Coronavirus Could Push Social Security to Insolvency Before 2030

0
99


Representative Steve Womack, a Republican ranked on the House Budget Committee, compared the coming crunch to recovering “water from a sinking boat when you have alligators that bite you.” And the alligators are Covid-19. “

“This is a train wreck that is going to happen and you can see it coming,” said the Arkansas Republican.

There is now an acceleration of what happened during the Great Recession a decade ago, when there was a 5% increase in eligible adults claiming social security on average six months earlier. At the same time, rising unemployment meant that the government was collecting less payroll taxes. The Obama administration estimated at the time that the fund would run out of money in 2037 – four years faster than expected before the financial crisis.

Today’s unemployment rate has already surpassed the 10% peak recorded during this recession, to 14.7% in mid-April, according to data released this month. And some economists think it could climb up to 20%. It is estimated that one in 10 Americans will still have no job for the next year.

At least 36.5 million people are not paying payroll taxes in the program at the moment, and a second wave of early retirement is expected. Social security benefits can be collected at the age of 62, although there is a penalty for not waiting until full retirement age.

Disregarding the pandemic and the resulting financial downturn, the federal government estimated last month that the program could fully deliver benefits until 2035. At this point, only 76% of benefits can be paid.

“It’s going to be much worse than that,” said Alan Auerbach, economist at the University of California at Berkeley.

To account for the pandemic, the Bipartisan Policy Institute estimates that the exhaustion date will go from 2035 to 2029.

But any discussion will inevitably come up against rights reform policy, against a backdrop of wide-ranging federal deficits and an invisible debt-to-GDP ratio since World War II. Much will depend on the composition of Congress and the occupation of the White House after the 2020 elections.

Congress never acts until it is almost out of choice, said Womack, who himself recommends a commission to study the issue and make recommendations to legislators instead of adopting a specific solution.

“I don’t know when we are going to decide to tackle the problem,” he said. “I hope and pray that it is not when we have no real options other than something drastic like big cuts or the fact that we have to put a lot of capital into the program to save people from a loss of benefits. ”

Representative Tom Reed (RN.Y.), Larson GOP counterpart to the Social Security Ways and Means Subcommittee, also endorsed the idea of ​​a commission, in addition to raising the age of eligibility for the program. Reed conceded that a commission would give delicate members a little blanket to make difficult choices for themselves.

“It pains me to officially say what I think about my colleagues and our leaders, but this is the reality of D.C.,” he said.

Larson presented a proposal called the Social Security Act 2100 which caught the eye but did not move in Congress. The bill would increase the benefits and payroll taxes that go to the program. It would also apply the payroll tax to wages over $ 400,000, up from the current $ 137,700.

Last year, the Heritage Conservative Foundation rejected the bill to “expand the size and scope of social security, raise taxes on all workers and leave them less money to meet their daily needs” .

“This is a very politically problematic situation and Congress, by its very nature, does not like to face politically problematic situations,” said Ms. Womack. “You are going to have to vote to do something to save these programs and it will be very unpopular with a lot of people. This is likely to end some people’s careers. ”

LEAVE A REPLY

Please enter your comment!
Please enter your name here