AMERICA'S SOCIAL Security trust fund for the country's elderly citizens is now more than old enough to be drawing a pension itself. When the programme launched in 1940, its future must have seemed assured. Lots of money went in and little came out: for each retired person drawing benefits, more than 150 workers were contributing to the fund, which invested in Treasury securities.
Today, after years of demographic transformation—lower birth rates bringing fewer workers to the labour force, and longer lifespans for the fortunate recipients—the ratio of workers to recipients is less than three to one. In 2017 the reserves held in the trust fund peaked at $2.8trn. Since then, the fund's size has dropped by $400bn, with more money leaving it in payments to retirees than has entered it in the form of contributions.
Outflows are accelerating, and some time around the end of the next presidential term, in late 2032 or early 2033, the fund will run dry. Washington has a little more than six years to find a remedy, which means that senators elected in November may still be serving their term when the fund runs out.
If nothing is done, the immediate consequences for pensioners will be dire. Payments will drop by around 23%, and will slide further in the following decades. The gap between the fund's revenue and payments last year is estimated to have been around $209bn, about 0.7% of GDP, a gap which would have to be covered by borrowing.
