all that in mind when the president gets on TV and starts talking about a looming “crisis” that magically requires Congress to privatize the entire system, rocket up the federal debt, slash benefits by up to 40 percent, and leave all retirees at the mercy of the stock market.