As an economist, I’ve watched how the system has been modified over the years to remain the safety net it was designed to be in the 1930’s. As someone versed in how money works, I’ve remained confident that similar changes will be applied over time to make sure it remains solvent and viable for my children and grandchildren.
Simply stated, it’s not going to go away. But those of you who benefit now and those who will benefit in the years to come need to pay attention. There are those in Congress who simply don’t give a damn about you unless you already have lots of money.
By Nick Thornton / December 2, 2014
The trustees of Social Security say that retirees needn’t worry about their monthly checks vanishing. But the fact is that unless Congress acts to change how Social Security is funded, benefit reductions are inevitable.
At least one federal lawmaker is pushing to do something about it. Connecticut Democrat John Larson, who’s represented the Nutmeg State since 1999, introduced the Social Security 2100 Act this summer. It has since picked up two co-sponsors.
In its 2014 annual report, the Social Security Administration said that under current law, beneficiaries can expect to see scheduled benefits reduced to 77 percent of what is now expected in 2033.
That’s when the Social Security Trust fund will be depleted. The fund was first tapped in 2010 to help cover current obligations. When that well goes dry in 2033, the program will be solely dependent on the FICA taxes raised each year to fund mounting obligations.
And that simply won’t be enough to cover promised benefits. Already, administration trustees are projecting an average annual deficit of $77 billion between this year and 2018. Things will only get worse after that, as the wave of retiring baby boomers assures the number of beneficiaries will grow substantially faster than the number of workers paying into the program.
Beneficiaries of the Disability Insurance Trust Fund are bracing for more immediate benefit reductions. By law, Social Security assets can’t be used to fund that program. Trustees expect it to be fully depleted by the end of 2016. “Lawmakers need to act soon to avoid automatic reductions in payments to DI beneficiaries in late 2016,” the trustees wrote in their most recent annual report.
Larson’s bill has been assigned to the House Ways and Means Committee, which has jurisdiction over Social Security. The chairman of that committee — influential Republican Paul Ryan – will decide whether it gets reviewed.
While Larson’s office is hopeful, at least one of the bill’s proponents is doubtful Ryan will give the proposed law a full vetting.
“Since he (Ryan) has been a strong advocate of President Bush’s plan to privatize Social Security, and since it’s up to the chairman to decide what legislation gets taken up by his committee, he is not likely to take up the legislation,” said Nancy Altman, co-director of Social Security Works, a non-profit that lobbies on behalf of Social Security’s preservation.
The bill has also been sent to the House Education and Workforce Committee and the Budget Committee, according to Ed Skowronek, press secretary for Larson.
“So far it’s the only bill that strengthens benefits and keeps the trust funds solvent,” he said. “And it proves you don’t have to cut benefits. Congressman Larson is looking forward to re-introducing it in the 114th Congress. We’re optimistic that Ways and Means will take it up for consideration.’
With all of that in mind, what follows is a look at what appear to be the most important provisions of Larson’s proposal, along with what the actuaries who watch over Social Security had to say about them.
The good news is that the Social Security 2100 Act scores well, according to a letter to Larson from Stephen Goss, chief actuary at the Social Security Administration.
The proposal scores so well, in fact, that it ultimately reduces the combined programs’ reserves to 147 percent of annual costs at the end of a 75-year projection period in 2087.
A reserve level of 150 percent is considered to be solvent, meaning Larson’s bill would leave Social Security funds with a small surplus 75 years from now, according to the actuarial estimates.