Statement by EPI Vice President Ross Eisenbrey on 2012 Trustees Report on the financial status of Social Security, “The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.”
Social Security will never run out of money. Even in 2033, when the multi-trillion dollar buildup of funds for the baby boomers is used up, there will be hundreds of billions of dollars of contributions to the trust fund, and Social Security will continue to pay three-fourths of promised benefits.
Many claim younger workers will never claim Social Security benefits. Far from it. Even for workers who retire after 2033, benefits will be higher in inflation-adjusted terms than they are today, though they will replace a shrinking share of pre-retirement earnings.
It is true, however, that reducing promised benefits is a bad thing. We should avoid it by making better-off Americans pay the same Social Security tax rate as average Americans. The loophole that shelters all but a tiny portion of millionaires’ income should be closed. Warren Buffet and Mitt Romney should pay Social Security taxes at the same rate on their income as their secretaries pays on theirs.
The worst way to address the potential benefit cuts that could happen two decades from now is for Congress to jump the gun and cut benefits now. Cutting benefits by raising the retirement age or reducing cost-of-living increases is no solution for future benefit cuts. That should be obvious, but there are plenty of snake-oil-selling politicians who want to do just that. There is only one way to avoid benefit cuts, and that is by raising more revenue.