Social Security was projected to be in the red 6 years from now, yet it’s happening this year. Due to the current economic downturn and waves of individuals retiring earlier than expected because of unemployment, both the CBO and the Social Security Administration were taken by surprise.

But lets get one thing straight, you won’t notice. This above all else worries me. Because of the trust fund, the system will be able to pay all its checks on time. And since people will be receiving their checks, thoughts of increasing taxes, reducing benefits, or modifying the system in any way will continue to be met with opposition.

You won’t notice, but that doesn’t mean it doesn’t matter. For the first time Social Security will start to add to the deficit rather than subtracting from it. As the SSA states in their 2009 report, “Projected long run program costs are not sustainable under current program parameters” and after 2016 taxes will only be able to support 76% of scheduled benefits. In 2037 the combined OASDI Trust Fund is projected to be exhausted.  This is a big deal.

Talking with people, it seems some are confused about the trust fund, assuming it is similar to their 401(k) or savings account. It isn’t a pile of money in a bank vault. It’s actually a stack of IOUs from Uncle Sam. But don’t be too worried, we know how to fix it! The reform options are relatively well understood and have been for decades. The choices, however, are difficult and politically charged. Some combination of tax increases and benefit cuts will have to be put in place and the longer we wait the more painful both will be.

Dare I bring up Medicare? As the SSA says, “Its cost growth can be contained without sacrificing quality of care only if health care cost growth more generally is contained.” The problems for Medicare are coming sooner and will be more severe than those approaching Social Security.  Obama has said that fixing Social Security is on his agenda for next year. While there is much debate over the health care bill, I believe that if he can actually reform health care in America, Social Security will be a walk in the park and we may have a bright future ahead.