‘That’s not the deal’
No crystal ball is necessary to predict Social Security’s future. Hard numbers tell the story. Social Security supports about 55 million people. By 2035, that figure will swell to 91 million. Today, for every person claiming benefits, there are three workers paying into the system. By 2035, there will be two.
Congress foresaw this as early as 1983. Inflation had driven the program’s costs through the roof. After decades of expansion, Congress finally had to scale back the program, choosing to tax wealthier retirees’ benefits and gradually raise the retirement age to 67.
Those changes, along with other adjustments, restored solvency and promised yearly surpluses that would build up the trust fund in preparation for the retirements of the baby boom. The surpluses were invested in special Treasury bonds, which, by law, must be repaid with interest.
Assuming they are, Social Security can pay full benefits through 2036. Once the trust fund is depleted, the system would rely solely on incoming taxes, and benefits would have to be cut by about 25 percent across the board.
Several factors have disrupted even that timetable. The recent recession caused the program to go cash negative years earlier than expected. The payroll tax holiday is depriving the system of revenue. And 10 years of escalating debt have crippled the government’s ability to repay the trust fund.
Certner, of the AARP, said it is unfair to cut Social Security benefits to solve that problem.
“The federal government is saying, ‘We’re in the red right now and we’re having trouble paying back Social Security, so we’d like to cut Social Security benefits,’ ” Certner said. “But that’s not the deal.”
Others argue that the deal has long since been abandoned and that the trust fund has become a fiction of accounting. “We can debate until the cows come home whether there’s really a trust fund or not,” said Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School who served on a 2001 presidential commission to study Social Security. “But the fact is, there’s no money available to pay for those benefits. And the system is short on cash now.”
Few argue that Social Security is too generous. This year, the average retirement check is $1,181 a month, or about $14,000 a year. Because of caps in the formula, even the wealthiest Americans get checks of only about $2,500 a month.
“Benefits are probably too high for upper-income workers,” who should be able to save more on their own, said David John, a retirement expert at the Heritage Foundation. But, he added, “they are actually too low for lower-income workers.”
“If we focused on this, we could fix it,” John said, but that pragmatic approach has been stymied by competing ideological views about the program’s purpose.
Sen. Richard J. Durbin (D-Ill.), who has long allied with those who want to preserve the current benefit structure, surprised much of Washington last year when, as a member of the Bowles-Simpson commission, he backed cuts in benefits as well as tax increases to stabilize the program.
The panel’s report — and Durbin’s vote — drew howls from Social Security’s defenders. Obama declined to back it. And Senate leaders resisted an effort by Durbin and five other senators from both parties to bring the plan to a vote in the Senate, an effort that ultimately failed.
In an interview, Durbin said he decided to back the Bowles-Simpson plan because he viewed it as “a chance to seize a bipartisan opportunity” to restore the program to solvency. He said friends assured him that regular people would accept ideas such as gradually raising the normal retirement age to 68 over 40 years: “To a person, they said, ‘Over 40 years? That’s not a problem.’ ”
“The reaction from some of the groups — and they’re my friends — I think was an overreaction,” Durbin said. “As I looked at this, I thought small changes made today will give 50 years or more solvency to Social Security. And that should be our goal.”