In Social Security…We Trust
Wilhelmina LeighWilhelmina A. Leigh is senior research associate of the Economic Security Initiative of the Civic Engagement and Governance Institute at the Joint Center for Political and Economic Studies.
On April 23, 2012, the Social Security Board of Trustees released its 2012 annual report on the financial health of the Social Security Trust Funds (formally the Old-Age and Survivors Insurance and the Disability Insurance Trust Funds). Like previous annual reports, this one contains estimates of revenues and expenditures of the Trust Funds for the current year and projections of the same for 75 years into the future. Also like previous reports, its findings lead many to conclude that Social Security won’t be there for them when they need it. This doesn’t have to be the case.
Many who conclude that Social Security will not be there for them support their view by citing the Report’s projection that the Trust Funds will be exhausted in 2033. They ignore the additional information that even if the current surplus in the Trust Funds no longer exists, the revenue collected by the program each year thereafter in FICA (Federal Insurance Contributions Act) taxes is projected to cover 75 percent of scheduled benefits and administrative costs. They also ignore the fact that between now and 2033, the United States Congress has 21 years in which to act to ensure the solvency of Social Security system.
It would serve us all well if members of Congress were to act sooner rather than later to retrofit the Social Security system to close the 75-year shortfall, currently projected to be 2.67 percent of taxable payroll (that is, all earnings subject to Social Security contributions). It is indeed possible to not only eliminate the shortfall but also simultaneously add features that would bolster program support for the many people for whom Social Security benefits—averaging annually only $12,870 in 2010—are the major, or only, source of income. The report of the Commission to Modernize Social Security features many suggestions for achieving these dual objectives.
Rather than an invocation to doom and gloom about the fortunes of the Social Security system, the 2012 Trustees report should be a call to those who care about it to insist that we act while its green light is on, rather than waiting for the yellow light or red light before acting. Crossing the street on the green light—in other words, in 2012, when the Trust Funds have a projected annual surplus of $57.3 billion—is the prudent thing to do. Crossing on yellow or red—when Trust Fund reserves are nearly or totally depleted—will involve avoidable and harmful fiscal risks.
This blog originally appeared on the Joint Center for Political and Economic Studies web site.