This week's annual Social Security trustee report said the program would be unable to pay full benefits in the year 2033, three years earlier than projected in the same report last year. Even so, if nothing was done, Social Security could pay its full benefits for 21 more years and then still be able to pay 75 percent of those benefits after that. So, we're talking about heading off a 25 percent spending shortfall more than two decades away.
Still, 20 years is not far off in terms of gradually implementing
changes that would provide for the program's longer-term needs while
not forcing jarring changes on people already retired or within 10
years of retiring. The program's smaller disability insurance component
is only four years from insolvency.
Lastly, the options for dealing with Social Security's financial
needs have been studied to death and then some. There are few surprises
here. And there aren't serious ideological issues either, at least not
by comparison with the intractable tax-and-spend tug of war that has
paralyzed Congress of late. But compromises would be needed.
The three most prominently advanced reforms are to reduce the size
of the annual cost of living adjustment, raise the retirement age, and
lift the ceiling on earnings subject to payroll taxes. It's now at
$110,100 a year, but because high earners have fared so well in recent
years, the program taxes a smaller percentage of the nation's wage
income than it used to.
The Simpson-Bowles deficit restructuring plan of late 2010 included
these and other suggested Social Security reforms. They provide a
well-researched starting point for changing the program. The Social
Security components of that plan could be peeled off, introduced
separately, and subjected to extensive House and Senate hearings.
If Congress and the White House were serious, the program could be
put on solid financial ground again well before the elections. And
because Social Security has historically been separate from the rest of
the federal budget, its needs could be addressed without opening up
that much bigger can of worms.