This week, Social Security’s trustees issued a dire warning. In their 2019 annual report, they announced that future costs for the program will be 20 percent higher than projected revenue. As soon as next year, Social Security’s yearly expenses are expected to exceed its income — forcing the program to begin drawing down its trust funds.
Those funds will be depleted in 2035, but we can’t wait that long for reform. Even if we were to cut off all new beneficiaries at that time — a measure so drastic that lawmakers would never allow it — the program’s financial shortfall would still be too enormous to avoid insolvency.
Social Security, in other words, has to be saved now.
Other thorny problems, such as containing the costs of health care and education, lack clear and immediate policy solutions. Social Security, by contrast, mostly requires leadership and political will. As Sen. Daniel Patrick Moynihan (D-N.Y.) sometimes quipped, “Social Security is easy; it’s just difficult.”
In 1983, the United States’ political class was still up to the challenge. Leaders of both parties — President Ronald Reagan and Sen. Bob Dole (R-Kan.), House Speaker “Tip” O’Neill (D-Mass.) and Moynihan, among others — brokered legislation to stave off insolvency. It was indeed difficult: They had to delay cost-of-living adjustments and tax benefits, raise the full eligibility age and withstand opposition from powerful lobbyists. Yet they got it done, because both sides put all options on the table and compromised.
Today, the threats to Social Security are even greater. The program’s current imbalance is already much larger than the one corrected in 1983. With each year that this imbalance grows, the fixes necessary to solve it become more painful. Now more than ever, the challenge of Social Security demands bipartisan leadership.
Instead, the program is imperiled by intensifying partisan polarization — a problem that has been decades in the making. In the 1990s, multiple bipartisan reform plans were introduced in the Senate and the House using every lever available to strengthen the program’s finances — eligibility-age changes, moderation of benefit growth and new taxes, among others. But they went nowhere. President Bill Clinton, and then President George W. Bush, agreed on the need for reform and made it part of their governing agendas. Yet both were stymied in their efforts.
The situation has only gotten worse. Throughout the past decade, those seeking the presidency have focused their rhetoric more on what they wouldn’t do to repair Social Security’s finances than on what they would. Congress isn’t doing much better. Instead of charting a realistic path forward, every congressional Social Security proposal introduced this year would do one of two things: add a new parental leave benefit, or significantly increase projected costs through a general benefit increase.
For more than 35 years, however, Congress has conspicuously declined to raise taxes enough to fund Social Security’s current benefit schedule. Unless and until there is some evidence that lawmakers are willing to raise Social Security taxes enough to close the current shortfall, for example by immediately raising the payroll tax rate from 12.4 percent to 15.2 percent, or enacting an equivalent tax increase, any discussion of further benefit increases is irresponsible fantasy.
Given these obstacles, what should today’s leaders do? From a pure policy perspective, ideal solutions would focus primarily on cost containment. Social Security costs are rising faster than our economic capacity, workers’ living standards are growing more slowly than beneficiaries’, the program facilitates some undesirable transfers of income from poor to rich, and the younger generations who already face large net-income losses through Social Security are those who would bear the brunt of any new taxes. Politically speaking, however, a reform package capable of winning both Republican and Democratic support would almost certainly have to contain a blend of changes — including moderating benefit growth, adjusting eligibility ages and increasing tax revenue.
The Social Security program and those who depend on it desperately need responsible bipartisan leadership. Let’s hope that our elected leaders, and at least one of those seeking high office in 2020, will provide it.
Blahous holds the J. Fish and Lillian F. Smith Chair at the Mercatus Center at George Mason University, is a visiting fellow at the Hoover Institution, and served as a public trustee for Social Security and Medicare from 2010 through 2015.