Don’t Let Social Security’s 91st Birthday Be One of Its Last
91 years ago tomorrow, President Franklin Delano Roosevelt signed into law the Social Security Act of 1935, establishing what is now the nation’s largest federal program and largest retirement program. Today, the Social Security program supports 70 million seniors, dependents, survivors, and disabled workers, providing many of them with vital income support. Unfortunately, Social Security faces a significant financial shortfall and the retirement program faces insolvency in just six years. At that point, the law requires an immediate 22% benefit cut.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
As policymakers blow out the candles on Social Security’s 91st birthday, they are doing far too little to ensure its continued longevity. Social Security won’t make it past age 97 as things currently stand – at least not in its current form. The best birthday gift we could give Social Security is a solvency package, so Social Security’s 70 million beneficiaries and 237 million contributors know they’ll be able to count on benefits, going forward.
Social Security is deep in deficit, and once its trust fund is depleted, under the law, it cannot pay more in benefits than it generates in revenue. In just six years, beneficiaries will face an abrupt 22% benefit cut – the equivalent of a roughly $500 cut in monthly benefits per beneficiary. That’s more than what the average retired household spends on groceries each month.
If policymakers try to paper over this cut with general revenue funding, it would add $190 trillion to the debt over the next 75 years – enough to set off a debt spiral – and end Social Security as we know it as a self-financed contributory program.
The window for saving this program is closing fast. Policymakers must enact a solvency package – or establish a process to develop a solvency package – as soon as humanly possible. This is a fast becoming a national emergency, and it’s time our leaders take this crisis seriously.
How the Committee is Working to Address Social Security Solvency
Developing Novel Solutions. The Committee has been releasing novel solutions to restore solvency to the Social Security trust fund as part of our Trust Fund Solutions Initiative. So far we have suggested and analyzed a Six Figure Limit on couples’ benefits, an Employer Compensation Tax to broaden the employer-side of the payroll tax, a COLA cap to limit benefit growth for high earners, and reforms to Social Security benefit taxation. You can see all our Trust Fund Solutions here.
State-by-State Analysis of the Looming Insolvency Cut: In a first-of-its-kind report, the Committee recently released No State Spared, a state-by-state analysis of the impact of the magnitude of cuts people would face upon Social Security insolvency. In 29 states, beneficiaries would experience an average cut of $500 or more. In the most-affected states, as much as 22% of the population would be impacted, with cuts as large as 1.9% of GDP. The report includes an impact card for every state, along with an interactive map to compare findings. Read No State Spared here.
Click on your state to see its estimated impact.
Supporting the Reform Process. A bipartisan commission, committee, or advisory board likely represents the best hope for Social Security reform. As we’ve shown previously, these commissions have often helped to effectuate policy change, facilitate bipartisan negotiations, develop and socialize policy solutions, create a safe space for negotiations, and elevate public discourse on important policy issues. This year, several bills have been introduced to create such a process, including the PROMISE Act, Bipartisan Social Security Commission Act, Fiscal Commission Act, Sustainable Budget Act, and the Budgeting for a Better America Act. As CRFB Senior Vice President Marc Goldwein recently testified to the Senate Finance Committee, these special processes have been used to help develop and enact all of the most significant Social Security laws – from the 1935 law establishing the program to the 1983 law extending its solvency by 50 years.
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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.
