The Social Security Board of Trustees today released its 76th annual report to Congress on the financial status of the Social Security trust funds. As a trustee of Social Security funds, I work with the other trustees to ensure the public is informed about the status of Social Security’s finances for the short term and over the next 75 years.
Workers earn their Social Security benefits by contributing through deductions from their paychecks. The Social Security trust funds include the Old Age and Survivors Insurance (OASI) fund, which pays benefits to retired workers and their families and to the families of deceased workers; and the Disability Insurance (DI) fund, which pays benefits to disabled workers and their families.
Today’s report shows that, as a whole, Social Security is fully funded until 2034, and after that it is about three-quarters financed. Considered alone, the DI Trust Fund is projected to become depleted sooner than the combined Social Security funds. I am pleased that legislation signed into law by President Obama last November averted a near-term shortfall in DI. With that small, temporary reallocation of the Social Security contribution rate, the DI fund will now be able to pay full benefits until 2023, and the retirement fund alone will be adequate into 2035. It is important that Congress act well before 2023 in order to strengthen the finances of the program as a whole.
Young people frequently ask: “Will Social Security be there for me?” I take this question very seriously, and I am sure Social Security will be there in the future. Its total cost is now about 5% of the national economy, or GDP. That will rise to about 6% when all of the baby boomers are retired. That increase, 1% of GDP, is less than the nation’s increase in spending for public education when baby boomers were children.
As President Obama recently said:
“Fewer and fewer people have pensions they can really count on, which is why Social Security is more important than ever. We can’t afford to weaken Social Security. We should be strengthening Social Security. Not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.”
Like the President, I am confident we will rise to the challenge. Social Security is an earned benefit—a benefit that is critically important to the people who receive it. It is a foundation of economic security when workers and their families face what Franklin D. Roosevelt called “the hazards and vicissitudes of life.” It is the nation’s most effective poverty prevention program, keeping 21 million people out of poverty. So when we talk about Social Security financing, it’s not just a budget exercise – it’s our retirement system and our family economic security system, now and for the future.
Lawmakers have many policy options to address the shortfall: increasing contribution rates, lifting the cap on earnings subject to contributions, drawing on other revenue sources, lowering benefit amounts, or a combination of changes. Social Security’s independent actuaries have analyzed over 100 policy proposals from lawmakers on both sides of the aisle, and those results are available on the Actuary’s website. Lawmakers should act soon to address the long-term shortfall and preserve the reserves that yield interest income to help pay future benefits.
I am confident about the future of Social Security. We look forward to continuing to serve the American people by delivering the foundation of economic security that we know as Social Security