A Plan to Fix The Social Security Deficit Problem?
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
November 21, 2019
Impeachment, gun control, climate change, immigration and Medicare for All top the list of issues most Americans seem concerned about as we head into the 2020 Presidential and Congressional elections. One of the sleeper issues in next year’s election may very well be the future financial viability of the Federal Social Security Program, according to surveys and articles appearing recently in Market Watch and Next Avenue.
The Social Security Program has long been an interest of mine. I remember my immigrant grandparents were among recipients of this Federal Program when it was launched as part of President Franklin D. Roosevelt’s New Deal Program. Nearly every year, I have several MPA students write their term paper for my budget and public finance courses on Social Security’s future viability.
In the United States, Social Security is the term commonly used for the Federal Old-Age, Survivors and Disability Insurance (OASDI). Social Security is funded primarily through payroll (FICA) taxes. Tax deposits collected by Internal Revenue Service are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund (OASDI) as well as the Federal Disability Insurance Trust Fund (DI).
Historically, the Social Security program has been very successful. Income derived from the Social Security program is currently estimated to have reduced the poverty rate for Americans age 65 and older from about 40% to below 10%.
In 2017, Social Security expenditures totaled nearly $807 billion for OASDI and almost $ 146 billion for DI, or about $ 1 trillion in federal expenditures. Together with Medicare, expenditure allocations for both programs amount to roughly 45% of the Federal Budget. Cumulatively speaking, since 1935, the program as collected approximately $22 trillion and paid out roughly $19 trillion, leaving asset funds for both main programs at nearly $3 trillion at the end of 2018.
What then is the concern that many Americans have about this issue?
The concern is founded on a belief that future projections of costs and income for the programs are uncertain, looking towards around 2035. Concern is due to rapid increases in population aging caused by the large baby-boom generation entering retirement and the expected lower-birth-rate generations entering employment.
This problem is expected to manifest itself starting next year, when total program costs are expected to exceed program income and interest. Projections indicate that around 2035, the Social Security programs would only be able to meet about 75% of expected obligations.
It is in this context that recently, United States Senator (and former Massachusetts Governor and 2012 Presidential candidate) Mitt Romney (R-Utah), along with Senator Joe Manchin (D-W.Va.), as well as Representatives Mike Gallagher (R-Wisconsin) and Edward Case (D-Hawaii) introduced the Time to Rescue United States’ Trust (TRUST) Act. This bill also has the support of Senator Krysten Sinema (D-Arizona) and others. This bill would establish special Congressional committees tasked with creating special legislation to fund deficits in the various Federal trust funds that appear to be in serious financial condition. It provides for the following:
- The Treasury department would have 45 days upon passage of legislation to report to Congress on the status of endangered Federal trust funds.
- Congressional leaders would appoint members of bi-partisan rescue committees.
- If a rescue committee reports a qualifying bill for consideration by both the House and Senate, it would receive expedited consideration.
At first glance, this proposed legislation seems like a step in the right direction. Obviously, the political will is needed to muster majority support for these committees and funding their recommendations. And, of course, implementation of passed legislation signed into law would have to be worked out. Only time will tell if this bill becomes a reality.
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of public administration at John Jay College of Criminal Justice (CUNY) and Pace University. He is Past President of ASPA’s New York Metropolitan Chapter and served four terms on ASPA’s National Council, as well as serving on many association boards. You can reach him at: [email protected] or [email protected].
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A Plan to Fix The Social Security Deficit Problem?
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
November 21, 2019
Impeachment, gun control, climate change, immigration and Medicare for All top the list of issues most Americans seem concerned about as we head into the 2020 Presidential and Congressional elections. One of the sleeper issues in next year’s election may very well be the future financial viability of the Federal Social Security Program, according to surveys and articles appearing recently in Market Watch and Next Avenue.
The Social Security Program has long been an interest of mine. I remember my immigrant grandparents were among recipients of this Federal Program when it was launched as part of President Franklin D. Roosevelt’s New Deal Program. Nearly every year, I have several MPA students write their term paper for my budget and public finance courses on Social Security’s future viability.
In the United States, Social Security is the term commonly used for the Federal Old-Age, Survivors and Disability Insurance (OASDI). Social Security is funded primarily through payroll (FICA) taxes. Tax deposits collected by Internal Revenue Service are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund (OASDI) as well as the Federal Disability Insurance Trust Fund (DI).
Historically, the Social Security program has been very successful. Income derived from the Social Security program is currently estimated to have reduced the poverty rate for Americans age 65 and older from about 40% to below 10%.
In 2017, Social Security expenditures totaled nearly $807 billion for OASDI and almost $ 146 billion for DI, or about $ 1 trillion in federal expenditures. Together with Medicare, expenditure allocations for both programs amount to roughly 45% of the Federal Budget. Cumulatively speaking, since 1935, the program as collected approximately $22 trillion and paid out roughly $19 trillion, leaving asset funds for both main programs at nearly $3 trillion at the end of 2018.
What then is the concern that many Americans have about this issue?
The concern is founded on a belief that future projections of costs and income for the programs are uncertain, looking towards around 2035. Concern is due to rapid increases in population aging caused by the large baby-boom generation entering retirement and the expected lower-birth-rate generations entering employment.
This problem is expected to manifest itself starting next year, when total program costs are expected to exceed program income and interest. Projections indicate that around 2035, the Social Security programs would only be able to meet about 75% of expected obligations.
It is in this context that recently, United States Senator (and former Massachusetts Governor and 2012 Presidential candidate) Mitt Romney (R-Utah), along with Senator Joe Manchin (D-W.Va.), as well as Representatives Mike Gallagher (R-Wisconsin) and Edward Case (D-Hawaii) introduced the Time to Rescue United States’ Trust (TRUST) Act. This bill also has the support of Senator Krysten Sinema (D-Arizona) and others. This bill would establish special Congressional committees tasked with creating special legislation to fund deficits in the various Federal trust funds that appear to be in serious financial condition. It provides for the following:
At first glance, this proposed legislation seems like a step in the right direction. Obviously, the political will is needed to muster majority support for these committees and funding their recommendations. And, of course, implementation of passed legislation signed into law would have to be worked out. Only time will tell if this bill becomes a reality.
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of public administration at John Jay College of Criminal Justice (CUNY) and Pace University. He is Past President of ASPA’s New York Metropolitan Chapter and served four terms on ASPA’s National Council, as well as serving on many association boards. You can reach him at: [email protected] or [email protected].
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