According to a report released by the U.S. Treasury Department, the Old-Age and Survivors trust fund will only be able to pay the scheduled benefits until 2033, at which point tax incomes will only cover 76 percent of the Social Security benefits that need to be sent out. Moreover, Medicare’s hospital insurance fund is expected to be depleted in 2026.
“The finances of both programs have been significantly affected by the pandemic and the recession of 2020,” the Treasury Department said in a statement.
Cuts to Benefits Unlikely
Andrew G. Biggs, a senior fellow at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration (SSA) during the George W. Bush administration, recently wrote in an op-ed that if the benefits were to be cut in any way, “it truly would precipitate a ‘retirement crisis.’”
However, “a sudden, across-the-board Social Security benefit cut is almost impossible to conceive. And I say that as someone who for years has argued that the best way to solve Social Security’s funding shortfall is via benefit cuts, albeit not sudden and across-the-board ones. But—and I can say this with certainty—that’s not what Congress will do,” he added.
Biggs offered up several recent examples, such as when the Social Security Disability Insurance program’s trust fund was projected to run out five years ago.
“Did Congress allow benefits to be cut, or even to enact any reforms to the troubled disability program? No. It instead transferred funds from Social Security’s retirement program to keep benefits flowing. No Disability Insurance beneficiary saw a penny of benefit cuts,” he contended, adding that just this past year, Congress green-lighted an $80 billion-plus bailout of underfunded multiemployer pension plans.
“So if Congress wouldn’t cut benefits for the disabled or for union members, what is the chance Congress will allow large, across-the-board benefit cuts for Americans who paid into Social Security for decades? Not very large, and I’m willing to wager my own retirement security on Congress could keep channeling general tax revenues to Social Security, as it currently does to repay the trust fund’s special Treasury bonds. Or it could raise taxes. Or Congress would simply borrow. But the risk of substantial benefit cuts, especially for low-income retirees who rely on Social Security the most, is remote,” he continued.
For Biggs, Social Security’s financial issues come down to simple math and taxes.
“The trust fund will run out precisely because, for decades, Americans via their elected officials have chosen not to pay the extra taxes needed to keep the system permanently solvent. So it’s not illegitimate for Congress to ask whether additional dollars should go toward Social Security benefits or to other government priorities,” he said.
“Yes, Congress needs to devise a plan to avoid Social Security’s insolvency. But that’s the easy part. What Congress really needs to do is decide how much of our future resources should flow to providing higher Social Security benefits to retirees whose incomes already are at record levels. That’s harder to do,” he concluded.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.