Social Security is the backbone of retirement planning in the United States. Nearly one-third of retirees receive almost all of their retirement income from the system and nearly two-thirds receive more than half of their retirement income from Social Security. In short, America’s retirees need Social Security. However, it is not only retirees that rely upon Social Security. The Social Security Disability Insurance Trust Fund provides benefits to disabled workers, their spouses, and children. In December 2014, nearly 11 million people received Disability Insurance from Social Security, with an average benefit of roughly $1,000 per month. While the Old-Age and Survivors Insurance Trust Fund, the portion of Social Security that most people think of as their retirement benefits, is not set to run out of money in the trust until 2033, the Disability Insurance Trust will run out in 2016 if nothing is changed. This shortfall would result in a nearly 20% cut to benefits, reducing those $1,000 checks down to $800 a month. The acting commissioner of the Social Security Administration, Carolyn Colvin, recently stressed the importance of the situation when she stated “I don’t want to be dramatic, but I’ve worked with this population my whole career. I think we [would] give them a death sentence[.]” However, some of the proposals coming from Congress and the current Administration would provide only temporary relief, again delaying any solutions to the real funding issues with Social Security.
The Social Security trusts have been in this situation before, and the solution has often been to just reallocate money from one trust to cover the shortfall in the other trust. President Obama’s 2016 budget proposed a reallocation of funds from the Old-Age and Survivors Insurance Trust Fund to ensure solvency of the Disability Insurance Trust so benefits would not be reduced after 2016. This is not a new idea; in fact, there have been multiple reallocations, eleven to be exact, between the Disability Insurance Trust and the Old-Age and Survivors Insurance Trust Fund over the years. However, this reallocation of assets would only worsen the issue by pushing the real funding problems onto the Old-Age and Survivors Insurance Trust Fund by hastening its own shortfall from 2033 to 2030.
Congress and the President need to stop pushing off the funding issues with Social Security. A recent study by the National Academy of Social Insurance, Strengthening Social Security: What Do Americans Want?, found that most Americans (84%) do not believe the current Social Security system provides enough income to retirees and that it is critical to preserve the system for future generations even if it means paying more taxes. The protection, improvement, and funding of Social Security is not a Democratic or Republican issue, but instead it is an issue for all Americans.
While reallocation between the trusts could prevent a current shortfall, and might be needed if a real change is not made, it is not the real issue. Instead, the focus must be on ensuring the solvency of the entire Social Security system for generations. Sen. Bernie Sanders (I-Vt.) recently proposed legislation to raise Social Security taxes in order to ensure the future of Social Security. These increases, would directly impact less than 10% of the country as it would raise the income cap for Social Security payroll taxes from just applying to the taxable wage base of $118,500 to additionally applying to all income above $250,000. According to Social Security actuaries, this would provide the Trust with enough money to remain solvent for the next 45 years. While an increase of taxes will come with some opposition, it could do a lot to ensure the solvency of the Social Security system. However, raising taxes should not be the only avenue examined. It is time to get serious about fixing the issue. There are many worthwhile proposals and ideas (in fact the Social Security.