"Today, the Social Security Trustees released their 2011 report on the financial status of both Social Security and Medicare. The reports make clear that both programs are on unsustainable paths, and reforms will be necessary to make them solvent. This analysis focuses on the financial status of Social Security."
Social Security’s Old Age and Survivors, Disability, and Combined Trust Funds (Percent of Annual Benefits)
"Disability Insurance faces the most immediate threat. Technically, Social Security is two programs – an old-age program, which stakes claim on 10.6 percent of payroll taxes, and a DI program which is funded by the remaining 1.8 percent (for a total of 12.4 percent). When looked at together, there are sufficient revenues and trust fund assets to last through 2036. The DI program, though, is projected to run out of money by 2018.
Over the past few years, the cost of the DI program has increased substantially – from 1.9 percent of payroll in 2005 to 2.4 percent this year, over a 25 percent increase. This is largely a result of the down economy, which has led many more people to enroll in the DI program when in better times they could have found work. From 2007 (823,106 awards) to 2010 (1,052,551 awards), the number of DI awards rose 28 percent, compared to only 3 percent from 2004 (797,226 awards) to 2007. At the same time, the economic recession has depressed revenue, exacerbating yearly DI program deficits.
According to the Trustees, the DI program deficits will equal about $275 billion over the next decade. Over the next 75 years, the program faces a shortfall of 0.1 percent of GDP (0.3 percent of payroll), about 16 percent of program cost. By 2018, when the trust fund runs out of money, it will technically require the equivalent of a 14 percent across the board cut in all DI benefits. The Trustees assume that Congress will not let this happen, and instead will allow borrowing between the Social Security trust funds."
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