The US is likely to see massive protests over the scaling down of the fabled Social Security, which, the authorities warn, will be receiving lesser funds than payouts from 2020 and run out of funds to sustain benefits as of now in another 15 years, reports say. By then the Social Security, according to its trustees, will have enough money to pay only 75 per cent of scheduled benefits.
According to Federal Reserve data, less than one-quarter of people currently nearing retirement will be able to get full Social Security. Half of those nearing retirement will end up in dire straits as they have little or nothing in private retirement plans. The report points out the country's 401(k)s and individual retirement accounts are owned by the wealthiest 25 per cent of the country. This means up to 85 per cent of the total balance is in the hands of the highest-earning one-fourth.
For the bottom half of the income distribution, there's only the Social Security to sustain retirement life, Fed report says. "Social Security is the key to understanding retirement resources for most families," according to the Fed.
Experts predict that in 10 years' time when this issue becomes urgent, people in or near retirement will make up more than half the voting age population. US Census says that by 2030 those over age 65 will account for 26 per cent of the voting age population, and those aged 45 to 59 and nearing retirement another 29 per cent. They are more likely to vote than those in the 20s. According to the US Elections Project, in the last presidential elections, just 43 per cent of those in their 20s bothered to vote. The figure for the over 60 was 71 per cent. Even in 2008, amid Obama-mania among the young, only 48 per cent of those in their 20s voted.
The trustees of the Social Security (Old-Age and Survivors and Disability Insurance, or OASDI) say balancing the Social Security account would need extra taxes of about 1 per cent of GDP (Balancing Medicare would need another 0.4 per cent). These will not be politically trivial sums considering that the taxes currently are only about 16.5 per cent of the GDP and nearly 10 per cent tax hike would become necessary, according to a report in the Barron website.
OASDI trustees project a total liability of over $16.8 trillion next 75 years. With less than $3 trillion in reserves, the programme is 83 per cent underfunded, "worse by far than any other public or private pension plan in the country".
The architect of the Social Security President Franklin D Roosevelt (FDR) promised that the programme would never run out of funds, according to a report. FDR was wrong on all counts: The programme will end, and not because politicians have grown a backbone, but because of simple math. First, there is no "legal right" to any Social Security benefits, thanks to a ruling by the Supreme Court in 1960 in Flemming versus Nestor, according to the New American. It's a government handout, pure and simple, subject to the wiles of the political system and its inevitable destruction by simple intergenerational math.