The Implications of Social Security’s “Missing Trust Fund”

The brief’s key findings are:

• As policymakers consider restoring balance to Social Security, understanding the reason for the shortfall is important.
• Specifically, the program’s “pay-as-you-go” approach, which dates back to the late 1930s, makes it expensive relative to a funded system.
• Paying full benefits to Depression-era workers meant forgoing the opportunity to accumulate more revenue in the trust fund, along with the interest on that revenue.
• To make up for the missing interest, costs are higher than in a funded system.
• Going forward, if revenues are considered as an option for helping to address legacy costs, the income tax is a potential alternative to the payroll tax.