This is a conversation that comes up in Washinton every few years before it fades away without anything being done about it. The clock is ticking for the Social Security system. It’s still solvent for the moment, but at the current rate of retirement for senior citizens and the shrinking number of young people entering the workforce, the program will begin running short of cash in roughly nine years. (Possibly a bit longer if the economy strengthens.) The math is fairly straightforward and it obviously needs to be fixed, but thus far, as NPR’s Scott Horsley reports, a politically palatable solution has not emerged. Legislators are hesitant to anger voters by increasing taxes again, but they also fear reprisals from senior citizens if they suggest trimming benefits. Someone is going to have to figure out something, however, because the math simply doesn’t add up.
We hear this from time to time, an assertion that Congress has only a few years to fix Social Security. NPR’s Scott Horsley reports.
The annual checkup on Social Security’s finances actually offers some good news. Thanks to workers’ higher productivity and a drop in disabilities, the popular program isn’t burning through cash quite as fast as trustees expected a year ago. But that only delays the inevitable. With tens of millions of baby boomers retiring and starting to draw benefits, and fewer people in the workforce paying taxes for each retiree, Social Security is expected to run short of cash in just over nine years. If that happens, almost 60 million retirees and their families would automatically see their benefits cut by 21%. Nancy Altman, who heads the advocacy group Social Security Works, doesn’t believe lawmakers will let it come to that.
NANCY ALTMAN: If they didn’t act, not only would they all be voted out of office, they couldn’t even remain in Washington. They’d be chased down the streets.
If all of that news wasn’t enough, Medicare is also expected to begin running short of money by 2036. These legacy entitlement programs were considered revolutionary when they were first introduced and it’s inarguable that they have benefitted countless people. Social Security has been around since 1935 when the population of the United States was roughly 127 million and the average life expectancy was 59 years. Since that time, the population has nearly tripled and life expectancy has risen by more than a decade. We are simultaneously facing a fertility crisis and falling birth rates. To borrow a common analogy, we will soon have more people riding in the cart than pulling it.
Joe Biden’s only answer is to tax the wealthy out of existence. Some Republicans have proposed a combination of gradually raising the retirement age starting with younger workers and reducing some benefits, but nobody who wants to keep their seat in Congress wants to put pen to paper and actually push for a proposal like that. I’m clearly painting a fairly dismal picture here, but a contrary argument is being made at the Wall Street Journal where we are assured that the situation isn’t quite that dire.
Right now, two Social Security trust funds—one for the disability-insurance program and another for the much larger old-age program, though they are often combined in forecasts—help make up the difference between program benefits and income. Since 2021, paying Social Security benefits has cost more than the program brings in from payroll taxes and other sources, putting the combined trust funds on track to depletion in 2035.
To some experts, the end of the trust funds wouldn’t require a substantive change to how Social Security is financed. Congress will have a straightforward option to keep delivering full benefits, they say, though the absence of cost savings or new revenue would mean leaving a significant driver of the overall federal deficit unaddressed.
So the situation could potentially be addressed through a combination of accounting tricks and some adjustments to benefit. But any solution along those lines will further drive up the debt and the deficit. The WSJ correctly points us to the other dragon waiting in the wings. Both parties in Congress have allowed the national debt to swell to previously unimaginable levels. Very soon we will be paying more to cover the interest on that debt than we do on our national defense. If we stop servicing that debt, our country’s credit rating will be slashed, and then further discussion of these entitlement programs will be pointless because the money won’t be worth anything. It seems clear that compromises will have to be made in several regards, but how much do you trust that collection of weasels in the swamp to pull something like that off? I can assure you that my confidence isn’t exactly brimming.