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The Social Security Combined Trust Fund is only 13 years away from insolvency, according to the latest annual report released by its trustees, due to large growing imbalances and deteriorating finances, among other factors.
Created by FDR’s New Deal, the Old Age and Survivors Insurance Trust Fund (OASI) – the country’s largest social protection program – will exhaust its reserves by 2033, while the Disability Insurance Trust Fund of the Social Security (SSDI) will become insolvent by 2057. These two funds combined are expected to deplete their reserves by 2034, when people currently aged 54 reach full retirement age. Once the Social Security Trust Fund becomes insolvent, all beneficiaries would see their benefits reduced by 22%, unless Congress implements policy changes before that date.
“Social security cannot guarantee full benefits to current retirees under current law,” warns the fiscal policy watchdog, the Committee for a Responsible Federal Budget.
As of August 31, 2020, the OASDI program was making payments to approximately 65 million people, having expanded significantly beyond providing retirement benefits to those who contributed to the system as it was originally designed to do. In 2020, 49 million retirees and retiree dependents were receiving Social Security benefits, in addition to 6 million survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers.
In April 2019, nearly a year before the state’s shutdowns began last year, administrators warned that Social Security’s total costs would exceed its revenues in 2020 for the first time since 1982. Without changes in policy, costs were expected to exceed revenues each year thereafter, they warned.
Based on data from 2020, administrators warned that the total cost of Social Security “is expected to be greater than its total income in 2021 and all years thereafter,” generating cash shortages of $ 2.4 trillion over the course of the year. of the next decade.
While the total cost of the program has exceeded its non-interest income since 2010, the interest income has increased the total income to exceed the total cost. In 2020, the total cost of Social Security was $ 1,107 billion, with total income of $ 1,118 billion (comprising $ 1,042 billion in non-interest income and $ 76 billion in non-interest income). ‘interests).
While Social Security typically made up the largest portion of the federal budget, in 2020 income security payments exceeded Social Security payments after the federal government began making payments to states and individuals to compensate. losses due to pandemic closures imposed by governors. Over a nine-month period, the federal government provided additional weekly federal unemployment benefits, in addition to direct cash payments in the form of stimulus checks. These payments were in addition to federal retirement and disability benefits, increased funding for food and nutrition payments, and assistance with rent payments. States have also received billions of dollars in federal bailouts through the CARES Act.
The federal government’s emergency income security efforts totaled $ 1.3 trillion, or 19% of the budget in 2020, compared to Social Security’s $ 1.1 trillion, or 17%. Meanwhile, the national debt grew to nearly $ 29 trillion and the national deficit to $ 3.13 trillion, meaning the government spent more than it received in revenue due the decrease in the number of people working – lost workers who, combined with their employers, would otherwise have paid more taxes on income and wages.
“Employment, incomes, interest rates and GDP declined significantly in the second calendar quarter of 2020 and are expected to increase gradually thereafter towards recovery by 2023,” the report says, “with the level of worker productivity and therefore GDP assumed to be permanently In addition, the pandemic and recession are expected to result in high death rates during the period 2020 to 2023 and delays in births and immigration in the short term. Taken together , these data and assumptions result in the depletion date of the reserves. “
In 2020, more than half of the total population of the United States – about 175 million people – had their incomes covered by Social Security and paid payroll taxes on that income, the report says.
But unfunded Social Security benefits – what the government owes and hasn’t paid – adds an additional $ 41.2 trillion to the national debt, Chicago-based Truth in Accounting calculates in its annual analysis of the federal budget.
The national debt is about $ 123 trillion – more than four times what the Treasury Department reports – when you factor in such factors as amounts owed for Social Security and insurance benefits. disease unfunded, argues Truth in Accounting.
“The federal government argues that massive unfunded Social Security obligations should not be a liability on its balance sheet because the government controls the law and can change it at any time,” said Bill Bergman, research director at the TIA. “With this reasoning, the government should stop including social security as a ‘mandatory’ program in the federal budget.”
In response to fears that the program might go bankrupt, the Pension Security Council said Social Security “can’t” and “won’t” go bankrupt. On the contrary, “it is insolvent,” says the group. “Insolvency is when a person or entity is unable to pay its debts with incoming income. It may sound a lot like bankruptcy, but you can be insolvent long before you file for bankruptcy. Insolvency simply means that your income does not keep up with your debts. and you are working at a loss. “
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