An office of the Social Security Administration in San Francisco.
Social Security’s latest report on the status of the trust funds it relies on to pay benefits has both good and bad news.
The good news is that the funds have not been hit as hard by the Covid-19 as initially feared, due to the economic recovery that has taken place.
The bad news is that fund exhaustion dates have been pushed back earlier, sparking a chorus of calls for Congress to act quickly to fix the problem.
“If this report doesn’t spark a pretty serious and quick discussion about Capitol Hill among lawmakers about what needs to be done to get Social Security back on a financially sustainable track, it’s hard to imagine what it could,” said Charles. Blahous, who served as a public trustee for Social Security and health care from 2010 to 2015 and is now a senior research strategist at the Mercatus Center at George Mason University.
This year’s annual report forecasts when the combined trust funds that pay pensions, survivors and disability benefits will run out of reserves until 2034, a year ahead of last year’s forecast. At that time, 78% of the benefits would be paid.
The concept is similar to running out of money in a savings account, said Social Security chief actuary Stephen Goss. At that point, the program would only have money to pay benefits based on payroll taxes coming in at that time.
“The purpose of this is simply to tell Congress that we have deficits, that we will deplete our reserves if you don’t act, so act,” Goss said of the trustees’ annual report.
Changes to fix the program could include tax increases, benefit reductions, or a combination of both.
But so far, Republicans and Democrats have not agreed on a way to handle the issue.
One plan on the Democratic side, called the Social Security 2100 Act, was last introduced in 2019 and had 209 co-sponsors. Interestingly, all that support came from the Democrats.
Solutions can’t come soon enough
Rep. John Larson, D-Conn., speaks at an event to introduce legislation called the Social Security 2100 Act. which would increase benefits and strengthen the fund, on Capitol Hill on January 30, 2019.
Mark Wilson | Getty Images News | Getty Images
Rep. John Larson, D-Conn., who proposed that bill and who serves as chairman of the House Ways and Means Subcommittee on Social Security, reiterated his commitment Wednesday to tackle the program.
“I’m working with my colleagues in Congress and President Biden to strengthen Social Security,” Larson said. “We just cannot afford to let politics get in the way of saving this program and securing this trust fund.”
Social Security relies on the Old Age and Survivor Insurance Trust Fund to pay retirement and survivor benefits. That fund is now expected to be exhausted in 2033 – a year earlier – after which 76% of the planned distributions will be paid.
The Disability Insurance Trust Fund, which pays disability benefits, will be able to pay the full benefits until 2057 – eight years earlier than the latest forecast – when 91% of the benefits will be paid.
Combined, these two funds will be able to pay the distributions on schedule until 2034, after which only 78% of the distributions will be paid.
Experts, including Blahous, said solutions can’t come soon enough. One major reason for that is that the 2034 exhaustion date is misleading, he said.
“By the time the trust fund exhaustion date rolls around, the game is long overdue,” Blahous said. “At that point, the size of the deficit is so big and so great that there really isn’t a realistic prospect of closing the deficit.”
If lawmakers were willing to act immediately to fix the system, Blahous said that would result in a 21% payout for everyone, including current beneficiaries. If that were instead limited to future claims starting next year, it would get a 25% discount on the benefit instead.
“The problem is huge,” Blauhous said. “If and when we make a change to the benefit structure, lawmakers will want to introduce it more gradually.”
Reid Ribble, a former Republican congressman for Wisconsin, said there needs to be more pressure on Washington’s leaders to address the issue.
“We elect members of Congress to solve these problems and if they don’t solve them, they should be fired and replaced with people who do,” Ribble said.
One of the reasons politicians shy away from tackling Social Security is fear of seniors, who represent the largest voting bloc in America, Ribble said.
However, that cohort is often willing to accept changes to the program if it means keeping it in the best interests of their children and grandchildren, he said.
Another reason Washington’s leaders are hesitant is because they don’t hear from the vast majority of voters who just want Congress to fix the problem.
Members of that quieter group of Americans should not underestimate the power of sending a polite, thoughtful email or letter or a phone call to both Democratic and Republican leaders: “I’ll be with you if you show the courage to face this problem.” to solve,” he said.
“They need to deal with this matter,” Ribble said. “If they did, members of Congress would be happy to find a miracle the courage it takes to solve the problem.”