A new study by the Urban Institute has found that failing to address Social Security’s financial shortfall could potentially throw 3.8 million seniors into poverty by 2045. The study, conducted by Richard Johnson and Karen Smith, predicts that ignoring the deficit would result in a $5,900 decrease in median promised benefits by 2022 dollars. Low-income seniors would be the most affected, facing a nearly one-fifth drop in their incomes, while high-income households would see a 5% decrease in income after age 62.
The impending crisis is attributed to an aging population and a shrinking ratio of workers to retirees. Social Security’s actuaries predict that the program’s trust fund will become insolvent by 2035, leaving it able to pay only about 83% of promised benefits. Eventually, this will decrease to 73%. The root cause of this issue is the increasing number of retirees and the lack of workers contributing to support them.
Possible solutions have been proposed, such as raising taxes, cutting benefits, or a combination of both. Congress could change current laws and use general funds to pay Social Security benefits, although this would require borrowing more money, cutting other programs, or raising additional taxes. Ways to reform the program include increasing the payroll tax cap, expanding the tax base, raising the retirement age, or restructuring benefits to provide more support for lower-income workers.
Despite the clear solutions to the problem, there is a lack of political will to address it. The current situation suggests that politicians are avoiding the issue and hoping for a miraculous solution to appear. Even former President Donald Trump, who vowed to leave Social Security untouched, has not taken any significant action on the matter. Joe Biden proposed modest changes during his presidential campaign in 2020 but did not pursue them while in office. Vice President Kamala Harris has yet to outline her plans for addressing the crisis.
The study by Johnson and Smith highlights the urgent need to address Social Security’s financial problems to prevent a catastrophic impact on low-income older adults who rely on the program for essentials like food, medical care, and shelter. Despite politicians’ claims that they will not touch Social Security, doing nothing is not a viable option. It is clear that action must be taken to secure the future of the program and ensure that seniors can continue to receive the benefits they rely on.
