The asset reserves of the Social Security Old-Age and Survivors Insurance Trust Fund, which pays benefits to retirees, are projected to become depleted in 2033 — one year sooner than projected last year.
However, according to the just-released 2023 trustees report, income from payroll tax revenue is expected to fund 77% of scheduled Social Security benefits in 2033.
The Disability Insurance Trust Fund is not projected to run out within the trustees’ 75-year projection period — the same conclusion made in the group’s 2022 report.
When combined, funds for both Social Security and disability payments are set to become depleted and unable to pay scheduled benefits in full on a timely basis in 2034. That is when tax revenue used to fund both programs is expected to cover 80% of scheduled benefits.
While politicians failed to act and shore up the trust funds during the debt-ceiling crisis of 2011, “the big difference [today] is that the programs are much closer to insolvency,” says Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
“Doing nothing and allowing the programs to become insolvent could lead to reductions in Social Security and Medicare benefits,” Johnson told ThinkAdvisor. “While our lawmakers have kicked this can down the road for years, we have almost reached the end of the road.”
More Views on the Report
Johnson also points out that this year’s report “is unexpectedly early. In many years, we often don’t see the report until summer. Thus, I suspect there have been requests from Congress and maybe from the White House to get the reports out early in order to provide material that can be discussed within the context of our debt limit debate.”
Many political leaders in Washington have promised not to touch Social Security or Medicare benefits as part of the debt limit agreement, but there may be “other sorts of negations going on,” she explains.
As Johnson recalls, during the debt-limit battle of 2011, Congress agreed to establish committees that took up Social Security and Medicare reforms. While no reform plan achieved a consensus, Congress could once again soon make the attempt.
“Lawmakers have a broad continuum of policy options that would close or reduce Social Security’s long-term financing shortfall,” the latest trustees report states. “The trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them.”
Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits, according to the trustees, who say Social Security will play a critical role in the lives of 67 million beneficiaries and 180 million covered workers and their families during 2023.
In comments shared with ThinkAdvisor, Nancy Altman, president of Social Security Works and chair of the Strengthen Social Security Coalition, says it is critical for policymakers and media pundits alike to put the report in its proper context — especially with the ongoing fight in Washington about raising the nation’s debt limit.
According to Altman, the most important takeaways from the 2023 Trustees Report are that Social Security still has a large accumulated surplus and that Social Security is “extremely affordable and will remain so throughout the 21st century and beyond.”
“In [75 years], Social Security will constitute around 6% of the nation’s gross domestic product,” Altman points out. “That is considerably less, as a percentage of GDP, than Germany, Austria, France and most other industrialized countries spend on their counterpart programs today.”
According to Altman, the reason Social Security maintains a reserve is to ensure that all benefits will continue to be paid regardless of the state of the economy or public health. True to that role, Social Security has never missed a payment in its 88-year history.
Altman says she will remain hard at work over the coming months trying to dispel key misconceptions about the Social Security program.
“Despite Republican threats to hold the debt limit hostage to Social Security cuts, the program, by law, cannot add a penny to the deficit,” Altman points out. “It has no borrowing authority and cannot deficit-spend. In recognition of this … the question of whether to expand or cut Social Security is one of values, not affordability.”
According to Altman, proposals to strengthen Social Security have strong support from Democratic, Republican and independent voters. In contrast, the vast majority of voters oppose cutting benefits.