Mon, Jan 23, 2023 11:43 AM
By Brett Rowland, The Center Square
Fresh projections from the Congressional Budget Office show the Old-Age and Survivors Insurance Trust Fund would be exhausted by 2033 if benefits are paid as scheduled.
In January, Social Security beneficiaries got an 8.7% increase in monthly checks, the largest cost-of-living adjustment since 1981. The increase added $146 to the average recipient’s monthly benefit. That is expected to push the average benefit to $1,827, up from $1,681, according to the Social Security Administration.
The Disability Insurance Trust Fund would be depleted by 2048 under the same schedule, according to the latest report from the federal agency that provides budget and economic information to Congress.
To keep the funds solvent through 2096, the federal government would need to immediately and permanently hike payroll tax rates by 4.9 percentage points or reduce benefits or implement some combination of tax increases and benefit reductions.
"After 2096, however, the gap between revenues and outlays would widen, and shortfalls would continue to increase," according to the CBO report.
If Social Security outlays were limited to payable revenues after the trust funds’ exhaustion in 2033, Social Security benefits would be about 23% smaller than scheduled benefits in 2034. They would be 35% smaller by 2096, and the gap would remain stable thereafter.
Social Security, which is the largest single program in the federal budget, has two components. The Old-Age and Survivors Insurance provides benefits to retired workers, their eligible dependents, and some survivors of deceased workers. Disability Insurance provides benefits to disabled workers and their dependents.
Social Security is funded by payroll taxes and income taxes on benefits. The payroll tax is generally 12.4% of earnings up to a maximum annual amount. That amount was $147,000 in 2022. Employees and their employers each pay half of the 12.4%. People who are self-employed pay the full amount, according to the CBO. To pay benefits as required by existing law and maintain trust fund balances through 2096, that 12.4% would need to be raised to 17.3% of taxable payroll, according to the report.
"Other ways to maintain the necessary trust fund balances include reducing scheduled benefits by an amount equivalent to 4.9% of taxable payroll or combining tax increases with benefit reductions," the report noted.
Many Americans depend on Social Security payments, according to the AARP. Social Security is the largest source of retirement income for most Americans, AARP research shows. It provides nearly all income for 1 in 4 seniors, according to AARP.
“Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security to help pay for Joe Biden’s reckless spending spree, which is more reckless than anybody’s ever done or had in the history of our country,” former President Donald Trump said Friday in a video posted on Truth Social.
Some Republicans have said that changes to Social Security and Medicare should be considered, according to media reports. Republican leaders have not embraced those calls.