An office of the Social Security Administration in San Francisco.
Social Security’s latest report on the state of the trust fund it relies on to pay benefits is both good and bad news.
The good news is that funds have not been hit as hard by Covid-19 as initially feared, due to the economic recovery.
The bad news is that the funding shortfall dates too early, which has prompted Congress to act quickly to address the issue.
“If this report doesn’t spark a serious and lively discussion on Capitol Hill among lawmakers, it’s really hard for me to imagine what needs to be done to put Social Security back on a financially sustainable path.” This is what could happen, ”said Charles Blahaus, who served as a public administrator for Social Security and Medicare from 2010 to 2015 and is now a senior research strategist at the Mercatus Center at George Mason University. .
This year’s annual report pushed projections of when mutual funds paying retirement, survivor and disability benefits would deplete their reserves by 2034, a year earlier than the year’s estimate. last. At this point, 78% of the profits would be payable.
The concept is similar to running out of money in a savings account, said Stephen Goss, chief actuary of the Social Security Administration. At this point, the program will only have money to pay for the payroll-based benefits owed at that time.
Goss said of the directors’ annual report: “This is just to tell Congress that we have shortages, if you don’t act we will deplete our reserves.” “
Changes to correct the program could include tax increases, benefit reductions, or a combination of the two.
But so far Republicans and Democrats have disagreed on how to approach the issue.
A plan on the Democratic side, called the Social Security 2100 Act, was last introduced in 2019 and has 209 co-sponsors. Notably, all of this support came from the Democrats.
the fix may not come soon
Representative John Larson, D-Conn., Speaks at an event to introduce a law called the Social Security 2100 Act. Which will increase profits and strengthen the fund on Capitol Hill on January 30, 2019.
Mark Wilson | Getty Images News | Getty Images
Representative John Larson, D-Conn, who proposed this bill and is chair of the House Ways and Means subcommittee on Social Security, reiterated his commitment to addressing the agenda on Wednesday.
“I am working with my colleagues in Congress and President Biden to strengthen Social Security,” Larson said. “We cannot let politics stand in the way of saving this program and securing this trust fund.”
Social security relies on old age and survivors’ insurance trust funds to pay retirement and survivor benefits. This fund is now expected to expire in 2033 – a year earlier – when 76% of scheduled benefits will be payable.
The Disability Insurance Trust Fund, which pays disability benefits, will be able to pay out full benefits by 2057 – eight years before the final launch – when 91% of benefits are due.
Together, these two funds will be able to pay the stipulated benefits until 2034, when only 78% of the benefits will be payable.
Experts, including Blahaus, said the fixes couldn’t come soon enough. One of the main reasons for this is that the reduction date of 2034 is misleading, he said.
“By the time the trust fund shortage date arrives, the game is over,” said Blahaus. “At this point, the size of the deficit is so large and so large that there is no real possibility of closing the deficit.”
If lawmakers were prepared to act immediately to fix the system, it would result in a 21% benefit reduction for everyone, including current beneficiaries, according to Blahaus. Rather, if it were limited to future claims starting the following year, there would instead be a 25% deduction on benefits.
“The problem is huge,” said Blahaus. “If and when we change the benefit structure, lawmakers will want to phase it out. “
Congressman Reed Ribble, a former Republican from Wisconsin, said Washington leaders needed to be put under more pressure to resolve the issue.
“We elect members of Congress to fix these issues and if they don’t fix them they should be fired and replaced with people like this,” Ribble said.
Ribble said one of the reasons politicians are reluctant to address Social Security is fear of the elderly, who represent the largest voting bloc in America.
However, this group is often willing to accept a change in the program if it means preserving it for the sake of their children and grandchildren, he said.
Another reason Washington leaders are hesitant is that they are not listening to the vast majority of voters who want Congress to solve the problem.
Members of this silent group of Americans should not underestimate the power of sending a polite and thoughtful email or letter or calling out Democratic and Republican leaders saying, “If you show the courage to solve this problem, I will be with you. ,” she said.
“They need to get involved on this issue,” Ribble said. “If they did, members of Congress would like a miracle to find the courage they need to solve the problem.”