Trustees warn of Social Security troubles

(From the ft.com) Government trustees warned of a “concerning decline” in the financial health of Social Security, the US pension and disability program, as they projected that the scheme’s trust fund would be depleted in 2033, three years earlier than expected.

The deterioration in the accounts of Social Security, driven by a combination of a weaker economy and higher energy prices, in 2011 produced the largest actuarial deficit since before 1983, when the program was last overhauled under president Ronald Reagan.

The sobering report will compound concerns about the inability of America’s gridlocked political system to grapple with its biggest fiscal challenges, including the reform of the most costly government programs.

Democrats and Republicans in Congress have been unable to reach any agreement to stabilise the long-term finances of Social Security and Medicare, the health scheme for the elderly, amid election year attacks and fierce divisions on tax and spending policy.

In their annual report released on Monday, government trustees said retirees could expect either a 25 per cent reduction in Social Security payments in 2033 or an increase in payroll taxes if the programme was not reformed. Meanwhile, the disability trust fund will be exhausted in 2016, two years earlier than previously projected, requiring even more urgent action.

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