Is Social Security broke?
No, but things aren't good. Here's what I said in a footnote in Volume 2;
Ignore those who say Social Security is a Ponzi scheme, that the government doesn’t have your money set aside, etc. They don’t understand that it has always been the case that current workers are paying the benefits of current retirees and have done so for the past 90 years. It is a cash flow problem driven by the demographics of the country’s population—which happens to be getting older now with not enough younger workers paying into the program. It is not a set-aside fund that politicians steal from. By law, Social Security cannot contribute to the federal deficit, because it only pays benefits from its trust fund. In past years, when the trust fund had a surplus, it loaned that surplus to the U.S. Treasury, and as it is being paid back, it pushes up the deficit, leading some to conclude that Social Security itself contributes to the deficit, but that’s not true. Since 2010, Social Security is paying more in benefits than the payroll taxes coming in, thus cashing the remaining bonds in the trust fund. The Treasury must come up with the money to pay back those bonds, issuing new bonds which drives up the deficit. In the future, the reduction in benefits described is simply using up all of the trust fund and not enough current workers FICA taxes paying the benefits of a larger, older population.
The misunderstanding some have of how Social Security is funded leads to all sorts of theories, whether it is or isn't already broke. The confusion stems from the investment of Social Security trust funds in Treasury bonds, which must be repaid by a Treasury that lacks sufficient funds to pay back those bonds beyond new debt. We're getting to a point about 7 years from now, where the trust fund is empty, thus current benefits can only be paid by current payroll taxes, resulting in an approximately 23% cut in everyone's benefits if no action is taken by then.
The real worry I have is that different tweaks that are suggested, such as raising the full retirement age to 70 or removing the cap on taxed earnings, are small band-aids that don't address how the program can work as designed for future retirees. Does congress fix it enough to extend the date 10 years, or make sure it's fixed for 30 years. It appears at this late date to be very difficult to fix without more than some tweaks. There are not enough younger workers, and too many people are living too long. By the way, this wasn't a new or unexpected problem. Other countries with older populations have and will face the same dilemma.
We as a country need to decide how much we value the program and thus how much we're willing to pay for it for future generations. If you follow the original premise of the program, it should not provide all of one's retirement, only the portion of the money one needs to live above the poverty line. If that's the case, then we - young workers and current retirees - are going to have to sacrifice to save the program. That probably means a combination of many fixes: increased taxes, higher retirement age, and less benefits for the well-off. Plus a much higher limit on earnings and lower Cost of Living Adjustments as one gets older. Obviously, the government is not in any financial shape to borrow more money, so the fix has to come from all of us: workers and retirees.