The Patient Protection and Affordable Care Act, better known as Obamacare, has been controversial ever since it became law. A recent report from the Congressional Budget Office recently concluded that Obamacare could cause full-time employment to drop by 2 million. Given that Social Security is funded by wage-based taxes, could that drop in wage income lead to Social Security's demise?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the CBO study and the implications on Social Security. Dan notes that because Social Security benefits are progressive in nature, a drop in wage income will cause payroll tax revenue to decline faster than the drop in benefits that workers are entitled to. As a result, it could hasten the end of surpluses in the Social Security Trust Fund. But Dan reminds viewers that Social Security isn't entirely at risk, with the worst-case scenario involving a mandatory reduction of benefits to match actual payroll tax revenue once the surplus is gone.