The good news last week from the trustees of Social Security is that the program is still projected to go belly-up in 2033, just as it was last year. The crisis hasn’t deepened.
But that’s also the bad news. Another year has passed without Congress and the administration acting and there is absolutely zero prospect of getting anything done this year, either. And yet the longer Washington waits, the more controversial and difficult the solution will have to be.
If the program is left on automatic pilot, the combined Social Security trust fund reserves will begin to shrink in 2019 -- just five years from now -- and be depleted altogether in 2033,according to the trustees.
And if nothing is done by that point, benefits to tens of millions of retirees will have to be cut by law by 23 percent, which is what the program’s income will cover at that point.
Meanwhile, the much smaller Social Security program that pays disability benefits will run out of funding, incredibly, just two years from now.
Sadly, however, a political deal to fix the overall program is probably further away now than at any time since President Obama arrived in office. A sensible compromise would involve raising revenue through hiking the cap on taxable earnings, slowing the growth of benefits for those who are not poor and, possibly, nudging up the retirement age.
Republicans don’t want anything to do with raising more revenue.
Democrats, meanwhile, not only don’t want to touch benefits -- and we’re talking about slowing their growth over decades, not cutting them -- some are talking about actually enhancing payments.
And the president, who to his credit had been willing to change the way Social Security is indexed to inflation as part of an overall compromise, has unfortunately backed away from that idea in his latest budget.
Since the federal government is no longer running trillion-dollar deficits and the day of reckoning may still seem like a long way away, the pressure to reform entitlements has eased.
"But make no mistake," says Jason Fichtner, former deputy commissioner and chief economist of the Social Security Administration who is now with the Mercatus Center, "there is a Social Security crisis. Misunderstanding the critical state of the program’s financial health would lead to grave consequences for beneficiaries of both the disability and retirement programs."
It could also lead to grave consequences for the economy if Congress and the president wait too long to address the problem.
~The Denver Post