Social Security is Going Bankrupt
There are no longer any convenient ways of avoiding the issue. Social Security is going bankrupt. In order to ensure that it doesn’t take the rest of the country down with the ship, Congress is going to have to grit its teeth, swallow hard, and grab a firm hold of the proverbial third rail of American politics. It is time.
According to data released from the Social Security administration, the number of beneficiaries of the program has never been higher. In November, that number reached almost 62 million Americans. With an aging population, that number is only expected to rise in the coming years, putting an extra burden on the system.
The program comprises over one-third of all mandatory government spending, and about 23 percent of the total federal budget. This is compared to the early years of Social Security, where it didn’t eclipse even 1 percent of the budget until its seventh year. It was not designed to handle this type of volume, and it will soon break under the pressure.
According to this year’s report from the Social Security Board of Trustees, it will be paying out more in benefits than it takes in in revenue as soon as the year 2022. This is because of the aforementioned problem of an aging population, as well as baby boomers flooding the retirement pool, and higher life expectancies. The landscape has changed, but Congress’ approach has not.
If nothing changes, the Board will likely be forced to make a 23 percent cut to retiree benefits across the entire program just to make it sustainable. This is why Congress must act.
Congress has several options at their disposal to address this pressing issue. It could make indirect cuts. These are measures that will cut the costs of Social Security itself without actually taking any money out of it. One of the most popular options that has been discussed would be to raise the retirement age. While the retirement age has been increased gradually to 67, it has not kept up with the increasing amount of senior citizens and the rising life expectancy. Raising the age at which one can receive full Social Security benefits would help cut costs.
Rep. Sam Johnson (R-Texas) is one of the few members of Congress who is currently trying to address the issue. He introduced the Social Security Reform Act at the end of the 114th Congress, and is still working to fix the system. As introduced in 2016, the bill would increase payments to low-income Americans while reducing them for high-income Americans. It would increase the retirement age over time to 69 from 67 for those born after 1960. Those who are able to work until 72 would collect larger benefits.
Another potential solution would be to switch to a chained Consumer Price Index (CPI) for calculating Social Security benefits. The Tax Cuts and Jobs Act already contains a provision for switching to this measure in 2024 for various taxes. They could take the same approach for Social Security. This would adjust how inflation and cost of living adjustments are calculated, and would slow the rate at which benefits increase year to year. Given the fact that Congress has already embraced this approach for the tax code, there is no reason it should not also be on the table when it comes to fixing our broken entitlement system. The Johnson bill makes this adjustment for single filers earning less than $85,000 per year, and joint filers earning less than $175,000.
Another road that is never a bad option is to make direct cuts to the program. House Speaker, Paul Ryan (R-Wis.) has long advocated for reforming entitlements and suggested recently that it should be at the top of the agenda come 2018. In the executive branch, the director of the Office of Management and Budget (OMB), Mick Mulvaney proposed the Balancing Our Obligations for the Long-Term (BOLT) Act in 2011, when he was a Congressman from South Carolina, that would have opened the door to Social Security cuts. Ryan, prior to becoming Speaker, praised that bill as “exactly the kind of example Washington needs more of.” Now is the time for our leaders to put their words into action.
The federal government’s history of waste and fiscal irresponsibility is well-documented. One of the largest poster childs for those trends is on the verge of bankrupting the country. On the heels of landmark tax reform, Congress should use that momentum to fix a system that has been out of control for far too long. If they don’t, taxpayers everywhere will pay the price, and they run the risk of undoing all the good that was just accomplished.