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The Sky Is Not Falling

May 31st, 2013 · No Comments · Blog, Featured Home Page Post

Nuclear bomb imageThe Social Security Administration Board of Trustees released their annual report today regarding the financial health of the Social Security trust funds. And guess what? – Social Security isn’t “going broke.” There is no immediate crisis in the fiscal health of our social insurance programs. I repeat, no immediate crisis.

What I am about to say might surprise you based on all that you hear about Social Security.

The 2013 Trustees report shows that the programs have a large and growing surplus. 

You read that right – a surplus! What’s more:

  • The surplus has grown year after year, even during the recession
  • As a result of decades of foresight and planning, its cumulative surplus is projected to be $2.73 trillion in 2013, growing to $2.92 trillion by 2021
  • Social Security has a large surplus in 2013 because it has more than enough income from its sources of revenue — payroll contributions, interest payments on the $2.73 trillion invested in U.S. Treasury bonds, and taxation of benefits — to cover scheduled benefits.

But wait a minute? Haven’t we heard over and over again that the program will be bankrupt?

That is not true either. Here are some more facts:

  • Our Social Security system can continue to pay all scheduled old age, survivors, and disability benefits until 2033, and about 77% of promised benefits if we do nothing before then
  • With modest increases in revenue, Social Security will be able to pay full benefits throughout the century and beyond
  • The Disability Insurance (DI) trust fund by itself is projected to pay full benefits until 2016. If no action is taken before then, the DI trust find will be able to pay 80% of scheduled benefits thereafter.

The report shows that Social Security is working exactly as it should –protecting the financial security and dignity of retirees, people with disabilities, and family members of workers who die, just as it was designed to back in the day of FDR.

You might think, “Okay, that’s good news, but don’t we need to do something soon to take care of the Disability Insurance trust fund, and the whole program’s finances in 2033?”

The short answer is yes, but there is no need to panic or do anything drastic. In the past, Congress has reallocated funds from the Old Age and Survivors Trust Fund into the DI Trust Fund (and vice-versa) to cover shortfalls many times. Eleven times to be precise, under GOP and Democrat administrations. And that would give us until 2033 to fix the overall funding shortfall.

Modest increases in revenue, phased in over time, could solve the long-term funding shortfall without breaking the promises we have made to the people who have contributed to the system and those who continue to do so. Raising or eliminating the cap on wages subject to the Social Security tax (currently $113,700), expanding the type of income taxed, or raising the overall Social Security tax rate (or some combination) could all fix the problem without cutting benefits or otherwise hurting current or future beneficiaries. And remember, as I told you back in February, 8 out of 10 Americans surveyed, regardless of party affiliation, support protecting and expanding Social Security and paying more to do so rather than cutting benefits.

Sounds like a plan.

Lisa Ekman, Health & Disability Advocates

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