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There was more bad news from Social Security at the end of March. The major finding of the Annual Report of the Social Security Trustees was that the retirement and survivors fund runs out of money in 2033, just 10 years from now. Last year, the report said it was 12 years away.
And yet, President Joe Biden, former president Donald Trump, and most other politicians endanger Social Security by refusing to reform it. They are afraid to touch the third rail of American politics.
If they were honest, their message to retirees, near retirees, and all future generations would be that—without reform—their benefits will be cut by over 20 percent in only 10 years. Of course, neither Biden nor Trump will be in office then.
The trustees gave lip service to the importance of making reforms "sooner rather than later" and "in a timely way in order to phase in necessary changes gradually."
Those phrases have been repeated for decades, but there is no push from the trustees for timely—or any—reforms. There are seven president-appointed and Senate-confirmed officials who sign the report. The six trustees are the secretaries of treasury, labor, and health and human services; the social security commissioner; and two public trustees (a Democrat and a Republican). The seventh signatory is the secretary to the trustees (principal deputy commissioner of social security, a position I held for four years).
Perhaps the reason there is no push for reform is that there have been no public trustees since 2015. Historically, the public trustees have been advocates for reform. Three of the other positions are acting, including the social security commissioner. That means only two of the seven signers have been confirmed by the Senate.
That is no way to run the single biggest government program, which spent $1.2 trillion in 2022, with 66 million Americans collecting Social Security with another 181 million paying into it. Since the Senate-confirmed social security commissioner was fired by President Biden without cause (even though cause is required by the law), service at Social Security has suffered and there is no push for reform. Just the opposite.
As Social Security is a bedrock, long-term program, the trustees do a 75-year forecast in every annual report. One of the numbers they calculate is the net present value of the shortfall over the 75-year period. They calculated that the government would have to put $22.4 trillion into Social Security, in addition to all the projected payroll and income taxes, to keep paying scheduled benefits.
To put that $22.4 trillion in perspective, it is about equal to the publicly held debt of the United States, accumulated throughout our history.
More bad news is that the present value shortfall is up $2 trillion from just last year. When I was helping President George W. Bush push for Social Security reform in 2004-05, the total net present value was $4 trillion. That is well less than 20 percent of today's shortfall.
There is still time to fix Social Security and reduce the government's massive debts, which the Congressional Budget Office projects will nearly double over the next 10 years.
The blueprint is the Bipartisan Policy Center's Commission Report, which I co-chaired with former senator Kent Conrad (D-N.D.). We pulled together a 19-member commission of senior politicians, corporate and union leaders, and pension experts, including the last two public trustees of Social Security. Our balanced proposals offer a path to fixing Social Security for the next 75 years and beyond.
Our commission's proposals increase benefits for lower-income retirees and survivors, while slowing the growth of benefits for higher-income retirees by slowly increasing the retirement age, improving the benefit formula, and using a better inflation index. Yes, the level of earnings on which payroll taxes are levied (currently up to $160,200) should be raised. Maybe more controversially, we proposed that FICA (half paid by the employer) should be raised by a total of 1 percentage point over 10 years. Given inflation, that annual 0.05 percentage point increase would be hardly noticeable for most American workers, but it would help protect their future.
It is time for politicians to face reality and tell the American people the truth. One of the results of the debt ceiling chicken game should be the creation of a Social Security Commission like the last successful one, created by President Ronald Reagan in 1982.
Its results should be presented to the new president in 2025 for action.
James Lockhart is a Senior Fellow at the Bipartisan Policy Center, was the Principal Deputy Commissioner of Social Security, and was twice nominated to be a Public Trustee of Social Security. He also served as the first Director of the Federal Housing Finance Agency.
The views expressed in this article are the writer's own.
