Washington, D.C. – As reporters cover the just-released 2020 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, including the context of the coronavirus pandemic and current economic collapse. 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 addresses only Social Security’s cash benefits Trustees Report (Old Age, Survivors, and Disability Insurance Trustees Report), and 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 her bio below.)
It is too soon for Social Security’s Trustees to report on the precise impact of the current pandemic and resulting economic contraction. That will have to await next year’s report. Nevertheless, the most important takeaways from the 2020 Trustees Report – and, indeed, from next year’s report, as well – will be that (1) Social Security has a large accumulated surplus, and (2) Social Security is extremely affordable, and will continue to be throughout the 21st century and beyond, even in spite of the current economic downturn. In three-quarters of a century, in 2095, Social Security will constitute 5.86 percent of GDP. That is considerably lower, as a percentage of GDP, than Germany, Austria, France, and most other industrialized countries spend on their counterpart programs today.
The 2020 Trustees Report projects Social Security’s reserve to be $2.9 trillion. The reason for Social Security to maintain a reserve is to ensure that even in times of lower revenue, as Social Security is experiencing this year, all benefits will continue to be paid regardless of the state of the economy or public health. Even if the pandemic were to cause one out of four workers to be unemployed for twelve months straight, Social Security will still be able to pay benefits in full and on time until 2035.
The 2020 report shows that Social Security is fully funded until 2035, 91 percent funded for the next 25 years, 85 percent funded over the next 50 years, and 82 percent funded over the next 75 years. While next year’s report may vary a bit more, it too will show that all benefits will be fully funded into the 2030s and close to fully funded for the next three quarters of a century and beyond.
While the 2030s are still more than a decade away, Congress should do its job and enact one of the many proposals to expand Social Security’s modest benefits while ensuring that the wealthy pay their fair share. If Congress does that, Social Security will be able to pay all benefits, including larger benefits, in full and on time for the foreseeable future.
Social Security is fully capable of withstanding the pandemic and resulting economic downtown. The bigger threat to the program is Republicans, led by Donald Trump, who are trying to use the coronavirus crisis as an excuse to reduce or even eliminate the payroll contributions that fund Social Security. Though this has been a longstanding goal, they are using the current need for economic relief as a cover to call for this less effective and targeted assistance to workers and businesses. Moreover, even before the pandemic, Republicans signaled that, after the election, they plan to use the federal deficit as an excuse to attack Social Security’s modest benefits.
In contrast, Congressional Democrats are pushing to expand Social Security. Their proposals will ensure that all promised benefits will be paid in full and on time for the foreseeable future. Democrats fully pay for these expansions, while restoring the program to long-range balance. Increasing Social Security’s modest benefits would provide much-needed support for many vulnerable seniors and people with disabilities during the ongoing health crisis.
The Social Security 2100 Act, introduced by Rep. John Larson (D-CT), has over 200 cosponsors in the House of Representatives. The Ways and Means Committee and its Social Security Subcommittee have held several hearings on the bill and the bill is ready for a vote. Several other bills to protect and expand Social Security benefits have also been introduced in the House and Senate. The presumptive Democratic nominee for President, former Vice President Joe Biden, has endorsed a plan from Senators Elizabeth Warren (D-MA) and Ron Wyden (D-OR) that would provide all Social Security beneficiaries with an extra $200/month during the coronavirus health crisis.
Moreover, the current pandemic is illuminating the pressing need for additional benefits, including paid sick leave and paid family leave. These are benefits that were contemplated when Social Security was created and are consistent with Social Security’s mission of insuring wages against loss. This includes not only old age, disability, and death, but also short-term illness and the need for family care.
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, and portability from job to job, Social Security is a solution.
The obvious solution to the nation’s looming retirement income crisis is to increase Social Security’s benefits, which are modest by virtually any measure. Over half (52 percent) of American households headed by someone of working age will not be able to maintain their standards of living in old age. 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, at best, 401(k) and other retirement savings plans, which have proven inadequate.
Thus, it is not surprising that about one out of two married senior beneficiaries and seven out of ten unmarried senior beneficiaries rely on Social Security for a majority of their income. Moreover, more than one out of five married senior beneficiaries and almost one out of two unmarried beneficiaries rely on Social Security for virtually all of their income. Social Security will certainly be even more important to tomorrow’s seniors. Especially during this volatile time of economic uncertainty, Social Security remains one constant all current and future beneficiaries can count on.
Expanding Social Security also is part of the answer to growing income and wealth inequality and the financial squeeze on working families. The current coronavirus health crisis is likely to exacerbate these trends, making Social Security an even more important solution. As just mentioned, it is also the solution to workers who must take time off from work as the result of illness and the demands of family.
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.
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Nancy Altman, President of Social Security Works and Chair of the Strengthen Social Security Coalition, has a 45-year background in the areas of Social Security and private pensions. She has been a faculty member at Harvard University. She 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 Truth About Social Security (Strong Arm Press, 2018), 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/.