The Social Security Board of Trustees recently released its Annual Report to Congress on Social Security’s long-term finances. Despite all the hype from the doom-and-gloomers, the program remains in very good shape.
According to the trustees’ report, Social Security trust fund reserves are at $2.73 trillion, and will continue to grow through 2020. Beginning in 2021, trust funds will begin to shrink. After 2033, even when the reserves are gone, the program’s on-going income will cover 77% of scheduled payments.
With only a 23% shortfall starting in 20 years, it’s not too difficult to balance Social Security’s finances. In May, Sen. Mark Begich of Alaska announced a plan to strengthen the program for the long haul.
Begich’s Social Security Fairness Act would lift the cap on high-income earners. Currently, income of more than $113,700 is not subject to the payroll tax, which funds the Social Security trust fund. This cap is a huge tax giveaway to wealthy people, allowing them to pay at a lower rate than middle income and poor wage earners.
Begich says eliminating this cap and taxing all income would keep Social Security solvent for the next 75 years.
Begich’s bill would also change the way cost-of-living adjustments are calculated, replacing the consumer price index (CPI) for workers with a formula commonly called CPI for the elderly (CPI-E), which would increase seniors’ benefits.
He said he could not support a “chained CPI,” which was included in President Obama’s 2014 budget. Begich said a chained CPI hits low-income seniors and people with disabilities especially hard because it would reduce their benefit payments over time. Republicans have insisted on including a chained CPI in any entitlement reform legislation.
Social Security remains a highly efficient program, proof that the federal government does some things right. Operating overhead is 0.8% of total expenditures, about the same as a discount mutual fund. It’s been a fraction of 1% for decades.