There’s no looming “insolvency” for Social Security. Not in 2032, 2052, or 2102. It’s all politics, from both sides.
How we know can be found in the fact that there was never a Social Security “lock box" in the first place. Instead, Social Security was always an extra income tax foisted on all working Americans. And the revenues raised from the income tax were spent in full, every year.
Of course, that’s why present and future Social Security recipients needn’t worry. And it also logically helps explain, beyond great wealth in the senior citizen cohort, why there’s no outcry about the latest “revelation” that Social Security’s insolvency date has been moved up to 2032. There’s nothing to it.
In the past, the Social Security taxes collected were used to pay existing recipients. Any excess, and there was always excess from the tax, flowed into general revenues as an extra source of spending sustenance for Congress.
Assuming projections about 2032 are correct, during that year Social Security won’t collect enough in taxes to pay all recipients. If so, there won’t be benefits cuts down to 78% of existing payouts as has been promised by the various Social Security scolds, rather Congress will dip into general revenues or borrow to make up the shortfall.
Importantly, what’s going to happen will almost certainly happen in a way that appears much less simple than described. Which is the point of this write-up’s title: the situation is political as opposed to one about insolvency.
With Social Security's insolvency date having been moved up, watch out for opportunistic politicians (a redundancy, no doubt) preaching about “entitlement reform,” “protecting our grandchildren from our profligacy,” and all sorts of other self-serving flagellations from politicians meant to whip up their flocks. No doubt Cato, the Peterson Foundation, and other entities that lean limited government will do the same, all the while rolling out myriad studies and books from the past and present that promise Armageddon related to the surely “unsustainable” entitlements. While there are no looming benefits cuts to speak of, members of the right will politic and speechify as though there are.
About what you’ve read, none of it’s a defense of Social Security or Medicare. Both were huge mistakes. But shrinking either won’t shrink government when it’s remembered that Congress exists to spend, and spend it will on existing and new programs if what’s not going to happen actually happens whereby the Social Security alarmists get their reform.
As for the opponents of reform, they’ll use 2032 to play their own "widows and orphans" politics, they'll preach about how Social Security is foundational to a “dignified” retirement in the U.S., and that Congress must shore up its finances to give seniors who’ve sacrificed so much for the U.S. what was promised them. Endless politics, which is what both sides want.
To maximize political effect, they’ll make sure to not solve the funding problem right up to the point when Social Security benefits will be cut, only for a last minute deal to be struck "miraculously." Call it "TACO" for Congress. Social Security is a political story with no relation to solvency.
