Event Recap: Decoding the Social Security Trustees Report
On Tuesday, the Committee for a Responsible Federal Budget hosted an event titled "Decoding the Social Security Trustees Report" to discuss the Trustees' latest update on Social Security's finances and policy options to reform the program. The event featured Social Security Chief Actuary Stephen Goss, Reps. Tom Cole (R-OK) and John Delaney (D-MD), and a panel discussion moderated by Damian Paletta of The Wall Street Journal. The panel featured experts from wide variety of perspectives, including Goss and four others:
- Andrew Biggs from the American Enterprise Institute
- Jason Fichtner from the Mercatus Center
- Jim Kessler from the Third Way
- Paul Van de Water from the Center on Budget and Policy Priorities
Delaney and Cole spoke first about the Social Security Commission Act that they introduced earlier this year, which would establish a bipartisan commission to recommend ways to make the program solvent over the long term. Delaney gave an overview of the bill and explained how it was modeled on the Greenspan Commission, which paved the way for Social Security reform in 1983. Cole was optimistic about the prospect of reform, and while he believed little would be done between now and the midterm elections, he was hopeful that progress could be made in the next Congress. He said that the divided nature of government meant that lawmakers had a "golden moment" to fix the program's finances, since any changes would require bipartisanship.
Goss ran through some of the findings in the Social Security Trustees report, explained key changes to the projections, and discussed options to make the Social Security solvent over the long term. He emphasized that the program was on an unsustainable path, and explained that the slight deterioration in the 75-year actuarial shortfall relative to last year's report was largely driven by changes to economic assumptions, particularly lower GDP growth projections. He said that revenue reallocation was one option to avert the insolvency of the DI trust fund in 2016, but that policymakers needed to look to other solutions to make the whole program solvent beyond 2033. He said this would require raising revenues by one-third, cutting costs by one-quarter, or a combination of the two if lawmakers waited until then to act.
Click here to see full presentation
Biggs started the panel discussion, stating that while the projections in the Trustees report were similar to last year's, it was important to look at cumulative changes over a longer period. He said that since 2008, the 75-year deficit had increased by two-thirds based on the Trustee's projections, and had quadrupled on CBO estimates. He also expressed concern for the growing number of proposals by lawmakers to expand Social Security benefits, as these often did little to fix the program's long-term finances.
Much of the panel discussion focused on the future of the Disability Insurance (DI) trust fund, and there was some debate about the merits of reallocation from OASI to avert the fund's insolvency in 2016. Van de Water argued that a reallocation was an essential and unavoidable policy fix, given that lawmakers were unlikely to agree to fundamental reform in the near term, and any major changes would need to be phased in gradually. Fichtner disagreed that reallocation was the right approach, instead supporting interfund borrowing as an interim solution. Fichtner argued that unlike reallocation, interfund borrowing doesn't mask the DI shortfall, fast-track OASI insolvency, or lessen pressure on Congress to address the program's structural deficiencies.
Panelists also debated whether the DI program does enough to encourage work. Van de Water said that while the program already has strong work incentives, the challenge lies in the fact that most eligible applicants have limited work capacity. Fichtner said the real challenge was keeping people in the workforce and more could be done to achieve this, such as shifting to a partial benefits system which would allow people to work part-time while still receiving benefits or making benefits time-limited in certain cases.
Four of the panelists supported reforms to prevent instances of fraud in the DI program. Biggs argued that such measures would be critical in securing legislative support for reallocation, and Fichtner said they were important to maintain public confidence in the program, irrespective of how much fraud was occurring. Kessler said he hoped that Democrats would take the lead on program integrity measures, rather than turning the issue into a campaign against benefit cuts.
Kessler was relatively optimistic about Social Security reform and talked about the potential political benefits of making tough decisions to address big challenges like Social Security insolvency. He emphasized that the longer it took to make reforms, the harsher the impact would be on low- and middle-income workers. Kessler and Goss also supported the idea of a Social Security commission to help restore the program's solvency, and Goss emphasized the importance of having Congressional leaders on the commission.
Overall, the event was very lively and informative and featured an insightful discussion on Social Security's future, particularly on the impending DI insolvency. While there was disagreement on some topics, it was great to see all speakers focused on the program's long term sustainability.
To read CRFB's Social Security Trustees' report paper, click here.
To view Stephen Goss' PowerPoint presentation from the event, click here.
To view the Center for Budget and Policy Priorities' chart book on Disability Insurance, click here.
To read Andrew Biggs and Sylvester Schieber's paper "Is There a Retirement Crisis?," click here.
To read the National Academy of Social Insurance's paper on the Social Security Trustees' report, click here.
To read the Office of the Chief Actuary's note on replacement rates, click here.