Social Security is on a fiscal trajectory that could result in benefits being cut by about 25% a decade from now if Congress fails to act, the director of the nonpartisan Congressional Budget Office (CBO) said Monday.
In an appearance on Fox Business Network’s “Cavuto Coast to Coast” CBO Director Phillip Swagel explained to host Neil Cavuto, “And this is the challenge, I’ll say first is that the Social Security Trust Fund is exhausted in 2032 in our projections. So benefits will be reduced by about 25% after that time. So doing nothing doesn’t save Social Security actually.”
Once Social Security’s major trust fund, the Old-Age and Survivors Insurance Trust Fund, is exhausted, the program will have to rely on incoming payroll tax receipts and be automatically required to reduce payments to beneficiaries below their current levels. Swagel said the federal government would “need about an additional $250 billion to keep benefits just within this decade, and in the next decade it’s $8 trillion.”
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“So that’s the hole, it’s $250 billion, then $8 trillion just to keep the current benefits,” Swagel said. “If the president wants to expand benefits, well that would be an additional cost.”
President Joe Biden is planning to begin the rollout of his budget blueprint this week, which is expected to include Social Security provisions. Presidential budget proposals are rarely adopted and in most cases serve primarily as a framework for Congress, the CBO, and non-governmental budget watchdogs to analyze the nation’s finances through a different lens based on the policy proposals presented.
Swagel discussed how the CBO analyzes policy options for reducing the budget deficit – including for programs like Social Security and Medicare – that involve tax increases or spending reductions to provide lawmakers with options to consider, though the agency doesn’t make recommendations as a nonpartisan entity.
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Swagel noted that the CBO’s options for Social Security reforms included policy options to mitigate the impact on Americans who are close to retirement age and may begin receiving benefits soon and give those who will be affected more time to plan.
He emphasized that “the longer you wait to make the adjustments, well, the more difficult the problem becomes, the more costly and more wrenching are the eventual adjustments.”
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“That’s really the message of what our report says, that the current path is not sustainable, the odds that we’re going to have no problems on the fiscal side are just vanishingly small, they’re zero – so action must be taken,” Swagel said.
Cavuto noted that at one point early in its existence, Social Security had 16 people paying in for every recipient and that the math is getting closer to 1-to-1. Indeed, data from the Social Security Administration (SSA) indicates that in 1950 the ratio was 16.5 workers for every beneficiary before it declined to around 3.3 workers per beneficiary where it remained from the 1970s until 2010 when it dipped to 2.9.
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As of 2022, SSA estimated there were 2.8 workers per beneficiary and the Social Security Trustees project that given America’s aging population, it will decline further to 2.3 by 2035.
“That’s the challenge we face: We have demographic change. We’re getting older as a society and that affects Social Security and Medicare,” Swagel explained. “And then healthcare costs are growing faster than the economy, faster than the price of other things. And with an aging society, we’re going to need more healthcare, more healthcare spending. And so that is driving our fiscal imbalance, along with higher interest. The interest payments we face as a nation are rising sharply as well.”
Fox Business’ Thomas Anderson contributed to this report.