Commissioner Barnhart Confirms: Future Benefits in Danger

October 2, 2003

In an exclusive interview with the American Legion Magazine, Social Security commissioner Jo Anne B. Barnhart addressed the findings in latest report of the Social Security board of trustees; specifically the Social Security trust funds' exhaustion date and the impact that will hold on future benefits. As head of the largest U.S. government program, Barnhart's statements confirm the veracity of the report's findings and contradict any person or body that claims the system is financially sound. Here is what she had to say about the future of Social Security:

Will Social Security be there for our children and grandchildren?

JBB: We have approximately $1.4 trillion in the Social Security trust fund today because more taxes have been taken in than benefits paid out. By 2018, benefits will exceed income. There will not be enough taxes coming in each month to pay result, we will have to dip into accumulated interest. By 2028 interest will be depleted, and we will have to use trust-fund assets. If no changes are made by 2042, the trust fund will be exhausted. We will then be forced to rely solely on taxes coming in month to month to pay benefits. That will not be enough. People retiring or who are retired in 2042 are projected to receive only 73 percent of their scheduled annual benefits.

Is Social Security tax used for other programs?

JBB: Income that is not needed goes to special interest-bearing bonds issued by the Treasury Department. Social Security funds have always been used for other purposes.

What is causing the steady depletion of assets?

JBB: Social Security is a pay-as-you-go system. The taxes people pay today pay benefits for retirees today. It's a system that has worked well. We have always had more workers to fund the program than retirees receiving benefits. But the ratio is dwindling, and income will eventually be less than what's needed to fund full benefits. In 1960, we had five workers per retiree. Today we have 3.3 workers per retiree. In the not-too-distant future, the ratio will be two-to-one and eventually less than two-to-one. … And as ratios decline, so do the reserves in the trust fund. It's simple mathematics.

What can be done to assure that future retirees get full benefits?

JBB: We could raise Social Security taxes 15 percent now and ensure the sustainability of the system beyond 2077. If we wait until 2042, Social Security taxes would have to be increased 50 percent to accomplish the same results.

Why not eliminate the tax cap on earnings to augment the trust fund?

JBB: That could certainly bring in more taxes, but I'm not sure it would generate enough revenue to mitigate anticipated shortfalls. It also becomes a fairness issue. The replacement rate for people who get Social Security benefits varies depending on income. Low earners have an approximate 52 percent replacement rate, meaning Social Security income typically might be half their annual salary earned while working. Average earners get approximately 40 percent. High earners get less than 25 percent. Looking at it from an equity perspective, high earners are already getting a much lower replacement rate.

How much is an adequate retirement income?

JBB: Professionals believe people need 70 percent to 80 percent of pre-retirement income to enjoy a safe, comfortable and secure retirement.

Should workers be permitted to divert some of their Social Security tax contributions into private investments?

JBB: The important thing to remember is that the longer we wait to address predictable problems the more drastic the solutions become. We should start talking about it now and hopefully take action within the next few years to avoid any abrupt changes and to give people transition time for planning. Because Social Security is a program that reaches into almost every American home and so many people rely on, or are affected by it one way or another, it is absolutely critical we have a bipartisan approach. Politics and Social Security is not a good mix. What we need is a plan where the politicians come together for the good of the program.

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