Warnings that Social Security’s long-term solvency is questionable are not new. But how about a little good news? A recent analysis suggests that maybe all is not lost.
The glass is half full, argue Kathleen Romig, Director of Social Security and Disability Policy at the Center on Budget and Policy Priorities and CBPP Research Associate Luis Nunez. They suggest in the CBPP blog entry “Social Security Is Not Bankrupt” that the challenges the system faces do not spell doom for it nor those whom it benefits.
Social Security faces short-term, as well as long-range, problems, Romig and Nunez acknowledge. They cite the 2022 OASDI Trustees report that after 2035, it is possible that the system may be able to pay 75% of the benefits it would be supposed to and would face “a significant, though manageable long-term funding shortfall.”
Romig and Nunez clarify that 2035 is an estimate, and that the trustees say that there is an 80% probability that the Social Security reserves will be depleted “sometime” between 2032 and 2039. They add that the Congressional Budget Office projects that the reserves will be gone by 2033.
Glass Half Full
Romig and Nunez consider it unlikely that policymakers will not do something to bolster Social Security. But, they say, even if they don’t, for at least a decade the system can pay all the benefits it is supposed to, and still would be able to provide at least 75% of that after that decade. Even if nothing else is done, Romig and Nunez say, the Social Security system could pay 80% of the benefits it is supposed to — and that according to the trustees still will be able to pay 74% of what it is supposed to in 2096.
Romig and Nunez posit that there is “no imminent crisis” for Social Security, and that there is time for government officials to “carefully” design a way to minimize a reduction in benefits.
In the meantime, Romig and Nunez point out, employees are still paying into the Social Security system through payroll taxes — which is funding benefits that the Social Security system is paying now. In 2022, they add, the system collected more than $1 trillion and paid approximately that amount as well.
The Bottom Line
“Don’t be fooled” by “alarmist headlines,” caution Romig and Nunez, adding that warnings that Social Security is going to become bankrupt are “highly misleading” and reveal “misunderstanding, or deliberate misrepresentation” of the matter.
What is certain, say Romig and Nunez, is that Social Security is one of the nation’s “most successful, effective, and popular” programs. They add that it “provides a foundation of income” workers can build on for their retirement, as well as “valuable social insurance protection” for those who become disabled and for dependents.
Romig and Nunez observe that absent Social Security, poverty in the United States would increase by almost 22 million more people. They assert that Social Security is the nation’s most effective program in reducing poverty.