The annual Social Security trustees report is once again upon us, and this year it actually bears some good news: The projections give us an extra year before the trust fund is exhausted in 2035.
In 2008, it was 2040, and the people likely to be worst affected — those who would be eligible to retire just as the trust fund was exhausted — were 35. Now, the people facing the most disruption are 54, much closer to retirement than to their college graduation.
In the meantime, the politics of fixing America’s old-age entitlements has gotten considerably worse.
This ought to be a lesson to today’s politicians. Instead, they appear intent on repeating — even amplifying — the mistakes their predecessors made in leaving reform for the future. America can’t afford the delay.
The time we have already wasted inevitably means that any fixes will be more disruptive. Pretty much everyone knows how we’re going to fix Social Security: through some combination of tax increases and benefit cuts. However, these are not the kinds of changes you want to make in one fell swoop, when today’s 54-year-olds are cutting the cake at their retirement parties. We need to give the 54-year-olds time to bump up their savings, or rejigger their retirement plans, or reconsider how long they will keep working. It would also be better to phase in new taxes gradually rather than in one painful whack.
Moreover, the longer we wait, the more likely it is that the easiest, least painful fiscal adjustments will be used to fund new spending, rather than shore up the spending we have already promised to do. We saw this with the Affordable Care Act, when the Obama administration used Medicare cuts to partially offset the cost of the new program. This got the ACA a favorable score from the Congressional Budget Office, but it also consumed many of the easy pay-fors that could have helped bring Medicare’s costs in line with revenue.
Now Medicare’s trust fund is even closer to the brink than Social Security’s; the latest trustees report says it will be insolvent by 2028.
But the short time we have left is not our only problem with either program. We also have to worry about new political obstacles that have arisen over the past 15 years.
Any effort to balance the budgets of our two biggest programs is going to be politically painful. We can find reforms that don’t sound quite as bald as “raise taxes or cut benefits,” such as “abolishing the cap on earnings taxed for Social Security” or “raising the retirement age.” But people will still see the results in their paychecks or their Social Security checks, and they won’t like what they see.
Senior citizens are America’s most powerful voting bloc. Any party that makes those changes unilaterally will be slaughtered — which means neither Republicans nor Democrats will do it unilaterally, unless they happen to be the unlucky folks who get stuck holding the bag when the money actually runs out.
This is the gloomiest development of the past 15 years. Not only are the parties more polarized than they were, making the bipartisan deal we need unlikely, but they struggle even to pass legislation on their own. President Donald Trump’s Obamacare repeal and President Biden’s Build Back Better agenda went down in flames not because of opposition obstructionism but because they couldn’t rally enough of their own party’s senators to make their bills pass. And these were minor compared with touching Social Security, the “third rail of American politics.”
Furthermore, Democrats now have a much more muscular left wing than they did a decade and a half ago, and that wing wants Medicare-for-all and increased Social Security benefits, not an austerity agenda. The Republicans, meanwhile, have sprouted an energetic populist faction that is also likely to oppose any attempt to touch benefits — or to raise taxes or allow in immigrants who might temporarily ease some of the fiscal strains on the programs.
The politicians of yesteryear treated our entitlement problem like a fine wine, bound to improve if we only let it ferment for a few more years. Instead, the problem got even worse. We can’t afford to wait around and watch it get harder still.