Dana Chasin has just commented on the Social Security Board of Trustees annual report, issued on Tuesday. Posted here by permission:
The Trustees' Report highlights the continued fiscal challenges that face the Social Security program (SSA).
Based on current trends, without supplemental taxes or other changes, the SSA would not be able to pay 100 percent of benefits in 16 years:
- Disability Insurance (SSDI) has income sufficient to pay full benefits on program only though 2032
- Old Age and Survivors Insurance (OASI) has income sufficient to fund program only through 2034
- In 2011, the Board projected that Social Security would be unable to provide full benefits only through 2036; they have now adjusted that projection to 2034.
- Social Security is now paying out more in benefits than it receives in total revenue, years earlier than previously projected.
The Report describes the above dates as the years when these programs will be “depleted.” The debate around the status of the OASI and DI programs has centered around the program’s looming “insolvency.”
Social Security, of course, does not go insolvent. Suggesting Social Security is or may become insolvent or bankrupt raises hackles needlessly even as it delights ideologues.
While looming benefit cuts are a serious concern that can and should be avoided, the SSA is not a business. It is a facet of the American government that has committed to guarantee retirement funds to the American worker.
Looming Shortfall; Several Simple Solutions
Experts warn that the longer Congress waits to solve Social Security’s pending shortfall, the more expensive it will be to fix. In 2011, the Social Security Board of Trustees estimated it would take $6.5 trillion to avoid benefit cuts over the next 75 years. This year, they calculate that it would take $13.2 trillion.
Fixing the program that economists call the most “valuable component of our retirement system,” will be relatively straightforward. House Republicans propose cutting benefits and raising the retirement age to buoy the SSA. Thankfully, this solution appears dead on arrival, given the public’s overwhelming support for maintaining or increasing current levels of Social Security benefits.
A particularly promising proposal in the House Ways and Means Committee is H.R. 1902, the Social Security 2100 Act. The bill currently has 172 Democratic cosponsors and would strengthen Social Security benefits by:
- increasing monthly benefits by two percent
- indexing cost of living adjustments to Consumer Price Index- Elderly (CPI-E)
- creating a new special minimum benefit equal to 125% of the poverty line
The bill would keep the Social Security Trust Fund “solvent,” ie paying out full benefits, for the next 75 years according to the SSA Board of Trustees. It would accomplish this by applying the payroll tax to income over $400,000 and gradually increasing the payroll tax rate on both employees and employers, among other measures.
Congress could also consider applying unearned income such as capital gains to Social Security tax. If we were to FICA a tiny portion (1-3 percent) of capital gains, we would solve the Social Security problem easily -- in fact, it would present a significant opportunity to increase benefit levels substantially, possibly by two times.
Midterm Political Challenge and Opportunity
With straightforward solutions available, Congress has no excuse not to address Social Security’s long-term shortfalls. Exacerbated by a brand new $1.5 trillion hole in the budget, this is a year when people will hear threats to Social Security. They may believe it. Democrats, as they have in the past, will provide reassurance. This cycle especially, this reassurance is likely to provide a large benefit for them in the midterms.