That means that if payroll taxes were raised a little over 1 percent for employers and a little over 1 percent for employees, the entire problem would be solved. Now, raising payroll taxes isn t the only option for correcting the shortfall there are lots of them. But this does give us an idea of the magnitude of the problem. It s significant, but manageable. Everybody needs to remember that when the trustees say that the Trust Fund will be exhausted, they don t mean Social Security will be exhausted.
Current workers pay for current beneficiaries.
Money comes into the Trust Fund as payroll-tax dollars and immediately goes out as benefits. Historically, Trust Fund reserves have equalled less than a year s worth of benefits merely a cushion in case of economic downturn. In fact, if we considered virtually empty Trust Funds as the sign of Social Security bankruptcy, it would have been near bankruptcy ever since 1940 the year the first benefits were paid. Yet the system has paid benefits, every single month, for 60 years. Their foresight illustrates the flexibility of the system, which has adjusted to shifting demographics and the changing needs of society ever since it began.