Many Americans have trouble covering their costs of living with income solely from Social Security. There have been a number of proposals made that are focused only on the restoration of the program’s long-run fiscal balance.
However, with all those focused restructurings, there is a similar takeaway – the share of older adults and younger people with disabilities who live in relative poverty would rise in the future.
This could mean that, given the substantial increase in benefits scheduled for future retirees under every one of these reforms, policymakers should take the opportunity to look at how Social Security reforms can alleviate poverty and, next, how to provide adequate protections for moderate-income workers.
Then they can discuss whether they can make the system solvent by raising taxes or slowing the growth in promised benefits for everyone else.
The pandemic has a smaller impact on Social Security trust funds — that is, Social Security’s solvency — than many feared during the depths of the pandemic downturn.
According to the new 2021 annual report from the Social Security Trustees, the depletion date for the combined trust funds —retirement and disability — is 2033 without any changes to program benefits. That would be when today’s 54-year-olds reach Social Security’s Full Retirement Age. Still, that’s one year earlier than last year’s 2034 estimate.
Depletion date or insolvency doesn’t mean bankruptcy — far from it. Funding from payroll tax receipts will be enough to pay 78% of promised benefits after the combined Social Security trust funds depletion date is reached.
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“The trust fund report should be seen as a strength,” says Eric Kingson, professor of social work and public administration at Syracuse University and co-author with Nancy Altman of “Social Security Works for Everyone: Protecting and Expanding the Insurance Americans Love and Count On.”
In a recent paper, it was examined how a basic minimum benefit could essentially eliminate poverty among older adults and people with disabilities.
The researchers assessed various effects of a minimum or floor benefit for almost all elderly and disabled individuals equal to the poverty level for a single individual, which equates to a bit less than 25 percent of the average wage in the economy and indexed it so, like other Social Security benefits, it would grow at the same rate as average wages.
The study published in Tax Policy Center examines a minimum benefit both to Social Security beneficiaries and to Supplemental Security Income (SSI) recipients who do not qualify for Social Security because they have made less than ten years of contributions to Social Security.
It leaves open whether the SSI extension should be financed through general revenues or Social Security trust funds. It warns, however, that past jurisdictional line-drawing between Social Security and SSI has led to neglect of many of the neediest elderly and disabled individuals, as many reform efforts throw up their hands and imply that that problem is someone else’s to solve.
Social Security reform won’t be easy, but it can’t be dodged much longer. Policymakers who soon must decide how to allocate trillions of dollars in higher future benefits have a unique opportunity at last to eliminate poverty for the elderly and for recipients of disability benefits.