Following is from a press release from Socialsecurityworks.org
It is one of the most misleading things I have ever read and people following them on Facebook believe it with no questions asked. The people running Social Security Works are smart people. They know how pension funding works. They know better.
However, they are taking selective parts of the Trustees Report out of context and ignoring the traditional solvency projection period. Can you imagine saying with a straight face that a pension plan that will stop paying full benefits in only eighteen years is running a surplus, fully affordable and can be expanded? Would you want to hear that about your employers pension plan? In fact, if Social Security were a private pension plan its funding would be in violation of federal law.
There is no surplus at all. The only reason the revenue is greater today than the benefits being paid is because of the interest received on Treasury Bonds held by the Trust; the very bonds that will be gone by 2034.
That $2.8 trillion “surplus” mentioned below is the Treasury Bonds held by the Trust. Every penny of those bonds will be used to pay benefits between now and 2034 and then there is no Trust Fund reserve as all. The only money to pay benefits beginning in 2034 will come from incoming payroll taxes. That’s why the payments drop to 79%. (actually 77% for non-disability retirement benefits- see below)
Of course Americans support expanding Social Security, but do they want to pay for it? Or do they want only other Americans to pay so they can accept government welfare?
First, we need to pay for what we have, then we (all Americans) need to pay for an expanded benefit if that is what people want.
(Washington, DC) — Social Security has a large and growing surplus, according to the 2016 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, released today. This year’s report projects that in 2016 Social Security will run an annual surplus of roughly $15.7 billion, bringing the accumulated surplus to about roughly $2.8 trillion by the end of the year. It projects that, even if Congress took no action whatsoever, there is sufficient revenue to pay for all benefits and associated administrative costs until 2034, and 79 percent of those costs thereafter. It once again shows that Social Security is fully affordable. At its most expensive, at the end of the 21 st century, Social Security will cost just 6.1 percent of GDP.
The following is a statement from the President of Social Security Works and the Chair of the Strengthen Social Security Coalition:
The 2016 Trustees Report shows that the current program is fully affordable. Indeed, the United States can fully afford an expanded Social Security. Poll after poll shows that the American people overwhelmingly support expanding the program’s benefits. Increasingly, our nation’s political leaders are listening.
Now read what the Trustees Report actually says:
“To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period: (1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.58 percentage points to 14.98 percent, (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 16 percent applied to all current and future beneficiaries, or about 19 percent if the reductions were applied only to those who become initially eligible for benefits in 2016 or later; or (3) some combination of these approaches would have to be adopted.
If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Much larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2034. For example, maintaining 75-year solvency with policies that begin in 2034 would require: (1) an increase in revenues by an amount equivalent to a 3.58 percentage point payroll tax rate increase starting in 2034, (2) a reduction in scheduled benefits by an amount equivalent to a 21 percent reduction in all benefits starting in 2034, or (3) some combination of these approaches would have to be adopted.
Under the intermediate assumptions, DI Trust Fund asset reserves are projected to become depleted in the third quarter of 2023, at which time continuing income to the DI Trust Fund would be sufficient to pay 89 percent of DI scheduled benefits. Therefore, legislative action is needed soon to address the DI program’s financial imbalance. The OASI Trust Fund reserves are projected to become depleted in 2035, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits.
The Trustees also project that annual cost for the OASDI program will exceed non-interest income throughout the projection period, and will exceed total income beginning in 2020 under the intermediate assumptions. The projected hypothetical combined OASI and DI Trust Fund asset reserves increase through 2019, begin to decline in 2020, and become depleted and unable to pay scheduled benefits in full on a timely basis in 2034. At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 79 percent of scheduled benefits. Lawmakers have a broad continuum of policy options that would close or reduce Social Security’s long-term financing shortfall. Cost estimates for many such policy options are available at http://www.ssa.gov/OACT/solvency/provisions/.
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 and could preserve more trust fund reserves to help finance future benefits. Social Security will play a critical role in the lives of 61 million beneficiaries and 171 million covered workers and their families in 2016. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
Wall Street Journal headline 6-23-16
Social Security, Medicare Trust Funds Face Insolvency Over 20 Years
New York Times headline 6-23-16
Medicare and Social Security Trustees Warn of Shortfalls
Categories: Social Security