Social Security has an insolvency problem and the next administration needs to fix it.
Pending the result of next week’s presidential election, a new government will form in the White House early next year and Social Security will be one of the first challenges it faces.
While both major-party nominees, Republican former President Donald Trump and Democratic Vice President Kamala Harris, have campaigned on multiple fronts to win the votes of the American electorate, Social Security has largely fallen by the wayside despite an impending funding cliff that could see benefits cut in the next decade.
Funded by a combination of taxes and trust funds, Social Security is by far the largest direct expense of the U.S. government’s annual budget, amounting to $1.3 trillion, or 5 percent of GDP, in 2023. It pays out benefits to more than 70 million retirees, disabled people and relatives or dependents of deceased workers every year.
Now, it is facing depletion of its Old-Age, Survivors and Disability Insurance (OASDI) program trust funds, something the next administration would be wise to solve, according to experts who have spoken with Newsweek. If a solution is not found in the coming years, benefits could be cut by 21 percent in 2034, according to the most recent annual report by the Social Security Administration’s (SSA) Office of the Inspector General.
Despite its importance, Social Security has not been big on the agenda in this presidential race. While candidates have put forth plans regarding taxes, including canceling levies on payments and raising payroll taxes for America’s highest earners, neither has directly touched on how to solve its impending funding cliff, despite the future of benefits being a concern for the vast majority of voters and considerable contribution to later-life incomes.
The Committee for a Responsible Federal Budget (CRFB), a nonpartisan public policy think tank, said in September that a retired couple with “medium income” who stop working in 2033 could stand to lose $16,500 from their annual retirement allowance in a scenario in which the SSA’s solvency is not addressed. A single medium-income person would lose about $12,400.
“Americans, on average, depend on Social Security benefits for close to 40 percent of their retirement income. If nothing is done to address shortfalls, the expected 20 percent reduction in benefits will significantly impact many retirees’ ability to maintain their lifestyles”, Stephen Kates, principal financial analyst for RetireGuide.
