As expected, the weak economy has taken a toll on Medicare and Social Security trust funds, with each projected to be depleted earlier than previously projected because of decreased payroll withholding.
The Medicare fund, now slated for exhaustion in 2024, would be depleted even sooner without savings in the Obama administration's health care reform law.
Social Security is good until 2036, instead of 2037. And, though you'll read payments this year will exceed payroll withholding (for the 16th times since 1958), that's not the whole story on Social Security. Some more background follows from a group fighting to preserve Social Security.
(Had to laugh at a recent news release. Rep. Tim Griffin is still defending the Republican plan to end Medicare as a way to save it for future generations. That's just a lie, if you understand Medicare to be what it is — a single-payer health insurance system for all. Griffin's plan would scrap that and give people younger than 55 vouchers that might or might not pay for the insurance they need in elder years.)
Media Backgrounder for Release of 2011 Social Security Trustees Report
Program Expected to Have Large Surplus Once Again
Washington, DC — As reporters cover the release of the 2011 Trustees Report, the Strengthen Social Security Campaign thought it would be helpful to provide you with an analysis of the 2010 Trustees Report with respect to the program’s financial condition. We believe the 2011 report will have similar findings. We also encourage you to speak with one of the campaign’s two Co-Chairs, Nancy Altman and Eric Kingson, who are nationally-recognized Social Security experts (see bios below). The Campaign will provide an updated version of this backgrounder Friday afternoon after the 2011 Trustees Report is issued.
The 2010 report had two critical findings:
1. Social Security was projected to have a surplus of $113 billion in 2011.This is based on revenue of $854.8 billion and outlays of $741.7 billion (See Figure 1). Social Security has three revenue sources: Payroll contributions from employers and employees, interest earned on Social Security’s U.S. Treasury bond assets, and income taxes on the Social Security benefits paid by those with higher incomes (see Figure 2).
It is true—but of no consequence—that the $741.7 billion in benefits paid and administrative costs in 2011 exceed the amount of payroll tax contributions. But that is not surprising, especially in an economic slump. It has happened 16 times since 1958, according to the Social Security Administration. More important, the program continues to have a large annual surplus even during a major economic downturn when more than 13.7 million Americans are officially unemployed and countless more were forced to retire early and begin collecting Social Security benefits due to the lack of job opportunitiesduring the Great Recession.
2. Social Security was projected to be able to pay all benefits until 2037. Social Security’s surplus was projected to be $2.6 trillion in 2011, and the surplus is projected to peak at $4.2 trillion in 2025. With no action Social Security will have sufficient income and assets to pay all monthly benefits in full and on time until 2037.
This data shows that Social Security is not in crisis. It also does not contribute to the federal deficit. By law, Social Security cannot borrow and it cannot make benefit payments if it lacks the revenue to cover them. Its only recourse is to cut benefits. That is why Social Security should not be part of any deficit-reduction deal.
The Trustees Report reminds us that lawmakers do need to address Social Security’s long-range funding gap, which the 2010 Trustees Report projected would occur in 2037, when the program will be able to pay about 78 percent of benefits through 2084; but there is no need for haste. Moreover, considering Social Security at the same time as the deficit debate risks reinforcing the widespread perception that the government is illegally commingling Social Security’s dedicated revenue with general fund revenues and stealing the contributions of hardworking Americans. Social Security should be considered in the sunshine after the current deficit debate is concluded and after the federal debt limit has been increased.
This long-range funding gap can be closed relatively painlessly by scrapping the payroll tax cap. Congress should raise the Social Security tax cap so that the 6 percent of the population that makes more than $106,800 a year pays taxes on all of their wages just like everyone else who makes less than that amount has to do. This will guarantee that full Social Security benefits can be paid for the next 75 years and beyond.
Nancy Altman, Co-Chair, Strengthen Social Security Campaign
Nancy Altman has a 35-year background in the areas of Social Security and private pensions. Before she became co-chair of the campaign, she taught at Harvard University. Prior to that, she served as Alan Greenspan’s assistant in his position as chairman of the so-called Greenspan commission, the bipartisan commission whose recommendations formed the basis of the Social Security Amendments of 1983. She is the author of The Battle for Social Security: From FDR’s Vision to Bush’s Gamble (John Wiley & Sons, 2005).
Eric Kingson, Co-Chair, Strengthen Social Security Campaign
Eric Kingson, professor of social work at Syracuse University's School of Social Work, is also a Senior Research Associate in the Maxwell School’s Center for Policy Research. Kingson served as policy advisor to two presidential commissions — the 1982-1983 National Commission on Social Security Reform and the 1994 Bipartisan Commission on Entitlement and Tax Reform. His scholarship examines the politics and economics of population aging, Social Security, and the public and private exchanges across generations.
For more information about the Co-Chairs, visit http://strengthensocialsecurity.org/staff-co-directors