Why Social Security faces a certain crisis


Social Security is largely on auto-pilot.



By Brenton Smith

In February, polling data revealed that questions surrounding the long-term financial stability of Social Security have pushed the program ahead of joblessness as the top economic concern of the voting public.

While this revelation should have triggered some political response to the economic pressures facing the program, politicians seem content with the peace in our time approach that has governed the program for decades and created trillions of dollars of promises for which the system does not expect to generate cash. These gaps are all but certain to spawn years of complications for the nation concerning the elderly and disabled.

Warnings From Trustees

These warnings do not come from right-wing think tanks. They come from the trustees of the system who are responsible for its safety and soundness. Their figures are confirmed by estimates from the Congressional Budget Office’s (CBO) forecast for the program.

The peace is preserved today by the Social Security Trust Fund, which provides a buffer against times like now when expense exceeds revenue. That cushion is dwindling, though. Even at $2.8 trillion, the trust fund is basically little more than economic parsley when compared to the projected gap between revenue and expense of the program.

brenton-smith75-resize-150x150On balance, these experts believe that the consequences of Social Security’s economic pressures will arrive in the early 2030s. The Social Security Administration (SSA) says that the system has roughly a coin-flip chance to pay scheduled benefits into 2034. The CBO believes that date is far too optimistic, projecting insolvency of the program in 2029.

While 15 years might sound like a long time, it isn’t. Someone turning 68 this year expects on average to be alive in 2034. Less favorable conditions mean that nearly 85 percent of voting aged Americans today can expect to be alive when the combined trust funds supporting Social Security are depleted.

Benefit Reductions at 40 Percent

Once the trust fund is exhausted, SSA estimates benefit reductions will start at 21 percent and grow to 27 percent over time. CBO believes that benefit reductions will exceed 40 percent. These projected reductions are system-wide. The ultimate impact on the individual retiree is unknown because there is no formula by which to allocate the reductions of benefits to each retiree. So the person who retires today has no idea when or how much he or she will be affected by the insolvency of Social Security. Americans under 50 today, nearly 55 percent of voting aged Americans, expect to retire to that uncertainty.

Voters should be asking questions, and politicians should be answering them. Thus far, the answers lack seriousness.

Where Candidates Stand

GOP candidates have all assured those approaching retirement that they will be insulated by reform of a system that cannot assure those who are in retirement today. None of the candidates have offered ideas on the new taxes that will be required to keep that promise.

When Donald Trump talks about a robust economy alleviating the economic pressures of Social Security, he is talking about 40 million new jobs next year in an economy that hasn’t created that many jobs in this century.

On the other hand, those running for Democratic nomination tend to see Social Security as a political pinata that sprinkles ever increasing layers of benefits upon voters — all at the expense of future retirees.

Hillary Clinton clearly tells us what she won’t do but provides no significant detail on what she will do. She says that the system is unfair but does not outline what changes are necessary to address her concerns. While Ms. Clinton assures us that she has repeatedly said that she would make the wealthy pay to extend the Social Security trust fund, the tax plans evaluated by the Tax Policy Center showed that her plan does not provide any adjustments to wages subject to Social Security taxes.

The clearest path for Social Security comes from Bernie Sanders. Unfortunately, his course would result in the opposite of what he is promising. His changes would spend more on current, wealthier seniors and lead to benefit reductions for future middle class workers.

Today Social Security is largely on auto-pilot, which is pushing the system to a crisis with a mathematical certainty. If we do not start talking about how to avoid the crisis, we will be all too soon be discussing how to manage it.

Brenton Smith is the founder of “Fix Social Security Now“ and writes regularly on issues related to Social Security.

This piece originally ran on the BaltimoreSun.Com

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