The White House convened a conference on Social Security in December of 1998. A December 4, 1998 memo
issued in advance of the conference included the following statement from President Clinton:
“We must act now to tackle this tough, long-term challenge. We must strengthen Social Security, and I believe we can do it in a way that maintains universality and fairness, ensures that Social Security continues to provide a benefit people can count on, protects low-income beneficiaries and those with disabilities, and sustains our fiscal discipline. This conference will help to pave the way for comprehensive, bipartisan Social Security reform next year.”
At the outset of a December 8, 1998 conference, President Clinton also made the following statements:
“By 2013, what Social Security takes in will no longer be enough to fund what it pays out.”
“By 2032, just 34 years away, the money Social Security takes in will only be enough to pay 72% of benefits.”
“The only way we can save Social Security … is by working together, putting progress ahead of partisanship.”
Eighteen (18) years subsequent to the 1998 White House conference, the Congressional Budget Office (CBO) published a December 2016-dated report entitled CBO’s 2016 Long-Term Projections for Social Security: Additional Information. Statements made within the 2016 CBO report include the following:
“In fiscal year 2016, spending for Social Security benefits totaled $905 billion, or almost one-quarter of federal spending. OASI (Old-Age and Survivors Insurance) payments accounted for about 84 percent of those outlays, and DI (Disability Insurance) payments made up about 16 percent.”
“According to CBO’s projections, without changes in the programs, the balance of the DI trust fund will be exhausted in fiscal year 2022, the balance of the OASI trust fund will be exhausted in calendar year 2030, and the combined balances of the OASDI trust funds will be exhausted in calendar year 2029. If a trust fund’s balance declined to zero and current revenues were insufficient to cover benefits specified in law, the Social Security Administration would no longer be permitted to pay full benefits when they were due. In the years after a trust fund was exhausted, annual outlays would be limited to annual revenues: All receipts to the trust fund would be used, and the trust fund’s balance would remain essentially at zero.”
“Under current law, the combined trust funds will be exhausted in 2029, requiring a 29% reduction in benefits payable in 2030.”
The net impact of administration and congressional efforts to address Social Security’s long term viability, between 1998 – 2016, was, therefore, to move up, by two years, the point in time at which a 29% reduction in benefits will be required given anticipated receipts paid into, and disbursements made from, the combined trust funds, as well as declining interest income earned on shrinking balances in the funds, through 2029. In other words, over half the anticipated 33-year time frame between 1998 and 2030 has passed with no measurable progress made in ensuring the long term financial viability of Social Security.
Part of this trajectory in trust fund balances is due to the Great Recession. According to a Social Security Office of Retirement and Disability Policy Report, primary income (consisting of payroll tax collections) paid into the trust funds “declined sharply in 2010 because of the recession. Post-recession tax income is projected to decline slightly as taxable earnings decline relative to Gross Domestic Product (GDP).” Primary income for the funds as a share of GDP actually peaked in 1990 at 5.2%. The apex in the Social Security combined funds (OASDI) reserves is projected to reach $2.8 trillion in 2020. Anticipated reserves would therefore fund projected negative net cash flow for only 9 years subsequent to reaching the 2020 maximum trust funds’ combined reserve balance. The analysis presented in the CBO report aptly demonstrates the significant economic challenges facing Social Security, under current law, and the requisite sense of urgency required to address the problem.
Urgency is further underscored by the extent of our citizens’ reliance upon Social Security, in the context of a broader retirement income crisis facing this country, as noted in following excerpts from the Center on Budget and Policy Priorities website:
“97 percent of the elderly (aged 60 to 89) either receive Social Security or will receive it, according to SSA estimates.”
“For 61 percent of elderly beneficiaries, Social Security provides the majority of their cash income. For 33 percent of them, it provides 90 percent or more of their income.”
“Reliance on Social Security increases with age, as older people — especially older women — outlive their spouses and savings. Among those aged 80 or older, Social Security provides the majority of income for 72 percent of beneficiaries and nearly all of the income for 42 percent of beneficiaries.”
Do U.S. citizens over-rely upon Social Security income relative to international counterparts – see following table?
The time is NOW for addressing Social Security. The White House and Congress must identify and implement suitable, equitable changes to enhance the long-term viability of Social Security.