For most retirees the average Social Security benefit of $1,100 is their main source of income. But the sluggish economy has made the federal budget deficit, including that of Social Security, balloon more rapidly than expected, according to a new report from the Congressional Budget Office (CBO). In 2010, for the first time since 1983, annual costs for Social Security exceed annual revenues, and that won’t improve very much in coming years. Instead, it will become a persistent problem.
CBO Director Douglas Elmendorf made the report to President Obama’s Fiscal Commission which is developing a plan to shrink the national deficit by 2015 — a target that TSCL believes will be extremely difficult to achieve without deep cuts to Social Security and widespread tax increases on middle-income taxpayers.
The CBO recently evaluated a number of different policy options for changing Social Security, noting three broad approaches that have received considerable attention, including:
Reduce the size of the initial retirement benefit that new Social Security beneficiaries are scheduled to receive;
Raise the age—currently 67 for people born in 1960 or later— at which workers become eligible for full retirement benefits; or
Reduce the annual cost-of-living adjustment (COLA) that beneficiaries receive once they become eligible for benefits.
The CBO also notes that increasing the payroll tax rate or subjecting more earnings to the payroll tax could improve Social Security’s financing.
TSCL is deeply concerned about the prospect of cuts to benefits and COLAs. Seniors can ill afford any reduction in benefits once they have already retired and are depending on them for their daily expenses. We urge you to learn how Congressional candidates stand on changes to Social Security and Medicare. To learn whether your U.S. Representative or Senators support legislation of interest to you, visit the TSCL website at www.seniorsleague.org or call toll free 1-800-333-8725.
Sources: “The Long-Term Budget Outlook,” CBO, June 2010. “CBO: Deficit Would Soar In Coming Decades Despite Obama’s Health Overhaul,” Lori Montgomery, The Washington Post, June 30, 2010.