Has there ever been a year in which headlines aren’t trumpeting “Social Security running out of money?”
While’s it’s true that Social Security will hit a gap in its trust fund balance in 2035, it doesn’t mean the program will shut down. Despite the epic leadership meltdown in the House GOP caucus, Congress can remedy Social Security’s fiscal woes any time.
The main reason why Social Security will survive and pay benefits is that it’s serving an enormous and growing number of Americans who have paid into it. According to the most recent Social Security trustees report:
“At the end of 2022, the OASDI (retirement and disability) program was providing benefit payments to about 66 million people: 51 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers. During the year, an estimated 181 million people had earnings covered by Social Security and paid payroll taxes on those earnings. The total cost of the program in 2022 was $1.24 trillion. Total income was $1.2 trillion.”
What’s the core truth about Social Security? Here are three facts you need to know:
* Benefits Will Not Stop in 2035. “In fact, if Congress doesn’t address the looming shortfall – and there’s still time for that – the payroll taxes that fund benefits will keep flowing into the program,” notes Kim Blanton, writing for the Center for Retirement Research at Boston College (CRRC). “But the reserve is shrinking because it is being used to cover part of the benefits being paid to the growing ranks of retiring boomers. Once the reserve depletes, benefits will not be eliminated, though they will have to be reduced if Congress doesn’t act.”
* The Trust Fund is an Investment Account, Not a Payroll Account. This is an important distinction. Benefits don’t have to be reduced if Congress finances the trust fund to cover future retirees — or boosts its rate of return. “The funds were created to hold and invest surplus tax revenue not used to pay out benefits, but in recent years, Social Security has started to use this money to fulfill benefits obligations,” a study from the National Bureau of Economic Research found. Again, this is something Congress can fix.
* Perception is Not Reality. By focusing on the trust fund balance, Americans get a skewed picture of Social Security. “The finances are complex,” Blanton adds, “and the average person has a tough time translating what they hear in the dire media reports about trust fund depletion into what that means for benefits. Sensational headlines about the program’s future “insolvency” or “bankruptcy” don’t help.”
What’s the bottom line in this muddle? There are several plans to fully fund Social Security. Congress needs to review and vote on them.
“Congressional Democrats have proposed several plans that expand benefits,” notes Nancy Altman, president of Social Security Works, a non-profit advocacy group.
“These proposals are bipartisan in the way that matters — they have strong support from Democratic, Republican, and independent voters. In contrast, 88 percent of voters oppose cutting benefits. While some political elites still cling to the idea of a so-called “balanced” package that includes benefit cuts, such a plan will not succeed because it is toxically unpopular among the American people.”
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