In last night's State of the Union Address, President Bush made Social Security one of his key topics of discussion. In his speech, he mentioned many true statistics about social security. It is true that over the years the number of workers paying into the system compared with the number of retirees collecting benefits is declining. It is true that sometime around the year 2020, if th system is left alone, the Social Security trust fund will be paying out more than it takes in. It is true that some sort of reform will be necessary in order to ensure that the system is solvent in the future.
However, Bush did use some potentially misleading rhetoric during his speech. When discussing the growing Social Security shortfall -- which will begin after the year 2020 -- he said "by the year 2042, the entire system [will] be exhausted and bankrupt." This statement is misleading on many levels. The words "exhausted and bankrupt" do not accurately describe the situation. The Social Security Trustees have predicted a 27 percent benefits cut by the year 2042 if no reforms to the program are passed. The Congressional Budget Office has predicted a 22 percent benefits cut by the year 2052 if no reforms are passed. A cut in benefits of approximately one-quarter is not the same as "exhausted and bankrupt." By that year, our surplus will be exhausted, but not the entire trust fund. Bush used these words in an attempt to make the situation appear more dire than it actually is; in order to garner more support for his plan to overhaul what is, in reality, a financially sound program.
Another interesting comment regarding what would happen if no reforms were passed was when Bush mentioned, "In the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat." While $200 billion sounds like a lot of money, it is nowhere near the shortfall created by Bush's tax cuts -- all of which have been financed by the deficit as opposed to spending cuts. $200 billion is also roughly the amount that our defense operations in Iraq and Afghanistan have cost. If the government is really interested in preserving Social Security - our most successful social insurance and poverty prevention program - there is no doubt they could find other ways to come up with $200 billion, without engaging in a costly overhaul that will also necessitate benefits cuts.
For more on Bush's discussion of Social Security in his State of the Union address, see this article and this article. For a great report on how Bush's plan will phase out Social Security and result in benefits cuts, read this report from the Center for Economic and Policy Research.