CBO Releases Social Security Projections
CBO's latest Social Security projections bring no surprises to anyone familiar with the state of the program's finances. CBO projects the program to face a shortfall in the 2030s, with permanent cash flow deficits.
CBO is predicting that the Social Security Trust Fund will be exhausted in 2038 (two years later than the Social Security Administration projects), at which time beneficiaries would face a 19 percent benefit cut (slightly smaller than the cut SSA projects). The 75-year actuarial deficit is pegged at 1.58 percent of taxable payroll under the extended baseline and 2.00 percent under the Alternative Fiscal Scenario; the difference is accounted for by lower revenue from taxation of Social Security benefits due to the tax cuts. In both scenarios, CBO's projection of the shortfall is lower than the SSA projection (2.22 percent of taxable payroll under current law), mostly due to higher revenue under CBO's projections.
Still, even with CBO's slightly rosier outlook, Social Security still faces a huge shortfall. The graph below shows the growing disparity between Social Security revenue and outlays as a percent of GDP, according to CBO's projections.
Whether you look at CBO or SSA, the message is clear year after year: we need to reform Social Security to make it solvent. Beneficiaries face either a 19 percent cut in 2038 under CBO projections or a 23 percent cut in 2036 under SSA's if we do not act to shore up the system's finances. The only other option would be for us to shovel large amounts of general revenue into the Social Security system to keep it going at full strength. Neither of these scenarios is optimal and the sooner we begin implementing reforms, the slower those reforms can be phased in, allowing retirees to better prepare for changes in the system. With the state of policy as it is, the joint committee may be our last best chance to enact real reform that can be phased in over time. We continue to hope that this committee will exceed its mandate and implement a comprehensive reform plan that addresses the entire budget and puts us on a sound fiscal path.