Monday, September 5, 2011

The problem with Social Security in one easy chart---too few "youngs" working for too many "olds"....

With all the political talk surrounding much needed reform of entitlement programs, mainly Social and Medicare, the graph below illustrates the heart of the problem.  These two programs are funded directly by payroll taxes levied on current workers wages (go HERE for a primer on these two taxes). Over the last 80 years, because of demographic changes in our population, there are fewer and fewer wage earners supporting an ever increasing number of retirees and other eligible recipients.

Strip away all the high flautin' political rhetoric on the issue you are left with this simple math---Workers must pay more in payroll taxes and/or we cut benefits to the "olds". 

Another option is we "grow" out of the problem---the economy recovers, we get back to full-employment and payroll tax revenues increase---that helps, but it does not reverse the numbers below.
Source: Carpe Diem
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