Rick Delaney, Chairman of the Board, TSCL
Could Social Security Solvency Issues Be Even Worse Than Estimated?
Recently we received a comment from Steve F. of California, who noted that, by his understanding, if Congress takes no action, Social Security benefits would have to be cut 30% by 2030. Steve asked what projections are available that estimate how fast Social Security will grow by the year 2030, that would lead to cuts of 30%.
This is a good question. Our government experts often differ on both the projected insolvency dates and the amount of reductions that would be required to fix solvency issues. It’s not at all uncommon for estimates of insolvency dates to change from year to year. But no matter what the date, without changes to strengthen Social Security’s financing, at some point benefits would need to be reduced in order to match Social Security revenues coming in. In order to bring Social Security into balance, there are two means that Congress has available — cut benefits or increase revenues.
The two sources of estimates on Social Security’s financing and solvency that Members of Congress frequently turn to are the annual Social Security Trustees report, and the non-partisan Congressional Budget Office (CBO). Currently the Social Security Trustees estimate that the combined Social Security Trust Fund, retirement, survivors, and disability would become depleted in 2035. To resolve the deficit by using only benefit cuts, they estimate that scheduled benefits would have to be reduced immediately by 17% for all current and future beneficiaries, or 20% if the cuts are applied to just future beneficiaries. If Congress were to put off action, the Trustees estimate that changes that begin in 2035 would require a reduction of 23 percent in all benefits starting that year.
The CBO’s June 2019 Long Term Budget Outlook differs from Social Security Trustee estimates, saying that Social Security benefits would need to be reduced beginning two years sooner, in 2033. The CBO estimates the total reduction would amount to 24 percent in 2033 and that reductions would grow even deeper to 29% by 2049 if Congress takes no legislative action.
TSCL is working for enactment of legislation that would address Social Security’s insolvency without cutting benefits. According to our surveys, the approach is strongly supported by adults at or near retirement age. We support legislation that would lift the taxable wage amount subject to Social Security taxes, so that high earning workers pay their fair share into Social Security. Currently the highest paid employees pay nothing on earnings over $132,900 — that includes even CEOs earning millions per year. This change, in addition to very gradually increasing the Social Security payroll tax rate, would provide 75 years of solvency to the program. There would be enough income to pay a more fair and adequate COLA by using the Consumer Price Index for the Elderly, while providing a modest boost in benefits for all current and future retirees.
To dive deeper into this topic and see the estimates frequently used by Members of Congress:
- 2019 Social Security Trustees report: https://www.ssa.gov/OACT/TR/2019/
- June 2019 CBO Long Term Budget Outlook: https://www.cbo.gov/publication/55331