How is social security in the US at risk of running out of funding, if every tax payer pays into it?
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Answer: It is NOT at risk of “running out of funding”. It may, at some point in 10-30 years, require that we budget money from the federal budget other than the dedicated payroll tax unless we make changes to that tax.
Social security was designed to be a redistribution from the currently working to the formerly working. However, when originally set up, the ratio of retired person to working persons was much lower. So, 1 retired person had 10-20 working people’s contributions to fund their retirement “pension” payment and this created a surplus that went into the social security trust fund.
That fund has grown over the decades from surplus and interest.
Now (2023), people are living longer (Yay) and having fewer kids and those kids are working fewer social security eligible jobs (ick, that’s not great).
So, at some point, variously forecasted in the 2030s to 2050s, the trust fund will start having to “pay out” because the social security taxes coming in will no longer cover the social security payments paying out. This is the “tipping point”
At some point 10ish years from the tipping point, the trust fund would be depleted and the federal government could either simply fail to send checks to retired persons who are eligible (extremely unlikely, given that it would be both a huge scandal and retired persons vote much more reliably that working and young folks) or they could find an alternative source of money from the wider government budget.
In short, Social security will never “go bankrupt” because social security is not a person or a business. It’s a government program. If America exists, it could choose not to fund social security of the current funding mechanism proves insufficient (as it is currently projected to be sometime in the next 10-30 years) BUT there are very real, reliable, and influential political reasons that no politician would let that happen. So, if America exists and old people exist and we still have voting, social security is here to stay.
If it goes away, it will not due to “bankruptcy”, it will be due to a polical choice not to fund this policy and to either fund something else (discretionary spending is the word) or the give out a tax break to wealthy/younger people.
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