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Last year, the trustees projected that Social Security would run out of money by 2037 unless Congress acts. Since then, the poor economy has increased pressure on the program's finances, as payroll taxes fell and the number of people applying for early retirement and disability benefits increased.
For the first time since the 1980s, Social Security will pay out more money in benefits this year than it collects in payroll taxes, according to projections by the Congressional Budget Office.
More than 53 million people receive Social Security. Retirement benefits average $1,100 a month, and disabled workers get an average of $1,065. Medicare covers more than 46 million retirees and disabled people.
Social Security is financed by a 6.2 percent payroll tax on wages below $106,800. The tax is paid by workers and matched by employers. Medicare is financed by a mix of general revenues, payroll taxes and premiums paid by beneficiaries.
The Social Security trust funds have built up a $2.5 trillion surplus over the past 25 years. But the federal government has borrowed that money over the years to spend on other programs. The government must now start borrowing money from public debt markets -- adding to annual budget deficits -- to repay Social Security.
President Barack Obama has formed a bipartisan fiscal commission that is working on recommendations to improve government finances, including those for Social Security and Medicare. Seniors' groups are lobbying against benefit cuts, while conservatives say they will oppose tax increases, creating a difficult political environment for compromise.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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