Social Security is set to face revenue shortfalls starting next year, advocates hope Congress will move toward new legislation to not only shore up America’s most important social safety net, but expand benefits.
The annual trustees report released Monday once again showed Social Security will begin spending more than it takes in next year in 2020, and will only be able to fund about 80% of promised benefits starting in 2035. Unless of course Congress stops kicking this can down the road and does something to address the problems.
The gloom and doom forecast has changed little the past several years, and the latest report comes at a time when the House has already held hearings on reform, with a particular bill garnering the support of more than 200 legislators.
“I think the fire is already lit,” said Nancy Altman, president of advocacy group Social Security Works. “The House is acting, and they’re hoping to vote on legislation this year.”
Altman’s group is among those that support Social Security expansion, pointing to what they say is evidence that the nation can afford it.
For instance, the program isn’t expected to comprise a much larger portion of gross domestic product down the road than it already does. The trustees report shows Social Security’s costs will equal 4.9% of gross domestic product in 2019, increasing to about 5.9% by 2039. After that it will decline to 5.8% by 2052 and then rise to 6.1% by 2091.
While the program can fully fund benefits for another 16 years or so, the trustees report cautions that the longer lawmakers delay taking action, the more severe the changes will need to be to restore solvency.
For example, if lawmakers were to make no changes until 2035, maintaining a 75-year solvency would require a permanent 3.65 percentage-point increase to the payroll tax rate (for a total of 16.05% that gets split between worker and employer) or a 23% reduction to all benefits starting that year.
Meanwhile, more than 200 lawmakers, all Democrats, have signed onto the Social Security 2100 Act in the House. Introduced by Rep. John Larson, D-Connecticut, the bill would gradually increase the payroll contribution by workers and their employers to 7.4% each by 2043 from the current 6.2% (to 14.8% altogether from 12.4%).
It also would require that earnings above $400,000 be subject to the payroll tax. Right now, earnings above a certain level — $132,900 for 2019 — are not subject to Social Security taxation.
Among other changes, the yearly cost-of-living adjustment for benefits would rely on a different formula to more accurately reflects rising costs for older Americans.
The end result would be extended solvency for the program for 75 years, according to Social Security’s Office of the Chief Actuary.
Altman also said that despite the impending funding woes, retirees should not worry that their benefits will be reduced or eliminated. In fact, she said, they should feel confident about the program.
“The whole reason Social Security is projected out for 75 years is to give people a sense of security,” Altman said. “Social Security has never missed a payment and I don’t believe it ever will.”