OPINION:
One wouldn’t know it from anything the 2020 presidential candidates have discussed, but most of us have known for years that the Social Security program’s future is in serious trouble. Unfortunately, the 2019 Social Security Board of Trustees Annual Report has reaffirmed that the program is hurtling toward bankruptcy.
The system is comprised of two trust funds. The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays out retirees’ monthly benefits, is under particular distress and is projected to become depleted in 2034. Income coming in from current workers would only be able to pay 77 percent of the monthly payments to beneficiaries. To put 2034 in perspective, that’s when those born in 1967 will reach the normal retirement age of 67.
The Disability Insurance (DI) Trust Fund, which funds monthly payments to disabled workers and their families, is estimated to be depleted in 2052, at which time it will be able to pay 91 percent of the program’s obligations.
The trustees announced that the total annual cost of the Social Security program (mainly benefit payments) is projected to exceed total annual income in 2020 and remain higher throughout the 75-year projection period. Last year’s report noted the program would run a deficit in 2019. The robust U.S. economy is the cause of the one-year reprieve from a deficit situation occurring this year. Nonetheless, asset reserves are expected to begin a decline in 2020. When interest income is excluded, Social Security’s cost has actually exceeded income every year since 2010.
If Washington policymakers fail to take decisive action before 2034, the available options to resolve the crisis will be almost too awful to contemplate. Raising the payroll tax by 15 percent to 20 percent (split equally between the employee and the employer would send a devastating shockwave through the American economy. Another choice would be to dramatically slash benefits as high as 20 percent, which cannot be considered a reasonable option.
It’s difficult to overstate the gravity of an impending calamity that threatens to upend Americans’ livelihoods and retirement security in just 15 years. And yet the presidential wannabes are instead concerning themselves with social justice virtue-signaling, massive spending programs like the Green New Deal. That attitude is endemic of the prevailing Washington, D.C., culture that avoids taking substantive action until the crisis is upon them.
The good news is that there is an effort in the House Ways and Means Social Security Subcommittee now and a bill introduced by the subcommittee chairman and a substantial number of his Democratic colleagues, which is aimed at shoring up Social Security’s beleaguered finance by increasing payroll taxes among some other adjustments.
A reform plan — called the Social Security Guarantee and Social Security Plus Act — to preserve and modernize Social Security developed by the Association of Mature American Citizens (AMAC) would guarantee annual cost-of-living adjustments based on income and incrementally raise the retirement age, without additional tax increases on workers. The Association of Mature American Citizens has recommended a compromise measure to the House subcommittee that includes provisions of the bill of Subcommittee Chairman John Larson, Connecticut Democrat, and some of those of its former and now retired Chairman Sam Johnson, Texas Republican, and key provisions of the Social Security Guarantee Act proposal.
The Social Security PLUS component of the Association of Mature American Citizens proposal would be a win-win for future retirees. The voluntary program would address the urgent need to help workers accumulate more income before retirement comes while taking some of the strain off Social Security’s traditional Old-Age and Survivors Insurance. Fifty million Americans have no employer-based retirement savings plan, and the average person receiving retirement benefits collects slightly more than $16,000 per year. Moreover, the majority of retired workers rely on Social Security as the largest portion of their retirement income, and for many Americans, Social Security is their only source of income.
Workers participating in Social Security PLUS would play an active role in their contributions, which would be divided between a highly regulated stock fund (80 percent) and any approved conservative investment (20 percent). Investment choices would be similar to those used in 401k plans and IRAs, and their Social Security PLUS plans would be administered by the financial services firms which offer those plans, rather than the federal government.
Congress needs to step up and address the long-term financial solvency of Social Security by prudently restructuring certain components along the lines recommended by the Association of Mature American Citizens. Moreover, the American people must keep their attention focused squarely on committing to bipartisan solutions to ensure that this happens. That means asking direct questions at candidate forums and townhall meetings. Lawmakers will kick the Social Security reform can down the road for somebody else to handle — when it’s too late — unless they hear from their constituents.
• Dan Weber is the president and founder of the Association of Mature American Citizens.
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