By: Sid Salter
American voters occupied themselves during the 2020 presidential and congressional campaign cycle, talking about COVID-19, the Amy Coney Barrett nomination to the Supreme Court, national social justice strife, and an uncertain economy.
What didn’t get much attention or discussion is the looming national crisis facing the Social Security system or the Old Age, Survivors, and Disability Insurance system as it is formally known. For all their flowery talk of “life, liberty, and the pursuit of happiness,” Social Security was not the province of our nation’s founders.
Social Security was the product of the Great Depression in 1935. Initially covering private-sector workers, it was expanded in 1939 to cover surviving dependents when the worker retired or died.
The 1950s saw Social Security substantially expanded to cover farmers and household workers, the military, most public employees (state and local), and preachers. By 1954, disability insurance was added to the program.
The next major expansion of Social Security came in 1965 when Medicare was enacted to provide health care for those aged 65 and older. In 1973, additional Medicare disability benefits were provided to certain individuals under age 65.
How many Americans are impacted by Social Security? According to the most recent trustee’s report in April, the program at the end of 2019 “provided benefit payments to about 64 million people: 48 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers.
“During the year, an estimated 178 million people had earnings covered by Social Security and paid payroll taxes on those earnings. The total cost of the program in 2019 was $1,059 billion. Total income was $1,062 billion, which consisted of $981 billion in non-interest income and $81 billion in interest earnings,” according to the report.
So, what’s the problem? In 1950, 120 workers were paying into the Social Security system for every individual drawing a pension from it. By the year 2035, it is projected that there will be 2.3 workers contributing to every worker drawing a pension. By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million as the Baby Boomers reach that milestone.
What does that imply? Well, think of it this way – bout 25 percent of Social Security recipients report it as their sole source of income. About 65 percent of recipients report Social Security as 50 percent or more of their income.
In 2017, the average Social Security check for men was $1,503 per month or $18,041 annually, while women averaged $1,196 per month or $14,353 annually.
The Washington-based Committee for Responsible Federal Budget (CRFB) analyzed the 2020 Trustees’ Report and offered this dismal assessment: 1) Social Security will be insolvent in 2035, just 15 years into the future; 2) Trustees projected the Social Security program would run cash deficits of more than $2 trillion over the next decade, the equivalent of 2 percent of payroll or 0.7 percent of Gross Domestic Product (GDP); and (3) Social Security’s finances are deteriorating. Between 2010 and 2019, the program’s actuarial deficit grew by nearly 50 percent from 1.92 percent of payroll to 2.78 percent. Over the past year, it has grown by an additional 15 percent to 3.21 percent of payroll.
Oh, yes, and none of those numbers assume the fiscal impacts of COVID-19 on the program’s finances. Suffice to say those impacts will be substantial and will likely accelerate Social Security problems.
Finally, what happens if Social Security becomes insolvent? The CRFB projects that “upon insolvency, all (Social Security) beneficiaries will face a 21 percent across-the-board benefit cut that will ultimately grow to 27 percent.
There was a time when Social Security and Medicare were the “third rail” of American politics. Touch it, mess with it, let it fail, and immediate political death followed. Whether or not that’s still true, we shall see.
The laments of the far left about “income equality” tend to roundly ignore the long national effort to address income inequality and poverty called Social Security and Medicare. How can we seriously discuss income equality when we are letting Social Security and Medicare die on the fiscal vine?