Based on the recent presidential campaign that was virtually devoid of public policy discussions, you would never know that the nation's bedrock retirement program — Social Security — will become insolvent in about 18 years when today's 49-year-olds reach full retirement age.
Now that the election is over, it is time to get serious about the fate of this crucial program. The longer we wait to fix it, the harder it will be to solve the problems that are exacerbated by the demographics of a growing retiree population.
The Social Security Trustees project that the program's trust funds, which hold surplus payroll tax revenues earmarked to pay benefits, will be exhausted in 2034. Currently, those trust fund assets are being used to supplement payroll tax collections to pay current beneficiaries. If Congress does nothing before 2034, all retirees, regardless of income, will see their benefits cut by 21%.
It's not the first time the country has faced a Social Security funding crisis.
In 1981, the Social Security trust funds were nearly empty and President Ronald Reagan and congressional leaders in both parties appointed the National Commission on Social Security Reform, chaired by Alan Greenspan, to come up with a long-term solution. Its recommendations laid the groundwork for bipartisan legislation — the Social Security Amendments of 1983 — that extended the life of the program by 50 years.
“Now, 35 years after the Greenspan Commission was created, it is time for a new bipartisan commission focused on strengthening Social Security for current and future generations,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a non-partisan public policy organization, during a Capitol Hill briefing on Wednesday.
“A commission creates an environment for compromise where a deal can be struck and where both parties can work together,” Ms. MacGuineas said. “Troublesome political and technical issues can be worked out more easily under the umbrella of political cover that a commission would provide.”
The briefing focused on a bipartisan bill introduced by Reps. Tom Cole (R-Okla.) and John Delaney (D-Md.) that would create a bipartisan commission on long-term Social Security solvency. The aim is to create a package of reforms that would keep the program solvent for at least 75 years.
The proposed commission would have 13 members, three each appointed by party leaders in the House and Senate and a chair — a tiebreaker — appointed by the president. It would have to report its recommendations within one year of its first meeting. Nine votes would be needed, assuring bipartisan support, to send the report to Congress, where it would get expedited consideration and an up-or-down vote.
Social Security has been called the third rail of politics — touch it and you die. But with 60 million people depending on benefits today, a number expected to grow to 100 million over the next 20 years, it can't be ignored. Although appointing a commission is often viewed as a way for politicians to punt on tough issues, when it comes to Social Security, this tactic has worked before and it can work again.
But someone, either President-elect Donald Trump or the leaders of the Republican-controlled House and Senate, needs to take ownership of this issue and get behind this proposal, said Mr. Cole.
“I am confident if we focus on the process, and not the politics, we can strengthen Social Security and extend its life,” Mr. Delaney added. “There are very few issues that affect so many Americans.”
The bill will have to be reintroduced in the new Congress, as all legislative proposals will die at the end of the current session. The two co-sponsors suggested that they may try to attach it to crucial legislation to raise the debt ceiling next spring. Without additional borrowing authority, the government would be forced to shut down — an unappealing prospect in the early days of a new administration.
Meanwhile, a new report from the Office of the Inspector General at the Social Security Administration found that even though the average number of visitors to the agency's 1,220 field offices nationwide has declined over the past five years as it encouraged the public to take advantage of online services, average wait times have increased. In fact, the number of visitors to SSA field offices who waited longer than one hour for service increased 95% from 2.3 million in fiscal year 2010 to 4.5 million in fiscal year 2015. The inspector general promised a follow-up review on the issue.
(Questions about new Social Security rules? Find the answers in my new ebook.)
Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.