Senators James Lankford (R-OK) and Joe Manchin (D-WV) sent a letter Thursday to Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) pushing for sustained momentum on addressing improvements to the Social Security Disability Insurance (SSDI) program.
Despite the postponement of the SSDI trust fund’s exhaustion until 2022 by the payroll tax reallocation contained in the Bipartisan Budget Act (BBA) of 2015, more is needed to be done in order to achieve long-term program sustainability. Lankford and Manchin commended the BBA’s small SSDI reforms while urging the Finance Committee to continue working further on options that will improve the program’s solvency. Quoting the 2015 Social Security Trustees’ report, they note:
The 2015 Social Security Trustees report recommended “Any necessary resource reallocation that does occur should not be regarded as a substitute for action to sustain the finances of DI and Social Security as a whole, nor enacted in a manner that has the effect of further postponing those required corrections.” Although the Act temporarily extended the solvency of the SSDI program and included some small improvements to the program, it did little to improve the program’s long-term finances or to improve the structure of the SSDI program for beneficiaries and taxpayers. We hope you agree that more substantial reforms are needed.
The deficit will grow from less than $550 billion in 2016 to $1.4 trillion in 2026, according to this week's report by the Congressional Budget Office (CBO), driven by a $2.5 trillion rise in spending that is only partially offset by a $1.7 trillion revenue increase. And according to CBO, nearly three-quarters of that spending increase comes from just three items – Social Security, Medicare, and interest on the debt.
CBO projects that Social Security spending will increase by about $700 billion over the next 10 years, while Medicare spending will increase by about $500 billion over the same period. These two programs account for 50 percent of the spending increase. Meanwhile, interest spending will rise nearly $600 billion over the decade – accounting for another quarter of the spending increase.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, was interviewed by the George W. Bush Institute and appeared in The Catalyst. It is reposted here.
Social Security, Medicare, and other entitlement programs face an uncertain future as the funds that run the programs dwindle. Strong leadership will be needed to save these programs.
We asked Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of Campaign to Fix the Debt, these questions about one of America’s most pressing domestic challenges: reforming entitlement programs.
MacGuineas has spent a large part of her professional career working on budget issues, advising members of both parties on tax and spending policies. As she makes it clear, modernizing these programs starts with strong leadership.
As it often does in December, CBO has released its detailed long-term projections for Social Security that build off the ones released with their long-term outlook in June. The projections generally show a worse picture for the trust fund and the 75-year shortfall than the Social Security Trustees expect. Notably, these are the first estimates since the Bipartisan Budget Act reallocated revenue to Social Security Disability Insurance (SSDI) and extended that trust fund's solvency through Fiscal Year (FY) 2021.
The combined Social Security trust fund is projected to be exhausted in 2029, five years earlier than the Trustees expect. At that point, benefits would be cut across-the-board by 29 percent to bring spending in line with revenue. The 2029 date is the median outcome of a range of possibilities, with CBO estimating a 10 percent chance that the trust fund is exhausted by 2026 and a 99 percent chance that it runs out by 2040.
The SSDI trust fund is projected to be exhausted by FY 2021, at which point benefits would be cut by 21 percent. If lawmakers reallocate revenue from the old-age program to extend SSDI solvency, it would bring forward the old-age program's insolvency date from 2030 to 2029. Notably, the SSDI reallocation that lawmakers undertook in the budget deal appears to have moved the old-age insolvency date from 2031 to 2030, since 2031 was the date CBO projected back in June.
During last week's debate on the Bipartisan Budget Act of 2015, Sen. James Lankford (R-OK) offered up an amendment making many further changes to the Social Security Disability Insurance (SSDI) program beyond the ones already included in the law.
Sen. Lankford's amendment contained a number of well-known ideas for improving the program, including some presented by the McCrery-Pomeroy SSDI Solutions Initiative.
The recently-introduced Bipartisan Budget Act of 2015 tackles a laundry list of items that lawmakers needed to address over this Congress, including the upcoming exhaustion of the Social Security Disability Insurance (SSDI) trust fund. Because the Social Security Trustees and the Congressional Budget Office (CBO) had estimated that the trust fund would run out of reserves by the end of 2016 and in the beginning of Fiscal Year (FY) 2017, respectively, leaders included a payroll tax reallocation to shore up the trust fund. This is coupled with very modest changes to Social Security, including one that would close loopholes in the Old-Age and Survivors' Insurance (OASI) program as well as a number of measures that affect the disability program.
According to estimates from Social Security's Chief Actuary, the changes would improve long-term solvency of the combined OASDI trust fund by 0.04 percent of payroll over 75 years. Over the next 10 years, the Chief Actuary estimates these changes will save the trust funds between $5 billion and $9 billion, and CBO estimates these changes will save about $3 billion. This bill would close 1.5 percent of the 75-year shortfall and reduce total Social Security costs by about 0.1 percent.
This blog is part of a series of "Policy Explainers" for the 2016 presidential election, where we explain some of the candidates' policy proposals that affect the federal budget.
Today, Republican presidential candidate and former Florida Governor Jeb Bush unveiled a new plan – among the most detailed we have seen so far from any presidential candidate – to reform Social Security and Medicare. According to our estimates, Gov. Bush's plan would save about $285 billion (including interest) over ten years and very roughly $2.7 trillion over twenty years. It would also close Social Security's shortfall over 75 years and beyond.
This blog is part of the “Fiscal FactCheck” series designed to examine the accuracy of budget-related statements made during the 2016 presidential campaign.
Last night marked the first Democratic Presidential debate, held in Las Vegas, and the candidates debated a number of different issues. While they did not mention any of our 16 Budget Myths to Watch Out For in the 2016 Presidential Campaign, there were other claims that related to the federal budget. Below is our analysis of these claims, and be sure to check our other fact checks of the first and second Republican debates.
Eliminating the Payroll Tax Cap Could Extend Solvency to 2061 and Allow for Expanded Benefits
Sen. Bernie Sanders (I-VT) discussed his plans to increase Social Security benefits and extend the program's solvency by saying "And the way you expand it is by lifting the cap on taxable incomes so that you do away with the absurdity of a millionaire paying the same amount into the system as somebody making $118,000. You do that, Social Security is solvent until 2061 and you can expand benefits." He is presumably referring to his plan that the Social Security Administration (SSA) evaluated in 2013, a plan that taxed all income over $250,000 and allowed the current payroll tax cap to eventually catch up so that all income was taxed. This plan did extend solvency to 2061 -- leaving a deficit of 1.5 percent of payroll in 2062, growing to 2 percent by 2090 -- but did not also increase benefits. If it had increased benefits, the insolvency date would be sooner.
In an op-ed for the Washington Post, Robert Samuelson called attention to a new report by the National Academies of Sciences, Engineering, and Medicine which found a notable increase in the life expectancy gap. In his piece, Samuelson points out the disparity means more federal spending going towards wealthy retirees who may not need help.
The Urban Institute published a new report showing that younger generations will receive much more in lifetime Social Security and Medicare benefits than today's retirees, and all generations will receive more benefits than they have paid in taxes, leading to ballooning economic shortfalls in the two programs.
The study, by CRFB board member Eugene Steuerle and Caleb Quakenbush, shows that benefits for an average-earning couple retiring today are valued at $1 million and expected to be $2 million for millennials turning 30 this year. Left unchanged, this trend will continue to rise for future generations.