Event Recap: Unpacking the 2019 Social Security Trustees' Report
On April 26, the Committee for a Responsible Federal Budget hosted a lunch and panel discussion on "Unpacking the Social Security Trustees' Report." The event brought together budget experts and congressional staff from across the political spectrum to dissect the latest report and discuss meaningful and long-lasting reforms to the retirement program upon which millions of Americans rely. After opening remarks by Committee for a Responsible Federal Budget president Maya MacGuineas, the panelists – Jason Fichtner of Johns Hopkins University, Ben Ritz of the Progressive Policy Institute, and Committee for a Responsible Federal Budget senior vice president and senior policy director Marc Goldwein – came together for a substantive discussion moderated by Kate Davidson of the Wall Street Journal.
Watch the event below or via C-SPAN.
Committee for a Responsible Federal Budget president Maya MacGuineas opened the event by providing an overview of the key takeaways from the Trustees' report. The Old-Age and Survivors Insurance (OASI) trust fund is projected to deplete its reserves by 2034, while the Social Security Disability Insurance (SSDI) trust fund is expected to be exhausted by 2052. On a theoretical combined basis, the Social Security trust fund will be insolvent by 2035, at which point current law calls for a 20 percent across-the-board benefit cut.
Put simply, the current Social Security program faces financial uncertainty and possible exhaustion in just 16 years. This will occur when today's youngest retirees turn 78 and today's 51-year-olds reach the normal retirement age. Since the average retiree is expected to live to age 85, the impending insolvency will affect those entering retirement now and in the future. This is in stark contrast to past rhetoric that always presented the Social Security shortfall as affecting future retirees; now, the narrative presents grave consequences for both current and future beneficiaries.
MacGuineas closed her remarks with three observations: there's no question that Social Security needs to be reformed, saying that Social Security needs to be reformed says nothing about how to fix it, and beware of politicians who promise to protect Social Security without outlining how to reform it. Going forward, there needs to be a political discussion of how to fix it, either through revenue increases, benefit decreases, or a combination of both. The art of political compromise is necessary and a sense of leadership is imperative to thoughtfully reform the largest government program.
Davidson kicked off the panel by asking each participant to provide a brief perspective on the latest report. Fichtner provided five takeaways: the 2019 Trustees' report was better than in previous years, trust fund insolvency doesn't mean Social Security is going bankrupt, the program is costly ($1 trillion in 2018 alone), the cost of delay is major, and the outlook for the SSDI trust fund won't always be so rosy. Ritz stressed the importance of the discrepancy between revenues and outlays in the OASI and DI trust funds; the gap between revenue and outlays is only going to grow, which means other parts of the federal budget will need to pick up the slack. Goldwein concluded by saying the latest report is a wake-up call and outlined three criteria for meaningful reform: a package that achieves sustainable solvency by bringing Social Security costs and revenues in line so the trust fund is positive at the end of the projection period; a focus on retirement security, including a benefit cut over time for wealthy seniors that don't necessarily need them while ensuring benefits for those who actually do need them; and a focus on economic growth that adjusts the signals Social Security sends to folks about when and how to retire and save.
The discussion then turned to the role of economic assumptions and how they influence projections – particularly for the SSDI trust fund. When the economy is in a recession, applications tend to rise because unemployment is higher and those with disabilities have a difficult time finding work or remaining in the workforce. In contrast, when unemployment is low and there are ample job opportunities – as is the case today – SSDI applications tend to fall. Current economic growth at around 3 percent helped push the SSDI insolvency date 20 years into the future, from 2032 last year to 2052 this year. However, all panelists warned the economic high won't last and growth will fall to around 2 percent in the coming years, at which point SSDI applications may rise. Therefore, any reforms to Social Security should aim to help workers with disabilities stay in the workforce longer.
Each panelist was then asked what areas of Social Security need reform. Fichtner argued the program needs to be modernized to account for longevity and the fact that people are staying in the workforce longer. Goldwein stated the tax base needs reform with new sources of revenue and the formula from which benefits are calculated needs reform to do more to promote work. He noted that the current formula generates a lot of benefits during a person's first years of work but generates few benefits during later years; a solution would be to flip the formula, which would help promote work during later years.
From there, the panelists were asked what policies are politically feasible and could generate bipartisan support. All of them agreed that reform needs to modernize Social Security for the 21st century and be done on a bipartisan basis and that the cost of waiting is huge. As Goldwein said, the cost of delay makes the adjustments more painful and is simply a "nasty thing to do."
To conclude, the panelists were asked about the interaction between Social Security and the rest of the federal budget, which began with a dialogue of on-budget versus off-budget elements. Social Security is considered off-budget because it has its own dedicated trust funds and isn't financed through general revenues, therefore it technically doesn't contribute to the U.S. budget deficit. However, when Social Security is placed on-budget and the unified budget deficit is analyzed, the fiscal position of the federal government is much darker and the deficit much wider. Therefore, from a program standpoint, it's important to look at how payroll tax revenue affects the positon of Social Security, since the trust funds can't borrow from general revenues to finance their outlays.
Learn more about the 2019 Social Security Trustees’ report and Social Security solutions by checking out our in-depth analysis below:
- Analysis of the 2019 Social Security Trustees’ Report
- Quick Take: Social Security & Medicare Headed for Insolvency in 16 & 7 Years
- Social Security Shortfall Could Be Worse Than Reported
- Social Security Will Start Spending Trust Fund Reserves Next Year
- The Good News on Social Security: We Have More Time to Improve Disability Insurance
- The McCrery-Pomeroy SSDI Solutions Initiative