The director of the nonpartisan Congressional Budget Office (CBO) said Monday that Social Security is on a fiscal trajectory that may cut benefits by 25% in the next decade if Congress does not act.
CBO Director Phillip Swagel explained in an interview, “And this is the challenge; I’ll say first is that the Social Security Trust Fund is exhausted in 2032 in our projections. So, benefits will be reduced by about 25% after that time. So, doing nothing doesn’t save Social Security, actually.”
The Old-Age and Survivors Insurance Trust Fund, once the significant Social Security trust fund is exhausted, the program must be automatically required to reduce payments to beneficiaries below their current levels and rely on incoming payroll tax receipts.
According to Swagel, the federal government would “need about an additional $250 billion to keep benefits just within this decade, and in the next decade, it’s $8 trillion.”
“So that’s the hold, it’s $250 billion, then $8 trillion just to keep the current benefits,” said Swagel. “If the president wants to expand benefits, well, that would be an additional cost.”
President Joe Biden plans to begin rolling out his budget blueprint this week, which is expected to include provisions for Social Security. In most cases, presidential budget proposals are seldom adopted and primarily serve as a framework for the CBO, non-governmental watchdog groups, and Congress to analyze the nation’s finances through another lens based on the policy proposals that are presented.
Swagel discussed how the Congressional Budget Office analyzes options for policy changes that reduce the budget deficit, including for programs like Medicare and Social Security, that involve spending reductions and tax increases to give lawmakers options to consider. However, the agency does not make recommendations as a nonpartisan entity.
CBO director notes that options for reforms include policy changes
The director noted that the CBO’s options for reforms of Social Security included policy options to diminish the impact on Americans who may start to receive benefits soon and give others who will be affected more time to plan.
“The longer you wait to make the adjustments, well, the more difficult the problem becomes, the more costly and more wrenching are the eventual adjustments,” emphasized Swagel.
“That’s really the message of what our report says, that the current path is not sustainable, the odds that we’re going to have no problems on the fiscal side are just vanishingly small, they’re zero — so action must be taken,” he continued.
At one point in its early existence, Social Security had as many as 16 people paying for each recipient. As it currently stands, the ratio is getting closer to 1-to-1. In 2022, the Social Security Administration estimated there were 2.8 workers for each beneficiary, and the Social Security Trustees predict that with America’s aging population, it will decline to 2.3 by 2035.
“That’s the challenge we face. We have a demographic change. We’re getting older as a society, and that affects Social Security and Medicare,” said Swagel. “And then healthcare costs are growing faster than the economy, faster than the price of other things. And with an aging society, we’re going to need more healthcare, more healthcare spending. And so that is driving our fiscal imbalance, along with higher interest. The interest payments we face as a nation are rising sharply as well.”
