It won't. Benefits will just be cut 30% if politicians stay asleep at the switch doing nothing until the money runs out. But that won't happen. There will be a slow cut in benefits through slight of hand, and infusion of general tax revenues. The problem with Bush's plan is that it really does not do much about the numbers, except infuse some more risk into the system, with a host of ancillary problems. Bush's proposal is dead. If something passes, it won't look much like Bush's plan.
SS is a pay as you go system. There is no doubt that benefits will be cut, but personal accounts will more than compensate for the loss of benefits and reduce the USG's unfunded liability in the future.
The problems associated with SS will not be solved through "a slow cut in benefits through slight of hand, and infusion of general tax revenues." If you understand the demographics, it cannot be a slow cut in benefits and it will take a massive infusion of general tax revenues (read borrowing) to honor the IOUs in the SS Trust Fund. SS started with over 40 workers per recipient, to 16 in 1950, to 3.3 today, to 2 in 2030. The system as currently structured will not work. The earlier something is done, the less painful the solution.
In 2008, the SS surplus starts declining and in 2018 we will be paying out more in benefits than we are collecting in revenue. We will need to start borrowing to make up the shortfall.
How will Congress replace the lost revenue? Borrowing more money through Treasury Bonds. The additional borrowing will increase the national debt, which means that we will have to pay more to service the debt annually.
Approximately 17 cents out of every dollar of total tax revenue collected is immediately used merely to pay the burgeoning interest on the Federal debt. This is now surpassing the costs for our entire defense establishment, and it is exceeded only by the revenues needed to fund the total Medicare and Medicaid programs.
Currently, 80% of all American wage earners pay more in FICA than in income taxes. 40% of all tax revenue comes from FICA and Medicare. If we don't do something about entitlement programs, the entire budget will be consumed by entitlement programs and debt servicing. Defense is a discretionary expense.