For the social security’s birthday, we are giving it a financing solution

Social Security celebrates its 89th birthday today, and there is much to celebrate. Social Security touches the lives of virtually every American. Nearly 97 percent of the United States’ senior population receives Social Security benefits, which average more than $1,800 a month for retirees. Social Security has become one of the most popular and effective anti-poverty programs in the United States, but it is at a critical juncture. The Social Security Trust Fund is facing a looming financial deficit, and Congress and the White House must take action to avert an across-the-board cut to the benefits that retirees rely on to cover their daily living expenses.

In fact, Americans want Congress and the next administration to take immediate action to close the funding gap. Opinion polls from the National Institute on Retirement Security (NIRS) found that an overwhelming 87 percent of Americans want a funding solution now, rather than waiting another 10 years until the trust fund is expected to be depleted. This demand for immediate action was consistently high, regardless of age, gender, and political party affiliation.

Americans want something to happen now on social security because they need it

Not surprisingly, Americans want action. The same poll found that nearly three-quarters (72%) of Americans say they need to keep Social Security benefits at their current level to have a financially secure retirement. This finding was also consistent across age, gender and income.

Data from the Social Security Administration (SSA) showed how important Social Security benefits are to the American middle class: For 49 percent of married couples ages 65 and older in the third income quintile, Social Security accounted for more than half of total income. For single people ages 65 and older, Social Security is even more important: For 91 percent of single people in the third income quintile, it accounts for more than half of total income.

It is important to emphasize that Social Security is not going bankrupt. The SSA has been putting surplus earnings into a trust fund for decades, and that fund has grown over time because surplus earnings are invested in federal bonds. Even if that trust fund is depleted, the law says the program will continue to pay benefits in line with payroll tax revenues.

If federal politicians fail to push through a financing solution, Americans face massive cuts in social benefits

When the last major reform was implemented, it anticipated demographic changes and life expectancy. So the plan was to build up surpluses to fund the program over the years when many baby boomer retirees would be collecting benefits. That’s why the trust fund was created. This largely worked as planned, with a surplus accumulating. But a little over a decade ago, the SSA began paying out more benefits each year than the agency collected in payroll taxes. The agency was able to do this by pouring surpluses from previous years into the trust fund.

According to the latest report from the Social Security Trustees, the SSA now expects the trust fund to last until 2033. At that point, benefits would either have to be cut to match current revenues or other legislative changes would have to be made.

Potential benefit cuts are estimated at about 20 percent for all current and future beneficiaries. In practice, it is difficult to imagine that these cuts would be allowed. To avoid such large cuts, Congress must act soon to make up the difference between benefits and revenues by adjusting benefits, increasing revenues, or a combination of both.

The American public is well aware of the importance of funding Social Security. An astonishing 87 percent of respondents believe that Social Security should continue to be a priority, no matter how bad budget deficits become. Fifty-five percent of respondents strongly agree with this sentiment. This belief in the priority of Social Security is high regardless of age, gender, income, and party affiliation. 86 percent of Republicans agree that Social Security should continue to be a priority.

While Americans have widely differing views on raising the full retirement age for Social Security benefits, they are more strongly in favor of increasing employee and employer contributions to the system and expanding Social Security benefits. This balancing of priorities perfectly describes the dilemma facing American policymakers in the coming discussions about how to balance the program financially over the long term.

As we celebrate Social Security’s birthday today, we should think carefully about what we want from this important program for the next 89 years. But we must also remember that the sooner Congress acts, the less costly the solutions will ultimately be and the shorter this grave threat will hang over the heads of our retirees.