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As French President Emmanuel Macron pushes forward with controversial legislation to raise the retirement age in France to safeguard the country’s pension system, Social Security faces its own long-term problems here in the U.S. Despite the politically contentious nature of Social Security reform, a bipartisan group of senators are trying to get the ball rolling on Capitol Hill on a plan to save it from insolvency. Here are Five Facts about the health of Social Security and what can be done to ensure this critical social safety program is there for future generations.
1. Roughly 40% of elderly Americans rely on Social Security as their primary source of income.
The latest data from the Social Security Administration shows that for 37% of men and 42% of women in retirement, Social Security checks account for at least 50% of their incomes. And for roughly 12% of elderly men and 15% of elderly women, Social Security accounts for more than 90% of their income. With roughly 67 million Americans receiving Social Security checks in 2023, that leaves approximately 9 million elderly Americans who would lose a large share of their primary source of income if benefits had to be reduced.
2. Social Security taxes have been outpaced by payouts since 2010.
Social Security is funded primarily through payroll taxes paid by workers and their employers, with a small portion coming from taxes on Social Security benefits. Since 2010, payments have exceeded revenues as more eligible Americans leave the workforce and enter retirement, cutting into the trust funds that serve as Social Security’s cash reserves. In 2021 alone, the program ran a deficit of $56.3 billion as it served about 65 million beneficiaries.
3. The ratio of workers per retiree is at its lowest point in history.
One way to understand Social Security’s woes is to look at the ratio of workers paying the payroll taxes that fund Social Security versus retirees who receive their benefits. In 1950, there were roughly 16.5 workers effectively paying for every retiree’s Social Security benefit, while in 2010, there were only 2.9 workers. A 2014 study estimated that ratio would fall to 1.9 workers for every retiree by 2100. Longer retirements and a shrinking birthrate are two of the factors contributing to this trend.
4. Social Security’s trust funds are projected to be technically insolvent by 2032.
The increasing costs and decreasing revenues paint a grim picture for Social Security, with the nonpartisan Congressional Budget Office predicting in February that the programs’ trust funds will be depleted within a decade. Once that happens, benefits could be cut by as much as 20% unless Congress acts to shore up the program. Only a year ago, Social Security pinned the insolvency date at 2034 – meaning that the window to keep full benefits flowing is shrinking faster and faster.
5. A majority of Americans want to preserve Social Security for future generations.
Unsurprisingly, Americans greatly cherish Social Security, with a 2020 AARP poll showing 96% of American adults support the program – however, that same poll showed that 57% of Americans weren’t confident in the future of the program.
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For the past week, government officials and banks have been working furiously to contain the fallout of the Silicon Valley Bank crisis, which has some worried about ripple effects that could impact the banking industry and the economy at large. Here are Five Facts about this historic bank failure and its aftermath.
1. Silicon Valley Bank failed after a run on deposits left it short of cash.
The collapse of Silicon Valley Bank was due to a number of factors, including an overinvestment in U.S. Treasury bonds that devalued as interest rates rose, a large number of tech-focused customers whose deposits were over the $250,000 limit insured by the FDIC, and mobile banking technologies that let customers withdraw their money almost instantaneously. These factors set the stage for a textbook run on the bank that Silicon Valley Bank could not manage on its own.
2. The Silicon Valley Bank collapse is the second-largest bank failure in U.S. history.
Measured by the total amount in assets held by the bank, Silicon Valley Bank is the second-largest bank failure in the history of the country, with the bank holding $209 billion in assets, making it the nation’s 16th-largest bank at the time of collapse.
3. Other regional banks have faced trouble in recent days.
Following the collapse of Silicon Valley Bank, New York-based Signature Bank also failed, while a consortium of major banks like JP Morgan Chase have invested $30 billion bailing out the struggling First Republic Bank. Nationwide, there are roughly 10,000 regional banks and credit unions in operation according to POLITICO.
4. Treasury Secretary Janet Yellen assured lawmakers Thursday that the U.S. banking system remains sound.
Secretary Yellen’s comments before the Senate Finance Committee suggest that the Biden administration is confident that their unorthodox plan to allow the Federal Deposit Insurance Corporation to guarantee the deposits of all customers at Silicon Valley Bank and Signature Bank – despite the fact that 94% of deposits in Silicon Valley Bank were not insured by the FDIC – will keep the fallout from spreading further.
5. Some leading financial executives and banking experts warn that more banks could fail.
In his annual letter to shareholders published this week, BlackRock CEO Larry Fink warned that numerous other regional banks could gradually collapse over a period of time, similar to the savings and loan crisis, where 32% of all savings and loan associations in the United States failed between 1986 and 1995. Likewise, former FDIC head William Isaac said he was certain there would be more bank collapses to come: “There’s going to be more. How many more? I don’t know. How big? I don’t know. Seems to me to be a lot like the 1980s.”
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