It was political theater designed to draw a clear line between the parties, but it left one important question unanswered.
How is the nation going to deal with the fast-approaching freight train of Social Security insolvency?
But political theater is one thing. Reality — the choices among painful alternatives — is much less fun but much more necessary.
The nonpartisan Congressional Budget Office this week said inflation — specifically, Social Security’s 8.7% cost-of-living adjustment to deal with higher prices — had moved up the projected date for the program’s insolvency to 2032. That’s now within the 10-year budgeting period, CBO Director Phillip Swagel said.
After 2032, if nothing changes, Social Security would be able to pay only about 77% of its scheduled benefits, according to the CBO. The trust funds wouldn’t have money for any more.
Consider this another wakeup call, although several congresses and presidential administrations have been exceptionally good at hitting the snooze button, again and again.
So, I ask once more, what’s Washington going to do, and when will it do it?
The range of potential solutions is small. Politicians can raise the age of retirement. They could increase the payroll tax from 6.2% to something higher. They could do away with the tax’s income threshold (many people don’t know that income greater than $147,000 is not taxed for Social Security). They could reduce the program’s benefits. They could change how Social Security’s cost-of-living increase is calculated, using a formula that understates inflation compared to today’s formula. Or they could do a combination of all of these.
They all, by the way, come with political pain; and the longer politicians wait, the worse it gets.
Professor R. Douglas Arnold of Princeton University, who has written books on the subject, said Republicans may favor strategic benefit cuts and a gradual increase in the retirement age.
“But it is hard to design a plan to reduce benefits that can somehow put Social Security in balance in just 12 years,” the Princeton website quoted him saying (before the insolvency date was moved up). “If they had started in 1994, it would have been possible. … It is very difficult to do when the runway is so short.”
(The runway is even shorter for Medicare, but that’s a subject for a different day.)
It’s not that individual members of Congress don’t have ideas. Utah Sen. Mitt Romney has introduced the Trust Act, which would set up bipartisan “rescue committees” for trust funds, including Social Security.
Sen. Mike Lee has been criticized for statements he made during his 2010 campaign about phasing out Social Security, but he has said those comments were taken out of context, and he has never said as much as a member of the Senate. More recently, he has proposed indexing the retirement age to life expectancy and allowing people to invest some of their Social Security contributions in private accounts.
Meanwhile, some glimpses of hope are beginning to flicker. Earlier this week, the Washington Post said it’s suddenly in style to talk about deficits again in Washington. This was spurred by CBO forecasts that the national debt will grow by about $3 trillion more during the next decade than was forecast last spring, for a total of $18.8 trillion more than today.
Even Democrats are squirming, the Post said, quoting several of them, as well as independent Bernie Sanders. He called the deficit, “a real issue that we’ve got to deal with.”
These are good signs, but the clock is ticking.
Biden probably hoped his give-and-take with Republicans during the state of the union would help his flagging poll numbers.
“We will not cut Social Security. We will not cut Medicare,” he said.
But really, that kind of sounds like the captain of the Titanic pledging at the beginning of the voyage that no one would be forced overboard.
It’s time to stop pledging not to cut and to explain what exactly will happen, because the iceberg is straight ahead.