By Jack Phillips
In December, CBO estimated that the Social Security trust funds will evaporate by 2033. But Swagel said that a new analysis suggests it may dry up before 2032, which marks the end of the budget window, according to December’s report.
“The Social Security solvency date—the exhaustion date for the trust fund—is now within the budget window,” CBO Director Phillip Swagel told reporters this week.
Swagel made reference to last year’s decision from the Social Security Administration to make an 8.7 percent cost-of-living adjustment (COLA) for 2023’s Social Security payments. The administration hiked the COLA due to decades-high inflation, which soared to over 9 percent during a period last year.
“There was high inflation, and that resulted in a high COLA, and then those benefits affect the solvency of the [Social Security] trust fund,” he told reporters. However, Swagel cautioned, “On net, it led to a deterioration in the system, and that moves our exhaustion date just forward one year but into the budget window.”
Elaborating, during a recent news conference, Swagel said that it “means in 2032, with no change in the law, beneficiaries (of Social Security) would see a reduction of benefits of more than 20 percent.”
There have been other projections about how long Social Security’s trust funds will last. A 2022 analysis by the Social Security trustees predicted it would run out by 2035.
“That does not mean Social Security will no longer be around; it means the system will exhaust its cash reserves and will be able to pay out only what it takes in year-to-year in Social Security taxes,” noted AARP, formerly known as the American Association of Retired Persons, in a post last year. “If this comes to pass, Social Security would be able to pay about 80 percent of the benefits to which retired and disabled workers are entitled.”
Future problems with the fund have long been predicted, largely because of demographic shifts. As birthrates decline, fewer people become workers, resulting in fewer payments of payroll taxes.
Meanwhile, more Baby Boomers are retiring and collecting Social Security. According to the latest Social Security and Medicare trustees report, released in June, the fund will no longer be able to pay full benefits beginning in 2035.
When the Social Security trust fund is depleted, the government will still be able to pay 80 percent of scheduled benefits for an indefinite amount of time, the Social Security trustees report said, while Medicare will be able to pay closer to 90 percent of scheduled benefits. That means, if nothing changes, future generations can expect to see a 20 percent across-the-board reduction in payments, with a 10 percent reduction in Medicare coverage.
After the COLA increase last year, William Arnone, CEO of the National Academy of Social Insurance, told The Associated Press that “the two economic enemies of the trust fund are high inflation and low employment, meaning not only high unemployment but low wages.”
“When they hit together, it’s a double whammy,” he said. In that context, a high cost-of-living adjustment can be “bad for the trust fund but great for the beneficiaries.”
Republicans and Democrats have proposed a variety of policy fixes. The last time legislation was passed to address Social Security’s future was in 1983, AP notes.
Sen. Rick Scott (R-Fla.), who has taken fire from both Republicans and Democrats, recently released an opinion article saying that he doesn’t propose a cut to either Medicare or Social Security.
“Note to President Biden, Sen. Schumer and Sen. McConnell—As you know, this was never intended to apply to Social Security, Medicare, or the U.S. Navy,” Scott wrote for Washington Examiner, addressing Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.).
“I have never supported cutting Social Security or Medicare, ever. To say otherwise is a disingenuous Democrat lie from a very confused president. And Sen. Mitch McConnell (R-Ky.) is also well aware of that. It’s shallow gotcha politics, which is what Washington does,” Scott added.
It came as former President Donald Trump this week cautioned Scott on potential cuts.
“Bad news for Senator Rick Scott of Florida! Club for NO Growth just announced they are going to back him, and without my backing them, an Endorsement from them is the kiss of death,” Trump wrote on Truth Social, his social media platform, this week.
The former commander-in-chief added: “Be careful, Rick, and most importantly, fight for Social Security and Medicare. THERE WILL BE NO CUTS!”
The Associated Press contributed to this report.