Recently, Social Security celebrated its 85th birthday! Since its inception, the program has been woven into the fabric of our nation and let countless seniors retire with dignity and respect. In 1935, when President Franklin D. Roosevelt signed the legislation, an astonishing 50% of seniors lived in poverty. Roosevelt said regarding Social Security, “It is, in short, a law that will take care of human needs…” Fast forward, and today the legislation keeps 15 million seniors out of poverty, which is a remarkable achievement. Presently, Social Security provides a modest benefit of $1,514 on average a month to 45 million retired Americans.
Given the critical role Social Security plays in the lives of older Americans, it’s important to examine the health of the program moving forward. In April, the 2020 Social Security Trustees Report, which outlines the fiscal solvency of the program, indicated the Social Security Trust Funds would be sufficient to pay future obligations until 2035. In 2035, the program can pay about 79% of its obligations.
Sadly, the prospect of a shortfall has caused some people to say, “Social Security is going broke.” Nothing could be further from the truth. While a shortfall might exist, that doesn’t mean Social Security is going broke. Social Security is funded through the payroll tax; consequently, even if Congress did not provide a legislative fix, there would still be revenue coming into the program. While not ideal, Social Security funding 79% of its obligation is a far cry from an account with no money.
As everyone is aware, COVID-19 has unfortunately slowed our economy. People might not know, though, the economic downturn has negatively impacted Social Security. During a sluggish economy with less people are working, fewer individuals are drawing a paycheck. Thus, employers and employees are contributing less in payroll taxes. If our government is generating less money from payroll taxes, then Social Security is receiving less revenue.
So how does the pandemic impact the long-term future of Social Security? The short answer: In July, Stephen Goss, Chief Actuary for the Social Security Administration, testified before the House Ways and Means Subcommittee on Social Security. He was asked to answer this question. Goss said the pandemic’s impact on Social Security depends on how long the virus lasts. If the economy rebounds in 2021 and we don’t have a second wave, Goss said, the trusts funds short fall might only accelerate by a year.
However, “if closure due to the pandemic extends through 2021, or if there is a permanent reduction in the level of economic activity after recovery from this recession (as has been the case for some recent economic recessions), then the negative effects on the actuarial status of the combined OASI (Old Age and Survivors Insurance Trust Fund) and DI (Disability Insurance) Trust Funds could be substantially larger,” he said. Goss also noted the conclusions drawn in the 2020 Social Security Trustees Report were not based on the pandemic.
Regrettably, talks between the White House and Congress are stalling regarding further federal stimulus legislation in response to the virus. As a result, the president issued an executive order that could potentially cut payroll taxes for the rest of the year. Clearly, the immediate future Social Security revenue is not going to be stable, making the president’s executive order cutting payroll taxes disappointing. Many estimates predict that it could cause a loss of about $100 billion in the program’s revenue. Any potential cuts to the payroll tax could erode one of our nation’s most important programs for seniors. At a time when so many people are struggling, I do not think it’s wise to propose defunding money from Social Security, a program that lifts millions of people out of poverty.
I am certainly not arguing against federal stimulus legislation. While the money in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is appreciated, it does not provide adequate funding to meet the challenges of the day. Legislation like The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) and the Emergency Housing Assistance for Older Adults Act of 2020 are important bills that secure funding for all Americans, particularly seniors. So, we can provide relief to millions of Americans without threatening Social Security.
A federal program’s 85th birthday is a good time to take stock. Social Security has brought the senior poverty rate down by about 40 percentage points — not a bad accomplishment for an 85th birthday! It is never a good time to threaten Social Security’s future; it’s an especially bad time to do so now.. As Roosevelt said, “It is, in short, a law that will take care of human needs…”
Evan Carmen, Esq. is the Legislative Director for Aging Policy at the B’nai B’rith International Center for Senior Services. He holds a B.A. from American University in political science and a J.D. from New York Law School. Prior to joining B’nai B’rith International he worked in the Office of Presidential Correspondence for the Obama White House, practiced as an attorney at Covington and Burling, LLP, worked as an aide for New York City Council Member Tony Avella and interned for Congressman Gary Ackerman’s office. Click here to read more from Evan Carmen.
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