Social Security May Not Make It Another Four Years
The problem with the long-term solvency of Social Security and Medicare is that the problems have always been long-term problems. It’s always been easier for Democrats to pander to short-term objections to tax hikes/benefits cuts, and for Republicans to pay nothing more than lip service to fixes, because the day of reckoning was always in the distant future. A time when other people would be holding elected office.
But the problem isn’t so distant now. Social Security may not be able to pay out full benefits for the next four years. Meaning Social Security could be hitting the skids before we elect another President:
As President Obama faces pressure on the left to defend federal entitlement programs from the benefit cuts that the Republicans say are necessary to keep the programs solvent decades down the road, one part of Social Security could fall short of paying out full benefits within a few years — even while Obama is still president.
Over the long term, Social Security and Medicare have promised tens of trillions of dollars more in benefits than the nation can pay for under current policies. But Social Security’s disability trust fund is in even worse shape, and current estimates say by 2016 it won’t have enough money to pay full benefits.
“That’s three years from now,” Jim Capretta of the Ethics and Public Policy Center said. “And given the president’s rhetoric and his posture, it’s quite clear that he has no intention of doing anything about it.”
The fiscal security of the disability trust fund got rapidly worse as the unemployment rate rose. The number of applications has almost doubled in the last 10 years, from 1.5 million a year in 2001 to more than 2.8 million a year in 2012.
Let’s be sure to remember that what has hastened this day was President Obama’s payroll tax cuts which weren’t renewed as part of the “fiscal cliff” deal. There has been some political blow back for Democrats as Americans, who had gotten used to lower rates of withholding, were hit with some sticker shock, but that was unavoidable given the fiscal situation the program is in. Leaving those tax cuts in place was only going to bring Social Security’s date with destiny a little bit closer (not to mention Medicare).
It doesn’t seem as though there’s any momentum for reform in Washington DC either, though that might change once we’re staring down the barrel of benefits cuts due to revenue shortages. But the “solutions” talked about most often – reductions in benefits and/or increases in payroll taxes – are not only going to be extremely unpopular with the public, their temporary fixes at best. Maybe we can change the downward trajectory of the program by a decade or two by sucking more money into the program and paying out less, but that’s kicking the can. What do we do a decade or so hence when we’re faced with the same solvency problem again?
More taxes? More cuts to benefits?
If we, as a nation, were capable of being adults about this we’d recognize that this program is a bad deal and begin an exit strategy. But if there’s one thing that’s a certainty in all this, it’s that grownups won’t be calling the shots.