No, the Social Security system is not collapsing, as much as the powers that be would like you to go into a full-blown panic.
Former NYTimes tax reporter David Cay Johnston points out in the comments:
What the story lacked was pointing out if the Congress fails to provide full benefits to those who have paid for them in advance because of the excess FICA tax it would be a form of default on US government debt.
THAT is the issue that needs a great deal of attention: reducing benefits paid for in advance is a form of default.
At its peak the excess tax equaled 4 percent of wages subject to FICA. That excess tax took away half of the savings capacity of the vast majority of Americans.
Factor in the time value of money and the effect of Reagan’s and Greenspan’s excess FICA tax was enormous and helps explain why so many Americans are mired in debt today. Fewer than half of taxpayers have ANY cash savings, while more than half did before Reagan took office.
Because of Reaganomics, Social Security was converted from a pay-as-you go system into a subtle way to subtle way to overtax wages and thus finance tax cuts for the rich. The integrated federal budget (SS used to be accounted for separately) made this sleight-of-tax possible.
Without overtaxing workers Reagan would not have been able to persuade Congress to give massive tax relief to the few who paid the 70 percent (and later 50 percent) marginal rates.
What the NYT story did not point out was that the pay-in-advance scheme was premised on Mr. Reagan’s promise that he would balance the federal budget within three years of taking office and use the surplus to pay down the existing federal debt (about $2.5 trillion in today’s dollars).
But take it from someone with four decades of experience, it is very hard to introduce into an article history even from as recently as 1983 when the second most valued word in newsrooms is “yesterday,” exceeded only by “early this morning.”