Washington, DC -
11/09/2010 - Social Security faces a significant shortfall, which policy makers would be better off addressing sooner rather than later, according to a new paper, Social Security Shortfall Warrants Action Soon, released by the Pew Economic Policy Group. Robert Greenstein, executive director of the Center on Budget and Policy Priorities, and Charles Blahous, public trustee for Social Security and Medicare and former economic adviser to President George W. Bush, coauthored Social Security Shortfall Warrants Action Soon. They agree that the shortfall is real and that policymakers should act soon to fix it. Although favoring different strategies to close the gap, they agree on the reality and scope of the problem.
“Addressing the solvency of Social Security often is considered a third-rail in political debates. This bipartisan analysis demonstrates that there is common ground and it would be better to address the gaps sooner rather than later,” said Ingrid Schroeder, director of the Pew Fiscal Analysis Initiative.
According to the authors, while the Social Security trust fund is currently projected to remain solvent through 2037, the retirement of the “baby boom” generation will move the program from annual surpluses to growing annual deficits well before then. If no action is taken before the point of trust fund exhaustion, benefit payments would be reduced to the level that incoming tax revenues can support. This would mean a sudden 22 percent reduction for all beneficiaries (including those already receiving benefits) in 2037.
“Though some have questioned the trustees’ projection of a shortfall, we find that future outcomes are extremely unlikely to deviate from current projections by enough — and in the right direction — to eliminate the need for legislative action,” said Greenstein and Blahous. “Action soon is far preferable to waiting until the need is more dire.”
Acting soon would yield several benefits:
- Reductions in scheduled benefits and/or tax increases can be phased in gradually;
- More options for restoring solvency will be available;
- Beneficiaries and taxpayers will have more advance notice of changes and will be able to adjust their work, saving and retirement plans accordingly;
- Confidence in Social Security will be strengthened; and
- Strengthening Social Security’s finances could provide a modest early step toward closing the federal government’s long-run fiscal gap.
The report Social Security Shortfall Warrants Action Soon
is available as a PDF download, as well as an executive summary