All eyes are on the U.S. economy’s unprecedented COVID-19 consequences, and the near-term effects are clearly catastrophic. But there is another aspect beyond the pandemic’s immediate impact on Americans’ livelihood that is catching the eye of economists: What will it do to our already troubled Social Security system?
The most recent Social Security Board of Trustees report reiterated that the retirement program’s financial reserves are likely to be depleted by 2034, forcing an across-the-board 24% cut in retirement benefits. When Disability Insurance fund reserves are included, the picture improves marginally, but the Medicare Trustees report an even more dire scenario—reserves reaching depletion by 2026. But that’s not the whole story.
The Social Security and Medicare Trustees Reports both included this daunting comment: Projections in 2020 Report Do Not Reflect the Potential Effects of the COVID-19 Pandemic. In other words, what has ravaged the economy in the first half of 2020 is not reflected in the already-gloomy projections, and that’s a concern weighing heavily on Social Security and Medicare.
Consider that ballooning unemployment, for example, is severely limiting the main income stream supporting these programs–the payroll tax revenue paid by workers and employers. Add in the projections for limited employment opportunities for this year’s crop of 4 million college graduates. Then factor in the historically low-interest rates diminishing the investment income typically received into the trust funds ($77.9 billion in 2019, for example).
Finally, consider the continuing decline in the number of workers providing payroll tax revenue and you have a clear four-part view of the hurdles facing these critical senior support programs.
The urgency of this problem cannot be understated. The longer it takes to achieve meaningful reform, the grimmer the consequences and the more severe the future impact on beneficiaries will be. AMAC understands this urgency, and for example has been at the frontlines advocating a solution via its Social Security Guarantee (see www.AMAC.us/social-security ), a legislative framework offering a solution to the solvency problem without the need for additional tax levies on the workforce.
A solution will require congressional attention. Rest assured that AMAC will continue to represent America’s seniors in the fight for a resolution to this critical problem.
AMAC does not have any seminars planned for November. Instead, they have given us permission to share the article below that appeared recently in the AMAC Magazine. Since late 2012, the author, Gerry Hafer, has been providing consulting and professional writing services to AMAC, He is one of their Social Security advisors, and has been serving as Acting Executive Director of the AMAC Foundation, Inc. He provides us with the monthly offerings by AMAC for publication in The Voice.