When taxes don’t cover benefits
 “Starting in the year 2017,when they don’t have enough tax income to pay the benefits, the government is going to have to go to private capital markets and borrow money to pay back the trust fund,” explains Dr. Joseph Gribbin, a professor at the University of Maryland, Baltimore County’s Erickson School, and an associate commissioner for the Social Security Administration.

“They won’t be able to borrow from Social Security like they have been, which has kept interest rates down. That’s going to spike interest rates because there won’t be any more annual surplus.”

According to Gribbin, that’s a “double whammy.” As a result, interest rates and housing interest rates will  spike, forcing the economy into a downward spiral and, subsequently, lower levels of economic activity.

As Gribbin explains it, the reason there are excess funds after Social Security benefits are paid is that, when the country was about five months away from going broke in 1983, the government decided to build up a surplus through a trust fund. The surplus has been building ever since and, today, sings to the tune of about $2.1 trillion.

In ten years, this $2.1 trillion will grow to $2.6 trillion, but there will also be fewer Social Security taxes collected than the benefits owed. This means the feds will have to look to the trust fund to make up the difference.

Further taxes likely
But Gribbin raises yet another concern. Where are they going to get the money to pay back the trust fund? The answer:

“They’re going to tax the American people again at a time when the debt is zooming,” predicts Gribbin. “So, when they say it’s going to be exhausted in 2041, that’s not the big problem. The big problem comes within the next ten years, when all of a sudden the government will not have a surplus from Social Security to borrow.”

It’s very likely that current and soon-to-be retirees will receive everything that is coming to them from Social Security, even if it requires the federal government to begin restoring the trust fund. Of greater concern is the continuation of those payments to people who will retire in 2030 and beyond.

Many alternatives to our country’s long-term Social Security problems remain at the center of national debate. Next month, The Erickson Tribune will explore those alternatives and ask for your opinion about the next steps we should take.