Half-truth: The system faces an $11 trillion shortfall.   MORE... • Is Soc. Sec. going bankrupt? • How big is the shortfall? • Is there really a surplus? • Will seniors' benefits be cut? • Are benefits guaranteed? $11 trillion is the number President Bush often uses to illustrate why he considers the system to be in crisis. It is based on projections from the 2004 Social Security Trustees report, a measure in today's dollars of the projected shortfall over an infinite time horizon. (The actual number in the report was $10.4 trillion.) So what's the problem? A shortfall measured over an infinite time horizon has limited value to policymakers, according to the nonpartisan American Academy of Actuaries. The health of Social Security is typically measured over 75 years. (The estimated shortfall over 75 years is $3.7 trillion.) "Many observers question the reliability or usefulness of calculating Social Security's unfunded obligation over 75 years. Calculations over an infinite period are even less reliable," an Academy report noted. A more digestible way to express long-term shortfalls is as a percentage of taxable payroll. That's the portion of your wages paid into the system. Currently, it's 12.4 percent -- half paid by you and half paid by your employer. Using assumptions made by the Social Security trustees, to bring the system into actuarial balance over the next 75 years, the payroll tax would need to increase today by 1.89 percentage points, to 14.29 percent. Over the infinite time horizon, it would need to increase by 3.5 percentage points, to 15.9 percent. next»

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