Another Urgent Item For Biden: The Social Security Funding Crisis

WASHINGTON — When you inherit a mess, as President Joe Biden has, everyone needs you to make their issue a priority.

The novel coronavirus is still spreading, causing thousands of deaths each day, and we can't get enough vaccines in the arms of people to stop it, or at least slow it down.

People are struggling to pay their rent or mortgages or put food on the table. Just last week, 900,000 people filed new unemployment claims.

Biden is moving fast to help. He's extended the payment pause for federal student loans until September. By executive order, he's extended a freeze on evictions nationwide through the end of March. Biden also extended to March a moratorium on foreclosures and evictions for borrowers with federally guaranteed mortgages.

But there's another matter that should get Biden's immediate attention. Right now, while the Democrats control the House and Senate, Biden needs to put this on his to-do list: fixing Social Security.

Many young adults already believe Social Security won't be around for them to collect. Although Social Security isn't bankrupt, it's certainly facing a serious shortfall in income to cover promised payments.

"Social Security and Medicare both face long-term financing shortfalls under currently scheduled benefits and financing," according to the 2020 trustee report for the Social Security and Medicare trust funds.

The reserves of the Old-Age and Survivors Insurance Trust Fund (OASI), which pays retirement and survivor benefits, will be unable to pay full benefits by 2034, the Social Security Board of Trustees projected. Without legislative action, in little more than a decade, OASI will have only enough tax income to pay out 76 percent of scheduled payments.

The Disability Insurance Trust Fund, which pays disability benefits, is in slightly better shape. The fund will have enough money coming in to cover 92 percent of scheduled benefits. The disability trust fund is healthier, in part, because applications have been decreasing since 2010. The number of disabled-worker beneficiaries receiving payments has also declined.

However, given how covid-19 is impacting millions of individuals, the solvency of the disability trust fund may be in jeopardy sooner than the projections show.

In an update last April, the trustees noted the covid-19 pandemic could impact the financial health of the funds. "The duration and severity of the pandemic will affect the estimates . . . and the financial status of the program, particularly in the short term," said Andrew Saul, commissioner of Social Security.

And now we know that some people are having health issues long after recovering from the virus. The Centers for Disease Control and Prevention (CDC) had reported that some long-term symptoms have included joint pain, respiratory abnormalities, inflammation of the heart muscle, and depression.

In November, Social Security's Office of the Chief Actuary released an informational letter updating the pandemic's effect on the trust funds, noting "the effects of the pandemic and recession will be significant."

More people unemployed means less payroll taxes collected. Low interest rates may help boost consumer spending, but it also means less income earned on the securities held by the trust funds, the Peter G. Peterson Foundation pointed out in a blog post last year.

The covid-related economic downturn will likely accelerate the timing of the shortfalls, according to a brief by the Bipartisan Policy Center.

Social Security is literally the financial lifeline for millions of Americans. Fifty-seven percent of retirees rely on Social Security as their major source of income, according to a 2018 Gallup poll.

Former President Donald Trump left office without taking any action to fix Social Security.

One solution often touted is raising the income threshold for the Social Security payroll tax. This year, the maximum amount of earnings subject to the Social Security tax will increase to $142,800, up from $137,700. Earnings above the maximum are not subject to the Social Security tax, which is 6.2 percent for employees and a matching 6.2 percent for employers.

There's no income cap for the Medicare tax, which is 2.9 percent. (Employers pay 1.45 percent and employees cover the other half.). The self-employed pay the entire 12.4 percent for Society Security and 2.9 percent for Medicare.

Of the 178 million workers with earnings in Social Security-covered employment in 2019, about 6 percent had earnings that equaled or exceeded the maximum amount subject to taxes, according to the Social Security Administration.

During his campaign, Biden said that, if elected, he would address the solvency problem by adding a new tier of FICA contributions for high earners. He recommends applying the payroll tax to income above $400,000, which would still only extend the life of the trust funds by about five years, according to a report by the Urban Institute.

Biden said older Americans should be able to count on a "steady, secure income as you age so your kids won't have to take care of you in retirement." This means protecting and strengthening Social Security, he said.

On the White House website, the Biden administration listed its "immediate priorities" - containing covid-19, encouraging a clean energy revolution, addressing systemic racism, providing relief to people struggling with the economic fallout from the pandemic, providing affordable health care, reforming immigration, and finally restoring America's global standing.

It's an ambitious list. Every action is worthy of Biden's attention now, but tackling the looming Social Security crisis needs top billing, too.

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., Washington, D.C., 20071. Her email address is michelle.singletary.washingtonpost.com.

Michelle Singletary

Columnist