Washington, DC – A new analysis released by the Bipartisan Policy Center, building on the projections in the just-released report from the trustees for Social Security and Medicare, finds that the recession resulting from the impacts of COVID-19 could deplete reserves in each of the Social Security trust funds before the end of this decade, much sooner than previously forecasted.
BPC’s analysis finds that if the current economic downturn is similar to the Great Recession and its aftermath, the Disability Insurance trust fund reserves will be exhausted within the next four years and the Old-Age and Survivors Insurance (OASI) trust fund reserves will be depleted around the time of the 2028 presidential election. A more severe recession could cause the funds to run dry even sooner. The reserves will be depleted more quickly for a variety of reasons, BPC’s experts project, but by far the biggest is lower payroll tax revenue as workers lose jobs, hours, and wage growth.
In a scenario where the current downturn mirrors the Great Recession, the retirement trust fund fails the trustees’ test of short-term financial adequacy this year, which would be the first failure since the test was introduced in 1991. If the OASI trust fund reserves are exhausted as projected without prior policy action, a 24% cut to Social Security retirement benefits would occur in 2029.
For several years now, the public trustee positions for Social Security and Medicare have remained vacant. BPC has hosted Charles Blahous and Robert Reischauer, the last two individuals to serve in these roles, as shadow public trustees to provide analysis and insights into the programs’ official annual trustees’ reports.
“This is as dire a situation as Social Security has faced in decades. The reforms required at this point to maintain the program’s longstanding structure are already very difficult to enact,” said Blahous. “Soon, the political barriers to a rescue will become prohibitive.”
“There is no more time to waste,” said Reischauer. “We cannot put off action to restore Social Security’s financial balance any longer, and it is critical that the public trustee positions be filled to instill public confidence as Congress considers reforms to the program.”
Earlier this year, BPC released a letter with more than 100 former lawmakers, cabinet secretaries, White House officials, Congressional Budget Office directors, and other experts urging the Senate to take quick action on President Donald Trump’s nominees to fill the Social Security and Medicare public trustee roles.
Read BPC’s analysis
BPC’s experts are available for comment.