FOR IMMEDIATE RELEASE:
Contacts: Lacy Crawford, lcrawford@socialsecurityworks.org
Linda Benesch, lbenesch@socialsecurityworks.org
2016 SOCIAL SECURITY TRUSTEES REPORT SHOWS THAT SOCIAL SECURITY CONTINUES TO WORK FOR AMERICA
An Expanded Social Security Will Work Even Better
Washington, D.C. – As reporters cover the just-released 2016 Social Security and Medicare Trustees Reports, Social Security Works provides you with this fact sheet that summarizes and puts in context the Social Security report’s key findings. This fact sheet updates the figures in the media backgrounder Social Security Works issued in advance of the Trustees Report’s release. Please note that this fact sheet does not deal with the Medicare Trustees Report.
In addition to reviewing this fact sheet, we invite you to speak with our president, Nancy Altman, who is a nationally recognized Social Security expert (see bio below). We also urge you to review our fact sheet that discusses, among other things, misinterpretations by non-experts caused by over- emphasis of unrealistically long valuation periods. You may also want to read Columbia Journalism Review’s “Report Card on Social Security Coverage,” written in response to coverage of the 2012 Trustees Report.
The most important takeaways from the 2016 Trustees Report are that (1) Social Security has a large and growing surplus, and (2) Social Security is extremely affordable. At its most expensive, at the end of the 21st century, Social Security is projected to cost just around 6.1 percent of gross domestic product (“GDP”), according to the new report. That is considerably lower, as a percentage of GDP, than Germany, Austria, France, and most other industrialized countries spend on their counterpart programs today! In 2015, Social Security constituted just 5 percent of GDP.
Social Security is fully and easily affordable. The question of whether to expand or cut Social Security’s modest benefits is a question of values and choice, not affordability. Indeed, in light of Social Security’s near universality, efficiency, fairness in its benefit distribution, portability from job to job, and security, the obvious solution to the nation’s looming retirement income crisis, discussed below, is to increase Social Security’s modest benefits. The average annual benefit received by Social Security’s over 60 million beneficiaries is less than $15,000 this year. Moreover, expanding Social Security not only addresses the retirement income crisis, it also is part of the answer to growing income and wealth inequality and the financial squeeze on working families. Expanding, not cutting, Social Security while requiring the wealthiest among us to contribute more – indeed, their fair share – is the best policy approach to addressing these challenges while restoring Social Security to long-range actuarial balance. Cutting those modest benefits will only exacerbate these challenges.
That is perhaps why the Democratic Party strongly favors expanding, not cutting Social Security. At this moment, the growing movement to expand, not cut, Social Security includes the President , Secretary Clinton, the presumptive Democratic nominee to be president, Senator Sanders, her chief rival, around 95 percent of the Democratic Senators and around 80 percent of the Democratic members of the House of Representatives.
The report projects that Social Security’s cumulative surplus will be $2.8 trillion in 2016, growing to about $2.9 trillion around 2019. It reports that Social Security is fully funded for the next decade, 95 percent funded for the next 25 years, 87 percent funded over the next 50 years, and 84 percent funded over the next 75 years. Without a single penny of additional revenue, Social Security will have sufficient income and assets to pay all benefits to America’s seniors, people with disabilities, and survivors of deceased workers, as well as all associated administrative costs, for around one and a half decades, until 2034, and 79 percent of all benefits and associated administrative costs thereafter. Moreover, the report shows that, with modest legislated increases in revenue, Social Security will be able to pay all scheduled benefits for the foreseeable future.
More specifically, journalists may want to give special attention to the following:
Income to Social Security from all sources exceeds all expenditures in 2016, which is why the program’s reserves will continue to grow (see Figure 2 on p. 2). As Figure 1 (see p. 2) shows, Social Security has three revenue sources: 1) wage contributions from employees, matched by employers; 2) investment earnings on Social Security’s U.S. Treasury bond holdings (which have the same legal standing and status as other interest-bearing Treasury bonds issued by the government); and 3) dedicated income taxes on the Social Security benefits of those with higher incomes.
It is sometimes reported that Social Security is paying out more money in benefits than it is collecting in income, but that is wrong. This claim counts only Social Security’s income from payroll contributions, disregarding one or both of its other two dedicated sources of income: investment income and dedicated income tax revenue, as stated above. While viewing Social Security’s finances in this fashion, i.e. ignoring one or two of its three sources of revenue, portrays it in “cash deficit,” this view (and term) has no legal meaning with regard to Social Security’s finances, and no bearing on its ability to pay benefits. Indeed, so-called “cash deficits” have happened 28 times since 1957, without ever affecting the system’s ability to pay benefits. Moreover, as Figure 2 shows, when income from all of Social Security’s statutory revenue sources is counted its 2016 revenue is projected to surpass its outlays.
The nation is facing a looming retirement income crisis where most workers will be unable to cease work without a drastic reduction in their standards of living. Over half (52 percent) of American households headed by someone of working age will not be able to maintain their standard of living in old age, and this figure rises to roughly two-thirds when health and long-term care costs are also considered. Traditional employer-sponsored defined benefit pension plans are disappearing, leaving workers with, at best, defined contribution retirement savings plans, which have proven inadequate. Around half of households aged 55 or older had zero retirement savings in 2013. Among those households age 55-64 with some retirement savings in 2013, the median amount of those savings was about $104,000, equivalent to an annuity of just $310 a month. Thus, it is not surprising that today two-thirds of senior beneficiaries rely on Social Security for a majority of their income. Social Security will certainly be even more important to tomorrow’s seniors.
As important as restoring Social Security to long-range actuarial balance is, it is imperative to remember that it is simply a means to the end of providing America’s families with basic economic security. Recognizing that Social Security is a solution to our looming retirement crisis and other challenges facing the nation, serious analysts, and a growing number of policymakers and nonprofit organizations have advanced responsible, fully-funded proposals to expand Social Security.
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Nancy Altman, President of Social Security Works and Chair of the Strengthen Social Security Coalition, has a 40-year background in the areas of Social Security and private pensions. She has taught at Harvard University. And served as Alan Greenspan’s assistant in his position as chairman of the so-called Greenspan commission, the bipartisan commission whose recommendations formed the basis of the Social Security Amendments of 1983. She is the author of The Battle for Social Security: From FDR’s Vision to Bush’s Gamble (John Wiley & Sons, 2005), and co-author, with Eric R. Kingson, of Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All (The New Press, 2015).
For more information about Social Security Works or the Strengthen Social Security Coalition, visit http://socialsecurityworks.org/.