The implications of Social Security's "missing trust fund"

Abstract

The brief's key findings are: (1) As policymakers consider restoring balance to Social Security, understanding the reason for the shortfall is important. (2) Specifically, the program's "pay-as-you-go" approach, which dates back to the late 1930s, makes it expensive. (3) Paying full benefits to Depression-era workers essentially gave away the trust fund that would have accumulated, along with the interest on those contributions. (4) To make up for the missing interest, costs are higher than in a funded system. (5) Little rationale, however, exists for burdening today's workers for the long-ago decision of allowing Depression-era workers to retire with dignity. (6) These additional costs could be funded more equitably through the income tax, rather than the payroll tax.