Although some argue that policymakers can wait to solve our long-term entitlement problems, CBO's recent Long-Term Budget Outlook suggests otherwise. According to their projections, the Social Security program is in particular trouble -- and much worse than we thought. According to CBO's latest projections, the trust fund will become insolvent three years earlier than what we previously thought, and its long-term funding gap is 50 percent larger.
Naturally, lawmakers are diverting their attention to resolving sequestration, the debt ceiling, and the expiring continuing resolution, but another important budget matter is only a couple of years away. The Social Security Disability Insurance Program will exhaust its trust fund by 2016, at which point benefits will either need to be cut by 20 percent or transfers will need to be made from the old-age fund, shortening its lifespan by two years (2035 to 2033).
While many in Washington are bracing for more partisan brinksmanship in the upcoming negotiations over the debt ceiling and a potential government shutdown, it is easy to overlook the fact that these fiscal debates present an opportunity for a bipartisan compromise on a comprehensive deficit reduction deal. This morning, the Orlando Sentinel published an editorial making that case for including Social Security in the debate:
Update: A new note from the Office of the Chief Actuary of the Social Security Administration finds that allowance rates actually fell during the Great Recession. The Coe and Rutledge brief appears to have been removed from the website for the time being. This blog includes an extra paragraph discussing the SSA's findings.
With President Obama set to give a speech in the coming weeks on retirement security, the Center for American Progress (CAP) has released a report describing a new retirement account that intends to improve on current 401(k)-type plans.
Today, a piece in the Financial Times shows the unnecessary damage being done by the ongoing sequester -- in this case, sharp cuts to federal support for low-income housing.
It's August 14 and that means it is Social Security's birthday! The program has been around for 78 years, providing retirement security to the elderly and support for the disabled. But the demographics have changed over the past 78 years and financial projections clearly show that reforms will be needed to ensure the program can continue to provide those benefits.
Over at Calculated Risk, Bill McBride has created an animated chart showing America's age distribution evolve, as far back as 1900 to the current day to the projected age distributions through 2060.
While everyone is focused on tax reform developments these days, we cannot forget about the need for entitlement reform. In an attempt to devise a solution, the Ways and Means Committee held a bipartisan hearing series on reforms to entitlement programs in April. They have since opened the floor up to the public by encouraging the submission of comments on any of the plans and have also released discussion drafts from each of the hearings.