The Funding Our Future campaign and the Bipartisan Policy Center hosted a digital event on the financial challenges facing Social Security on April 23, 2020. Specifically, the discussion summarized the 2020 Social Security trustees’ report and explored what assumptions might already be outdated as a result of COVID-19. Featured experts included the chief actuary of the Social Security Administration and two former public trustees of the program. You can watch the full webinar here.
We also synthesized the key takeaways from the event. Check it out:
The 2020 estimates were developed before the economic fallout from the COVID-19 pandemic. Under that framework, reserves in the DI trust fund are estimated to be depleted in 2065, an extension of 13 years from last year’s report. OASI reserve depletion is projected to be in 2034, and the combined OASDI reserve in 2035, each the same estimate as last year’s report.
Costs for Social Security have risen substantially over the past decade and are expected to keep increasing largely due to a drop in birth rates and a rise in the number of Americans retiring. Additionally, the elimination of the Affordable Care Act’s excise tax along with lower interest rates have added to the trust fund shortfall. Notably, the two public trustee positions for Social Security’s board are currently vacant. It will be crucial to fill them before the next trustees’ report so the public has confidence in the adjustments made to account for the impact of the virus.
With so much economic uncertainty, the biggest financial impact is likely to be a reduction in the payroll taxes that fund most of Social Security. BPC modeled a number of different scenarios to project the impacts of recessions of varying depth and length over the coming months and years. As an example, if tax revenue to Social Security decreases by 15% for 2020 and 2021, this would bump up the depletion date for the OASDI trust fund from 2035 to 2033. If the economic impact persisted longer, the depletion date could be as soon as this decade.