The Need for Action on Social Security

The Concord Coalition, a prominent federal budget watchdog group, has been vocal about the pressing issue of high deficits. In order to support their arguments, they often share opinion pieces penned by experts who share their concerns. Recently, the Congressional Budget Office (CBO) released its 2023 Long-Term Budget Outlook, which reaffirmed the Coalition’s position.

The CBO report contains some striking headlines. According to their projections (see Figure 1), annual federal deficits will steadily rise until 2053, when the public debt will reach a record high of 181% of GDP.

While it is apparent that action must be taken, it is not entirely clear why Social Security and Medicare are being targeted for cuts.

Focusing on Social Security

Now, don’t misunderstand me – I firmly believe that Social Security should continue to provide scheduled benefits. These benefits are crucial for most retirees as they form the backbone of their retirement income. However, sustaining these benefits requires additional revenues. If we solely rely on increasing the current payroll tax rate, both employers and employees would have to bear the burden of a 2-percentage-point hike. Nevertheless, there are various other options available, such as alternative payroll tax strategies. In fact, I strongly argue that considering an infusion of general revenues is a compelling option. When compared to other large OECD countries, Americans are significantly undertaxed (see Figure 3).

Taking action to secure the future of Social Security is imperative. However, it is crucial that any changes made carefully consider the impact on recipients and explore all possible revenue sources. Let us work towards a sustainable solution that supports retirees while maintaining responsible fiscal policies.

Social Security and the Need for Attention

In a recent op-ed shared by the Concord Coalition, two former congressional staffers brought up three arguments that, upon closer examination, proved to be flawed.

Argument 1: Life Expectancy and Social Security

Argument 2: Social Security Insolvency

The second argument made in the op-ed claims that Social Security will become insolvent in the early 2030s. However, it is important to note that the term “insolvent” refers to being unable to pay debts as they come due or having liabilities surpassing assets. This definition does not apply to Social Security, as it does not have liabilities exceeding its revenues. Therefore, Social Security will be able to meet its financial obligations.

Argument 3: Increasing Full Retirement Age

The Importance of Addressing Social Security

While acknowledging that Social Security requires attention, it is crucial to focus on program-related issues rather than budgetary concerns. Future retirees will rely on Social Security’s current level of protection. It is important to recognize that there are no magical solutions. Revenues need to be raised to ensure the sustainability of the program. Fortunately, our tax burden, relative to GDP, is comparatively low when compared to other OECD countries. This positions us well to generate the necessary revenues.

By reevaluating these arguments and considering the program’s actual dynamics, we can better understand the importance of addressing Social Security for the benefit and security of future retirees.