Brenton Smith: The Social Security conundrum (2024)

The trustees of the Social Security Trust Fund recently released their annual report on the financial outlook for the program over the next 75 years.

Generally, the media have parroted the false narrative that Social Security got a slight boost from a “strong” economy. Martin O’Malley, commissioner of the Social Security Administration, described the latest report “as a measure of good news for the millions of Americans who depend on Social Security.”

That isn’t how the numbers in the report look to me. The projections appear to be little more than intellectual cannon fodder for Congress to do nothing for an additional two years. That sounds more like a disaster for the millions of Americans who depend upon Social Security.

Clearly, how the media cover Social Security is fundamentally flawed. The news cycle compresses more than 250 pages of complex financial analysis into two numbers: the date the combined programs will reach insolvency, and the systemwide reduction that would follow.

This is not a 10,000-foot view of the system’s prospects or even a 50,000-foot view. It is the Hubble telescope view of a program on which most Americans will depend at some point in their lives. Voters need to think about these programs as though their lives depend upon it. Statistically, most of us will.

Additionally, the coverage unwisely aggregates two programs, the old-age/survivors and disability funds, into a unified outlook. This approach makes sense only in a world where these programs share a common financial fate. They don’t. According to the Congressional Research Service, “Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other.”

The distinction is important because one program shows the strongest financials it has had in decades while the other has been steadily losing ground over that time. Lumping these programs together serves to hide the financial difficulties of one in the solvency of the other.

Maybe Congress should consider a permanent adjustment to the allocation of payroll taxes, or maybe a reduction in payroll taxes collected from workers to support a well-financed program. Until Congress changes the law, it is unwise to assume that those eligible for disability benefits will quietly absorb 75 years of partial checks so that everyone else can collect full benefits for an extra year.

So, in the words of Commissioner O’Malley, it would be more accurate to say that the latest numbers serve as even more good news to those Americans who depend upon disability benefits.

For the tens of millions of Americans who are dependent on the old-age and survivors fund, on the other hand, things still look pretty grim. Insolvency continues to play out in 2033. That date means that someone who turns 80 years old today expects to outlive the system’s ability to pay scheduled full benefits.

Where is the good news in that number for those 79 years old and younger?

The forecast provided by the trustees does not reflect an improving economy in 2023 or 2024. The good news in the numbers is something that may or may not happen between 2030 and 2040, falling cost rates particularly in the disability system. The numbers cited by O’Malley more likely show the national economy improving more than a decade in the future.

Too many voters believe that 2035 is a guarantee. It isn’t. It is a stern warning about what might happen even in a relatively robust economy where lawmakers can pass unpopular laws. If the expected economic Pollyanna fails to materialize, the reduction in benefits may occur sooner, delivering severe cuts to the millions of Americans who depend on Social Security.

The report is not good news, but rather a frightening incentive for politicians to do nothing. That is terrible news.