Heather, I usually like your stuff. But this time...Just In: Social Security is projected to be insolvent by 2035 and Medicare by 2036.
— Heather Long (@byHeatherLong) May 6, 2024
The good news: This is better than last year's projection of SS insolvent by 2034 and Medicare by 2031. (The strong labor market is helping here)
The bad news: It's urgent to ACT to shore up…
WRONG! 2035 is when the trust fund that pays for Socal Security is not able to pay the same amounts of benefits that it would pay out today. That is NOT "insolvency" for Social Security, as the trust fund will still be paying benefits (83% of them, based on the estimates), and Americans will be entitled to the benefits they have earned, unless laws are changed that reduce the amount of benefits that they have had . If no laws change, no benefits change. We'd just have to figure out another place to pay for the rest of it. Let's go into the summary of the report from the Social Security Administration, and see how they explain the reason for improvement of the combined OASDI trust fund (which we generally call the "Social Security fund").
The projected long-term finances of the combined OASDI fund improved this year primarily due to an upward revision to the level of labor productivity over the projection period and a lower assumed long-term disability incidence rate. These improvements were partially offset by a decrease in the assumed long-term total fertility rate. The revision to labor productivity was based on stronger economic growth in 2023 than had been anticipated in last year’s reports. The Trustees lowered the long-term disability incidence and fertility rate assumptions based on continued low levels in both series. The projected long-term finances of the HI Trust Fund also improved this year relative to last. This improvement was due to several factors, including a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates starting in 2024, higher payroll tax income resulting from the stronger-than-expected economy, and actual 2023 expenditures that were lower than projected last year.But it's worth remembering that "Social Security" is really two separate programs - Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). And the Trustees' report says what actually runs out is the OASI trust fund, while Disability's trust fund will be just fine.
The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits. • The Disability Insurance (DI) Trust Fund is projected to be able to pay 100 percent of total scheduled benefits through at least 2098, the last year of this report's projection period. Last year's report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2097, the last year of that report's projection period.In fact the Social Security Administration says that, Disability's trust fund is projected to keep growing throughout the next 75 years, unlike OASI and Medicare's Hospital Insurance fund (HI).
On November 2, 2015, President Barack Obama signed into law the Bipartisan Budget Act of 2015 (H.R. 1314; P.L. 114-74). Among its many provisions, the act authorized a temporary reallocation of the Social Security payroll tax rate between the OASI and DI trust funds to provide DI with a larger share for 2016 through 2018. Specifically, the DI trust fund’s share of the combined tax rate increased by 0.57 percentage point at the beginning of 2016, from 1.80% to 2.37%. Because the act did not change the combined payroll tax rate of 12.40%, the portion of the tax rate allocated to OASI decreased by a corresponding amount. This means that OASI’s share of the combined tax rate declined by 0.57 percentage point at the start of 2016, from 10.60% to 10.03%. For 2019 and later, the shares allocated to the DI and OASI trust funds are scheduled to return to their 2015 levels (i.e., 1.80% to the DI trust fund and 10.60% to the OASI trust fund).As that passage mentions, the pre-2015 allocations went back into effect in 2019, and have stayed there since then. There's no reason we couldn't change the allocation again, to adjust to the decline in Disability costs. Of course, there's one overriding thing I want to reiterate with all of this talk about Social Security's finances. We are talking about these programs' trust funds, we are not talking about the programs' ability to continue. If Congress does nothing, Social Security and the amount of its benefit payments will NEVER go away. We'd just have to pay for the extra funds beyond what the trust funds would cover, likely by doing the same thing we do for most things that the Feds pay for - regular income taxes and deficit spending. The Congressional Budget Office already includes Social Security and Medicare in their budget projections, so there's nothing that would change from that perspective. It would just be changing the nature of a program that "pays for itself" and instead make it more like any other federal spending. We'd just have to decide if we'd want to keep funding it as-is, fund it more or less than today, and figure out if we want to pay the taxes or fund the deficits to keep it going. Like most things, if we taxed the rich like we did in the 1990s (or especially if we did it like we did back in the glory days of the 1950s), this would be taken care of without having to worry for pretty much the rest of our lives. And if you hear anyone try to insist Social Security is "going broke", THEY ARE LYING OR STUPID, and should be ignored from that point forward.
I don’t understand why so many people in my circle seem to think it’s OK for rich people to keep a greater percentage of their income. Certainly not tax fairness.
ReplyDelete