The crux of the conservative attack on Social Security in recent years has been the claim that the program is on an unbroken path to insolvency. Monday’s release of the Social Security trustees’ annual report knocks a pillar out from under that campaign, for it shows that the program actually got healthier during the last year.
The trustees predicted that the program’s reserves — that is, the trust funds of its retirement and disability components — will be exhausted in 2035. In last year’s report, the trustees pegged that date at 2034. In other words, the trust funds’ exhaustion last year was 16 years away; this year it’s still 16 years away.
To use a different metric, the cost of making Social Security perfectly solvent has come down. Last year, the trustees projected that it would require an immediate increase in the payroll tax of nearly 2.8 percentage points, bringing the tax to 15.18% (shared by employers and employees), up from the current 12.4%; this year that estimate came down to 2.7 percentage points, bringing the required payroll tax rate to 15.1%.
The trustees also revised their near-term expectations. Last year’s report, which was based on 2017 statistics, warned that the system would be paying out in benefits more than it took in starting in 2018. The shortfall was projected to be more than $1 billion of the annual program budget of about $1 trillion, and would mount steadily into the limitless future, unless changes were made in benefits or taxes. This year’s report says the program actually was in the black last year, by more than $3 billion, and won’t have to start drawing down its reserves until 2020.
We’ll get to the main reason for the improvement in a moment. But the bottom line is positive. “This year’s trustees report shows that, contrary to conservative propaganda, Social Security is not ‘going bankrupt’ or ‘in peril,’” Max Richtman, head of the National Committee to Preserve Social Security and Medicare, said after the report’s release.
These are incremental improvements, to be sure. But they underscore an important point: Social Security’s fiscal condition is dynamic. It’s dependent on a host of interrelated economic and demographic factors, many of which are fundamentally unpredictable even a few years into the future, much less 16 years. Pundits who tell you they know what’s going to happen are blowing smoke.
Read the rest: Los Angeles Times