Editorial: Congress must tackle Social Security shortfall now, not later 

In 2010, the cost of delivering Social Security benefits to eligible Americans began exceeding the annual amount taken in from payroll taxes. In 11 more years, the well the government has been relying on to make up the difference will run dry. 

About 65 million people received Social Security benefits in 2020. About 175 million people paid into the program. Costs totaled $1.107 trillion, but only $1.042 trillion in non-interest income was collected. The $76 billion in interest earnings balanced the books. But total costs are expected to exceed total income going forward. Reserves will cover the difference only for so long. In its annual report this past August, the Social Security Board of Trustees said it anticipates the Old-Age and Survivors Insurance Trust Fund to be depleted in 2033. At that time, the program would have to reduce payments by an estimated 24 percent to remain solvent. 

The average monthly Social Security benefit as of January 2022 was $1,657. A 24 percent cut would be nearly $398 – a huge blow for many households. 

No sane politician wishing to stay on the job would let that happen. Older Americans are a powerful voting demographic. In 2019, twenty-four percent of registered voters were 65 and older and 28 percent were in the 50-64 age bracket. According to a 2020 AARP survey, 96 percent of those polled said Social Security was “either the most important government program or an important one compared with other government programs.” Two out of five surveyed said Social Security would make up a substantial portion of their retirement income. Whether the respondent was a Democrat, Republican or independent, the takeaway was the same: Don’t mess with Social Security.  

Yet with alarm bells long ringing about the future of the program, Congress has played a shameful game of kick the can. Procrastination hurts us all. “If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations,” according to program trustees. 

A drop in payroll taxes during the pandemic was a blow, but Social Security’s biggest problem commenced with the baby boomers. As they continue to retire, the increase in beneficiaries is outpacing workforce growth. Plus, people are living longer.  

There are a few ways for leaders to attack the issue, namely by adjusting benefits to reduce costs, increasing taxes to bring in more revenue or some combination of the two. Using outside resources to prop up the program passes the problem around; Social Security should be self-supporting. Raising the income level that is subject to Social Security tax or eliminating it altogether has been oft debated. Presently, earnings over $147,000 are not subject to the tax. But Social Security’s wide popularity has rested on its being an earned benefit. Taxing more wages without those earners seeing a correlating benefit in retirement income fundamentally changes the program.  

The tax rate for eligible wages this year is 6.2 percent, both for employers and employees. The self-employed pay the full 12.4 percent on eligible wages.  

A multi-pronged approach, including raising the taxable threshold, adjusting benefits and gradually increasing the minimum age to receive full benefits, seems sensible. That work should start now, not later when the eventual crisis arrives. 

Meanwhile, American workers need better financial literacy commencing in high school. We need to understand the value of savings plans and accept the responsibility for planning our financial futures. 

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