Dean Baker at Beat-the-Press has pointed out (sorry, not able to link to it) that Associated Press put out a tweet that presents an essentially hysterical story about future prospects for Social Security following the recent release of the Trustees. This report says that as of 2026 Medicare and as of 2034 Social Security will face a “shortfall.” However, the AP tweeted that what they face is “insolvency.” Needless to say, “insolvency” is much more serious than “shortfall” and simply feeds the overblown hysteria that so many think about these programs, feeding political pressures to mess with them.
The new report provides the latest update on what would happen if the forecast happens and nothing is done. Given that the projection is that Social Security benefits are set to increase by about 20% by 2034, if somehow nothing were done and benefits were set to be reduced so that they could be paid by expected tax revenues, the benefit would be cut back by about that amount to about what they are now in real terms. In short, this is not the hysterical crisis AP suggested or that so many think is out there. We have seen this nonsense before.
Of course, Dean accurately points out that by law the benefits must be paid. This may also be a time to remind everybody that the US is really in much better shape demographically in terms of life expectancies, retirement ages, and expected population growth rates than most other high income nations, with such cases as Japan and Germany in much worse shape than the US. However, all these nations are making their public old age pension payments. In the case of Germany the payments are higher than in the US, but the payments are being made, and its economy is humming along very well. There simply is not basis for any of this hysteria in the US regarding the future of Social Security.