The Congressional Budget Office (CBO) released a new report that estimates the Social Security program’s benefit schedule, saying that the Old Age and Survivors Insurance (OASI) trust fund will “fall to zero” by fiscal year 2034 and that the Disability Insurance (DI) trust fund will do the same in 2034. 2064.
The report is based on testimony offered by Molly Dahl, CBO’s chief of long-term analysis, before the US Senate budget committee.
This is generally in line with previous predictions, but other depletion timelines in recent years have fluctuated between 2034 and 2035. CBO added that “Social Security revenues beyond 10 years will not be sufficient to cover all benefits that the current law. ,” the report said.
Social Security benefits are often a primary source of income for retired people who no longer receive a regular paycheck from work. Beneficiaries are eligible for benefits starting at age 62, but these benefits are significantly lower for those who do not choose to wait until age 67 or 70.
CBO offers two prescriptions for extending the payment term in its forecast. One would “immediately and permanently” increase the Social Security payroll tax by 35% – from the current rate of 12.4% of taxable income to 16.7%. The other would reduce benefits by 24%.
“Alternatively, Social Security’s finances could be strengthened through a combination of changes in taxes and benefits or through transfers from the Treasury’s general fund to the trust funds,” the report said.
The uncertainty about the country’s economic and demographic trends contributes to broader uncertainty about long-term Social Security projections.
“For example, if the economy grows faster than CBO projects, the trust funds’ annual revenues will be greater, and the changes in taxes or expenditures that would be necessary to pay benefits as planned under current law through 2098 will be smaller,” said CBO. “If, on the other hand, the economy grows more slowly than expected, revenues will be smaller and the changes needed would be greater.”
CBO projects Social Security health 75 years into the future by using “a detailed microsimulation model that starts with data on individuals from a representative sample of the population and demographic and economic outcomes for that sample over time simulates,” the agency explained.
Just a few months ago the Social Security Administration SSA’s board of directors predicted the fund will last a year longer than previously forecast, expiring in 2035. CBO shortens that projection by a year in its own model, but attention will be needed from both the House of Representatives and the Senate to advance the lofty goal of substantive reform beyond the legislative finish line.
The issue of Social Security reform is one that reveals serious disagreements between the two major political parties, and the limited balance of power between them in both houses of Congress has made any meaningful progress difficult.
Despite political pressure for action and lawmakers’ failure to reach consensus, the latest effort to address the program’s challenges came in a bill supported by Democrats and independents in the House of Representatives and the Senate.
The proposal would increase monthly benefits and require the SSA to use a different inflation calculation formula. Currently, the Consumer Price Index for Urban Wage Earners (CPI-W) from the previous year is used. Because Social Security benefits have not kept pace with the rising cost of living for the majority of seniors living on fixed incomes, lawmakers believe this calculation formula should be changed.
“The Consumer Price Index for Americans 62 or Older (CPI-E) is another price index that better reflects the actual costs incurred by older adults; For example, within CPI-E, medical costs weigh more heavily than within CPI-W,” according to a fact sheet about the proposal.
Both the House and Senate versions of the bill have stalled in committee this year, and neither currently has Republican co-sponsors.
Both major candidates in this year’s presidential election have pledged to preserve the Social Security program. The Republican Party Platform 2024 promises to “restore economic stability to ensure the long-term sustainability of social security” without cuts or changes in the retirement age. It does not contain policy descriptions on how to achieve this.
On the Democratic side, the 2024 platform says the party will uphold its “ironclad commitment to protecting Social Security, Medicare and Medicaid.” We reject any effort to privatize Social Security or cut the benefits the American people have earned,” saying this would increase the power of the trust fund by raising taxes on wealthy Americans.
