Opinion: Social Security can’t wait long for a fix
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I don’t expect the white papers from the Center for a Responsible Federal Budget to put more spring in my step and a song in my heart, but today’s report about Social Security’s looming fiscal problems was unusually sobering. The CRFB said that recent analyses by the Congressional Budget Office and the Social Security Trustees don’t agree on all the specifics, but they leave little doubt that the Social Security trust funds will soon begin doling out more cash than they collect from payroll taxes. By the CBO’s reckoning, that day will arrive in 2017, wiping out the trust funds by 2043. By the Trustees’ estimates (which are more pessimistic because they assume the Bush tax cuts will remain in effect), the trust funds begin to drain in 2016 and run out of money by 2037. ‘Despite these differences,’ the report says, ‘both reports show with near certainty that the Social Security system will add significantly to projected deficits and require considerable revenue or spending adjustments to remain solvent.’
Ugh. The situation is similar in some ways to the Medicare Trust Fund, which is expected to become insolvent in 2017. The Social Security trust funds have about $2.4 trillion in reserves, which make the shortfall in revenue seem less pressing. But the shortfall will exacerbate the federal budget deficit immediately, so lawmakers won’t be able to avoid the problem for long.
Without a change in policy, the CRFB says, Social Security benefits will have to be cut by an estimated 17 percent as soon as the trust funds empty. ‘Averting this scenario would require the equivalent of a 3 percentage point increase in the payroll tax in 2042 – the equivalent of a little over 1 percent of GDP,’ the report estimates.
While the exact size of the shortfall cannot be precisely predicted, one thing is certain: Social Security cannot continue on its path in the current fiscal context. The system will need to be rebalanced through adjustments to benefits and/or revenues; and the sooner we act the more we can spread out these changes and give workers time to prepare.
The CRFB calls on the Obama administration and Congress to take on Social Security as soon as possible, and give it the same intensity and urgency they’ve given healthcare reform. That may be good policy, but it sounds like a political non-starter. The bruising fight over healthcare reform is likely to drain Washington’s will to fight another Herculean political battle, as well as the public’s willingness to support yet another major policy initiative.
-- Jon Healey