As a long time watcher of Social Security I was shocked (yes, shocked) at the recent Congressional Budget Office (CBO) report on America's largest entitlement program. CBO concluded that the long term outlook for SS deteriorated substantially over the last twelve month. (CBO link)
CBO revised its assumptions regarding mortality. This is a huge variables for SS. With people living longer, they will receive more checks; this eats into the solvency of SS over a long-term period.
CBO concluded that one option to 'balance' the solvency of SS required an "Immediately and Permanent" payroll tax increase of 3.4% (Wow!). A year earlier, CBO stated that a payroll tax increase of 1.9% was required to balance SS. The change in the tax increase required is 70% higher than that reported just a year ago!
SS's taxable payroll is equal to 36.3% of GDP. That comes to $5.8 Trillion for 2013. A 3.4% tax increase translates to approximately $200 Bn! A tax increase of this magnitude would absolutely sink the economy. There is no chance in hell that anything like that could (or should) happen. However, there are a variety of other alternatives to tweak SS that would not have the negative consequences of such a big tax increase.