WASHINGTON, 14 August 2024 /PRNewswire/ — As the Concord Coalition marks the 89th anniversary of Social Security today, we have an opportunity to review the program’s achievements while also taking a critical look at its future – including the need to put the federal government’s largest program on a sustainable path.
Under current policies, deficits are expected to grow
“Politicians from both major parties are quick to promise they won’t touch Social Security. If they really mean that, they are condemning the program to an uncertain future of sudden and significant benefit cuts in about 10 years, when the combined Old-Age and Survivors Trust Fund (OASI) and Disability Trust Fund (DI) are expected to be depleted. Rejecting the Do Nothing Plan and passing the necessary reforms to put the program on a sustainable path for the next 89 years or more is the best birthday present we can give Social Security,” said the executive director of the Concord Coalition. Bob Bixby.
Social security provides important protection for pensioners and disabled people as well as their families and survivors. But the program, whose expenditure 1.4 trillion US dollars is facing major challenges. The system has been running annual cash deficits since 2010. At the same time, the growing gap between benefit payments and earmarked revenues will contribute to future federal budget deficits. Here are some basic facts:
- Social Security provides retirement benefits to more than 90 percent of older Americans. Nearly 40 percent of seniors receive more than half of their income from Social Security.
- But Americans are living longer and having fewer children. That means there will be fewer workers to support each beneficiary in the future. As a result of this demographic shift, Social Security will no longer be able to pay benefits in full and on time.
- The Social Security program has two trust funds, Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Social Security trustees have projected that the total balance of the trust funds will be exhausted in 2035 and beneficiaries will face a flat cut of about 17 percent, with cuts becoming even larger after that.
- The trust fund balance is merely the legal basis for the payment of benefits. From a cash flow perspective, the level of earmarked revenue relative to the cost of benefits is important. From this perspective, the annual deficit is expected to increase from 0.6 percent of GDP in 2024 to 1.3 percent of GDP in 2054. This corresponds to 366 billion US dollars in today’s dollars.
- Congress and the President have acted in a bipartisan manner to close the Social Security funding gap before, most recently in 1983. They must undertake such an effort again. The sooner they do so, the more time the population will have to prepare for the changes needed to safeguard their future retirement benefits.
“Many analysts with different perspectives have put forward a number of well-considered proposals. It is a frightening lack of political will, as opposed to substantive options, that puts the future of Social Security at risk,” Bixby said.
As the 2024 Social Security Trustees’ Report notes, “lawmakers have many options for changes that would reduce or eliminate long-term funding shortfalls. Taking action sooner rather than later will allow a broader range of solutions to be considered and will allow more time to phase in changes, giving the public ample time to prepare.”
“If lawmakers heed the trustees’ advice, we can celebrate Social Security’s 90th birthday next year with a sustainable future. If not, we are one year closer to the abyss,” Bixby added.
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