The Social Security and Medicare Boards of Trustees have released their annual report, and the news is not good for those eligible for retirement benefits in a few years.
Thanks to inflation and a worsening economic outlook over the next few years, the Trustees now project that the Old-Age and Survivors Insurance Trust Fund — the fund that pays most of the benefits to retirees — will go bust in 2033 — a year earlier than projected last year. The Hospital Insurance Fund’s finances have improved slightly, pushing the day or reckoning back three years to 2031.
Biden unveiled a plan to strengthen Medicare, which is also on the ropes, last month. But no one takes the plan to raise taxes on the rich seriously especially since the increase in taxes would only put a band-aid on the problem.
The long and short of the Social Security funding problem is simple: the longer we wait to address it, the more difficult and politically painful the solutions become. This has been known since the 1990s when the first stirrings of troubles with the various trust funds became obvious. At that time, it became apparent that the number of workers supporting the system was falling faster than expected.
Various other bandaids over the years have been tried; raising Social Security taxes and raising the retirement age are two of the most notable ones. And it is possible that Biden will propose one or both of those fixes rather than do what is obvious and necessary: putting Social Security on a long-term track to sustainability. This will involve limiting some benefits and possibly tax increases — and not just on the rich.
Since last year’s reports, projected long-term finances of the OASI and the OASDI Trust Funds worsened due to the Trustees revising down the expected levels of gross domestic product (GDP) and labor productivity by about 3 percent over the projection window. The Trustees made this change as they reassessed their expectations for the economy in light of recent developments, including updated data on inflation and U.S. economic output.
Despite the downward revision to economic assumptions, the projected long-term finances of the HI Trust Fund improved since last year’s report. The improvement is mainly due to lower projected health-care spending stemming from updated analysis that uses more recent data.
Neither party in Congress is crazy enough to touch the Social Security solvency problem even though workers in their 50s may not receive full retirement benefits unless something is done. It’s a case of both parties being very polite and offering to let the other one go first in proposing fixes for Social Security and Medicare.
“The Trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually,” acting Social Security Commissioner Kilolo Kijakazi said in a statement accompanying Friday’s report. “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
All that from this Congress? Dream on. However, not all members are cynical dullards who want to bury their heads in the sand until the Social Security Trust funds go bust. There’s a small group in Congress that is looking at the matter with a seriousness that would have been appropriate 20 years ago but is now desperately needed.
There are some signs that it might. Sens. Bill Cassidy (R–La.) and Angus King (I–Maine), along with a small group of colleagues, are holding preliminary discussions about potential policy changes for Social Security. Semafor reported last month that the group is considering ideas like raising the retirement age to 70, changing the formula used to determine an individual’s benefit payments, and raising the cap on the payroll tax, among other things. Even though the group has not presented anything resembling a fleshed-out plan, they’ve already been attacked for allegedly leading a “trojan horse” attempt at cutting benefits.
“America needs to have a conversation” about something is shorthand for it’s an important issue that needs to be discussed and we’ll get right on it after we convict Trump, impeach Biden, or pass that congressional pay raise. The current “America needs to have a conversation” is related to race, and we’re all seeing how that working out.
Time is running out. And the politician who can alert the voters while proposing something that might actually work has my vote for president in 2024.
