Sept. 22--With Social Security projected to become insolvent in less than 20 years, one member of Congress thinks it's time to declare a "National Save Social Security Day."
The $929 billion program provides retirement and disability benefits to about 60 million Americans. It is funded by a 12.4 percent payroll tax that's split evenly between employer and employee.
During a House Ways and Means subcommittee hearing Wednesday in Washington, D.C., Rep. Earl Blumenauer, D-Ore., said he hopes Congress will take steps soon to address the looming revenue shortfall that threatens to reduce program benefits.
"I'd love us to come together and declare a 'National Save Social Security Day' and invite people to look at this information and look at what the choices are," he said. "I think Americans want to roll up their sleeves and help us come up with alternatives that aren't draconian and that can be phased in to avoid the (benefits) cliff, without making this one more political battlefield."
Social Security is the federal government's single largest program. It's about 50 percent larger than the entire defense budget, and accounts for nearly a quarter of the $4.15 trillion in total federal fiscal year 2016 expenditures.
Although the combined disability and retirement trust funds currently have about $2.8 trillion in assets, that balance is steadily eroding because annual benefits exceed the amount of tax revenue collected each year. If nothing is done to address the situation, the program trustees estimate the trusts will run out of money by 2034. Benefits would then have to be cut by more than 20 percent to match the incoming revenues.
An alternative projection from the Congressional Budget Office suggests the trusts will run out of money by 2029.
Besides exhausting the trust funds, the trustees and Congressional Budget Office also project an enormous Social Security shortfall over the next 75 years. Congressional Budget Office Director Keith Hall, for example, told lawmakers it would take an immediate 4.7 percent increase in payroll taxes -- equivalent to about $300 billion per year -- to meet the program's obligations through 2090.
Using different economic and demographic assumptions, the program trustees say it would take a 2.66 percent increase in taxes to cover payouts during that time period, or about $185 billion per year. Alternatively, Congress could cut benefits by a similar amount, or choose some combination of higher revenues and lower benefits.
Rep. John Larson, D-Conn., said Congress has been remiss in not addressing this problem sooner.
"The last time we looked at Social Security in a meaningful way was 1983," he said. "People talk about this as an entitlement program, but it's really an insurance program. Has anyone's insurance premiums gone up since 1983? Yet we haven't adjusted Social Security (tax rates). It's incumbent upon us to meet the actuarial standards, so this program is solvent for the next 75 years."
Larson highlighted a Democratic proposal to boost Social Security benefits by 2 percent -- "so we make sure no one retires into poverty" -- while simultaneously scrapping the cap on income above $400,000 per year and increasing everyone's contribution rates by 1 percent over 25 years.
"That's about 50 cents per week for someone who makes $50,000 per year," he said. "This is an insurance issue that's very solvable by adjusting the premiums in a way that's not burdensome."
The subcommittee spent much of its time Wednesday discussing why the Congressional Budget Office and trustee projections differed so much. Several suggested that would make it harder for lawmakers to agree on a solution.
"We have to show political courage here," said Rep. Tom Rice, R-S.C. "I'm very hopeful this committee is prepared to do that, to offer a plan that takes this problem off the table -- but if the CBO and trustees (projections) differ, we won't know what number we need to hit. That makes it more difficult; when we deal with this, we don't want to have to revisit it in a few years."
Spence may be contacted at [email protected] or (208) 791-9168.
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