President Joe Biden and House Republicans have promised not to touch Social Security in their battle over cutting spending to address the nation’s debt ceiling crisis.
While that vow is intended to indicate support of the popular entitlement program, it could actually lead to financial disaster.
Tens of millions of senior citizens and other recipients could see their benefits slashed by at least 20% within a decade. The latest Congressional Budget Office projection found that Social Security’s retirement trust fund would be exhausted by 2032.
“There’s a sense in which doing nothing does not preserve Social Security but affects the benefits that are not able to be paid out,” CBO Director Phillip Swagel said at a Bipartisan Policy Center event last month.
Social Security has long been on shaky financial ground. As the US population ages, there are fewer workers paying into the program and supporting the ballooning number of beneficiaries, who are also living longer. In all, nearly 66 million retired workers, their dependents and survivors, disabled workers and their dependents receive monthly payments.
Forecasts on when Social Security’s retirement and disability trust funds may be depleted differ by a few years. Social Security’s trustees last year pegged the date at 2035 if Congress doesn’t act.
However, the entitlement program is also one of the third rails of American politics, so elected officials are hesitant to suggest any changes that could lead to benefit cuts.
“Pretending this isn’t a problem, that this isn’t current law, is dishonest,” said Gordon Gray, the director of fiscal policy at the right-leaning American Action Forum. “And it is a choice – a number of policymakers are making this choice. And it is a major financial risk to the retirement benefits of tens of millions of Americans.”
The last time Congress enacted a major overhaul, in 1983, Social Security was only months away from being able to pay full benefits. At that time, Democratic lawmakers who controlled the House agreed with Senate Republicans and GOP President Ronald Reagan to increase payroll taxes and gradually raise the normal retirement age from 65 to 67, among other reforms.
While Biden has promised to strengthen Social Security and defend it from any cuts by Republicans, he has yet to lay out his vision for protecting the program. Ahead of his full budget release this week, the president on Tuesday unveiled a plan to bolster a key Medicare trust fund – which could be depleted as soon as 2028 – by raising taxes on higher-income earners and allowing Medicare to negotiate prices for even more drugs.
There are several ways to put Social Security on more solid financial footing, though each has its opponents on Capitol Hill and in the White House. Lawmakers could raise the early retirement age, currently 62, or increase the normal retirement age again. They could hike the payroll tax rate, now 12.4% split between the employer and worker, or lift the cap on income subject to the levy, currently $160,200. Congress could also change the formula of the annual cost-of-living adjustment so it ramps up more slowly.
However, it’s unlikely anything will be done in the near term, in part because of the current lack of bipartisanship in Washington, said Gary Engelhardt, economics professor at Syracuse University.
“It’s only going to be more expensive, the longer you wait,” he said. “But Americans have a penchant for waiting to do things politically. So I just feel like nothing’s going to happen in the short run.”