- Quick Facts
Editor’s Note: If you want links to core data on Social Security finance, this post by UnionWatch contributor Mike Shedlock is a good place to start. Shedlock correctly notes that during the most recent 12 months the Social Security program ran a deficit for the first time in history. The 2013 resumption of full 6.25% employee payroll withholding for Social Security will defer the occasion of another deficit for at least several more years. But if you want to fix the Social Security program, the solution is simple: Put every public sector worker onto Social Security, and merge the assets of the Social Security Fund with those currently held by public sector pension funds. And let them all purchase risk-free Treasury Bills to hedge the funds against inflation and finance government deficits. Why not? Shouldn’t every worker in the United States earn their taxpayer funded retirement security according to a common formula?
* * *
Inquiring minds are digging into social security trends including the numbers of beneficiaries, average costs, total costs, number of workers, and the ratio of workers to beneficiaries.
First, let’s take a look at the CNS News report Social Security Ran $47.8 Billion Deficit in Fiscal Year 2012.
The Social Security program ran a $47.8 billion deficit in fiscal 2012 as the program brought in $725.429 billion in cash and paid $773.247 for benefits and overhead expenses, according to official data published by Social Security Administration.
The Social Security Administration also released new data revealing that the number of workers collecting disability benefits hit a record 8,827,795 in December–up from 8,805,353 in November.
With that backdrop, let’s look at the actual data to see the underlying trends.
- Social Security data from Social Security Online.
- Employment data from St. Louis Fed Total Nonfarm Employees.
- OASI is the retirement fund (What people normally think of as Social Security)
- DI is the Social Security Disability Fund
Social Security Beneficiaries December 2012
|OASI Trust Fund|
|Retired Workers & Dependents||Retired Worker||36,719,288|
|DI Trust Fund|
|Total OSASI + DI||56,758,158|
Social Security Beneficiaries, Costs, Employment
|Year||Beneficiaries||Average Monthly Benefit||Total Annual Cost||Employment||E/B Ratio|
Notes for Above Table
Employment and beneficiary numbers are in thousands.
I computed the total annual cost as monthly benefit * 12 * number of beneficiaries. That method will tend to overstate annual costs slightly vs. totaling every month individually. Thus, the total cost may vary slightly from other published figures.
Average Monthly Social Security Benefit
Total Annual Cost of Social Security 1967-Present
Social Security Beneficiaries vs. Total Non-Farm Employment
Ratio of Workers to Social Security Beneficiaries
Social Security Benefits Analysis
- The ratio of workers to beneficiaries peaked in 1999 at 2.927 to 1.
- The ratio of workers to beneficiaries was 2.361 to 1 at the end of 2012.
- The ratio of workers to beneficiaries is falling fast and will continue to fall fast for a decade as the baby boomer population ages.
- The average payout and the number of payouts are both rising fast
- Total Social Security payouts (a multiplication of two rising numbers) are on an unsustainable exponential growth path.
The system is currently running a deficit. Trends say that deficit is going to worsen with each passing year unless benefits are cut and/or taxes are hiked.
About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.
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