Social Security Will Go Broke Faster Than You Think, Wharton School Says

A study from the University of Pennsylvania's Wharton School of Business published in the Penn Wharton Budget Model warns Social Security will be depleted faster than the government claims, reports Financial Advisor . This is because officials have failed to account for the future spike in the national debt, which will reduce the projected growth of the payroll tax base. "Using a model that incorporates future macro-economic forces, Penn Wharton projects that the Social Security trust fund depletes in 2032," the study says. "More importantly, we project much larger future annual cash-flow shortfalls. Relative to the payroll tax base, we project a cash-flow shortfall in 2032 that is 36 percent larger than the Trustees' estimate for that year. By 2048, our projected cash-flow shortfall is 77 percent larger than theirs." The study says Social Security's senior and disability programs will be on "a path that is not sustainable" if predictions are accurate. Increases in the national debt reduce the tax base on which Social Security tax is charged because a rise in debt lowers the capital stock, reducing GDP and work, and making the tax base contract, both for Social Security and general federal revenues. With less investment there is less production and therefore less work and lower salaries to tax. The Committee for a Responsible Federal Budget says the federal debt could nearly triple as a share of GDP if Congress makes the Trump tax cut and spending increase permanent.