San Francisco Social Security Administration Office Getty Images
Social Security has released its latest report on the state of its trust funds, which it uses to pay benefits. It contains both good and bad information. Due to the economic recovery, the Covid-19 has not had as severe an impact on the trust funds as initially thought. The good news is that they have not been as badly affected as originally feared. Unfortunately, the depletion dates for the funds have increased earlier than expected. This has prompted a chorus of calls to Congress to swiftly address the problem. Charles Blahous, who was a public trustee for Social Security from 2010 to 2015, is now a senior research strategist at Mercatus Center at George Mason University.
The annual report for this year raised the projections of when combined trust funds that pay disability, survivors, and retirement benefits will run out of reserves to 2034. This is one year earlier than was projected last year. 78% of benefits will be payable at that time. Stephen Goss, Chief Actuary at Social Security Administration, stated that the concept is similar to running out money in a savings account. The program would then only have the money to pay benefits based upon the payroll taxes that were received at the time. The annual trustees report stated that the purpose of this was to inform Congress of our shortfalls and that we will deplete all of our reserves if we don't take action. The program could be fixed by tax increases or benefit cuts, or both. Republicans and Democrats are still not able to agree on how to tackle the problem. The Social Security 2100 Act (Democratic plan) was introduced in 2019, and received 209 cosponsors. Not surprisingly, all that support came from Democrats.
It's impossible to get fixes fast enough
John Larson (D-Conn.) speaks at an event for legislation called the Social Security 2100 Act. On Jan. 30, 2019, on Capitol Hill, John Larson (D-Conn) spoke at an event to introduce legislation called the Social Security 2100 Act. Getty Images News
Rep. John Larson (D-Conn.), who introduced the bill and is the chair of the House Ways and Means Subcommittee on Social Security reiterated Wednesday his commitment to address the program. Larson stated that he was working with President Biden and his colleagues in Congress to strengthen Social Security. We cannot afford to allow politics to get in the way. Social Security depends on the Old-Age Survivors Insurance trust funds to pay retirement and survivors benefits. The trust fund will likely be exhausted in 2033, one year earlier than the last projection. At that point 76% of scheduled benefits would be payable. The Disability Insurance Trust Fund will pay disability benefits and will be able, eight years earlier than last projected, to cover full benefits up until 2057. 91% of benefits will still be payable. These two funds together will be able pay benefits as planned until 2034 when 78% will be payable. Blahous and other experts said that there are no quick fixes. Blahous stated that one reason is because the 2034 date of depletion is misleading.
Blahous stated that "By the trust fund depletion deadline rolls around, it is too late." "At that point the amount of the shortfall will be so great and so huge that it is impossible to close the gap." Blahous says that if lawmakers were to act quickly to fix the system, it would result in a 21% reduction in benefit for all beneficiaries. Instead, the benefit would be cut 25% if it were restricted to future claims beginning next year. Blauhous stated that the problem was "impossible". "If we make any changes to the benefit structure, lawmakers may want to do so gradually." Former Republican Wisconsin congressman Reid Ribble said Washington leaders should be put under more pressure to address the issue. Ribble stated that Congress members are elected to solve these problems. If they fail to do so, they should be fired and replaced by people who will.
