Yesterday, the Social Security Administration announced that beneficiaries will be receiving a 1.5 percent Cost-of-Living Adjustment (COLA) this year. Although this update is below the 1.7 percent increase provided this year and the 3.6 percent increase provided for 2012, it is reflective of the relatively low inflation experienced over the past year.
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.