It’s often said that Social Security is the third rail of politics. A politician who tries to change anything puts her career at risk. At the same time Social Security is a good political football when one party claims to want to increase benefits and the other is portrayed as anti-Social Security. But regardless of which end of the spectrum they are on, politicians have difficulty telling Americans the full story and the truth.
Ignore the rhetoric and focus on the facts. Following are quotes from the latest Social Security Trustee report. This is what it would take to keep the program solvent for 75-years. (before any negative financial impact from the pandemic). There is no surplus. The payroll tax revenue is insufficient to pay current benefits. The trust fund is gradually being depleted.
It is irresponsible to talk about increasing benefits before assuring the program is on a sound, sustainable footing.
To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period: (1) revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.14 percentage points to 15.54 percent, (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 19 percent applied to all current and future beneficiaries, or about 23 percent if the reductions were applied only to those who become initially eligible for benefits in 2020 or later; or (3) some combination of these approaches would have to be adopted.2020 Trustee Report
If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2035. For example, maintaining 75-year solvency with changes that begin in 2035 would require: (1) an increase in revenue by an amount equivalent to a permanent 4.13 percentage point payroll tax rate increase to 16.53 percent start- ing in 2035, (2) a reduction in scheduled benefits by an amount equivalent to a permanent 25 percent reduction in all benefits starting in 2035, or (3) some combination of these approaches.2020 Trustee Report
Americans must also decide if they want to maintain the original principles funding Social Security – “If I have anything to say about it, it will always be contributed, both on the part of the employer and the employee, on a sound actuarial basis. It means no money out of the Treasury.” FDR