Social Security and the National Debt - CATO Institute
Does Social Security contribute to the national debt? According to this article published by the CATO Institute, yes it does. This once again becomes a discussion topic on the heels of the recently published annual report by the Trustees of Social Security, showing that the assets in the Social Security Trust Funds will be fully depleted in 2032, resulting in a 22% across-the-board cut in everyone’s monthly Social Security benefit. But, according to this CATO Institute article, the problem isn’t a future concern; rather it is a present one, because Social Security is already contributing to the national debt, and will continue to do so at an increased rate in future years. The article goes on to explain how Social Security already adds to the nation’s debt, concluding with the opinion that Congress should consider how any program reform affects the national debt, rather than a specific date at which benefits will be affected. A very interesting piece of this CATO analysis is their “menu” of potential reform options (see those here) and the effect each of those options might have on the Social Security program. Click here to read the entire CATO Institute article authored by Romina Boccia and Ivane Nachkebia.
As an example of leading thinking on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.