Social Security Trustees Update 2020 Report To Include Effects of Covid Recession

Reader and poster Dale Coberly updating Angry Bear readers on recent Social Security findings in the 2020 report. Reader Bruce Krasting had alerted Angry Bear to the publication by the Social Security Trustees of a “revised baseline” that includes effects of the Covid recession on their projections otherwise from the 2020 Trustees Report. “Updated Baseline for Actuarial Status of the OASI and DI Trust Funds, Reflecting Pandemic and
Recession Effects“

The Trustees have better information than I have and assumed a lower unemployment rate with effects of the recession lasting over several years, but returning to “normal” by the year 2029.  Their new projections bring the Trust Fund exhaustion date one year closer, but the ultimate 75 year deficit remains at about 4% of payroll.

Using their revised baseline, and attendant projected changes in some of the parameters they use for their projections, I was able to replicate their calculations, giving me confidence that my own findings regarding necessary payroll tax changes are consistent with their projections.

The necessary payroll tax changes amount to an average tax increase of less than one tenth of one percent (each) per year.  This is different from my pre-covid findings only in that the tax increases would need to be a bit larger in the first years than previously estimated.

I suggest (there are other possibilities…which all amount to the same thing in the end, except for the politics) that a tax increase of two tenths of one percent of payroll (about two bucks per week for the average worker) for the next three years, followed by a similar increase at longer intervals over the actuarial window.  This means that instead of raising the tax two bucks per week every year, it would become necessary to raise it only every other year, then every three or four years, and so on, until about once in ten years … and then none at all.

The reason for the accelerated tax increases is to avoid a projection of “short term financial inadequacy,”  which would amount to nothing serious, but would be the excuse for the bad guys to foment hysteria crying “Social Security is broke.”

Krasting also pointed out to us a report by SSA showing the actual tax income to Social Security for 2019 and 2020.  This showed an increase in income for 2020 compared to 2019… which is counterintuitive given the recession and the Trustees own revised baseline showing a decrease in income (as we would expect) due to the recession.

So far, I don’t know what to make of this and cannot find the SSA income report on line.

Some people appear to think that an increase of the Social Security “tax” would be unfair and a terrible burden on the poor.  It is not and would not be.   SS is not welfare. It is a way for working people to save “at least enough” for their own retirement protected from “the market” and insured against their own personal bad luck…including a lifetime of wages too low for them to save enough to allow them to retire in reasonable comfort.

Social Security “works” because it is not welfare.  It was Roosevelt’s genius that “put that tax in there so no damn politician can take it away from them.”

Roosevelt did not reckon with the persistence of damn politicians or the forgetfulness of workers (and the people who claim to represent them). Two dollars per week is not a burden out of an income of 50 thousand dollars per year. (A person making only 25 thousand per year would see a tax increase of only one dollar per week.  And he would get this money back with interest.. in his case a lot of interest . . . when he will need it most.

Those who want to “expand” Social Security by taxing the rich need to try to understand what Roosevelt did.

If there are people who need more help than SS now provides,  they should look to SSI or other programs (welfare) for that help. Or agree to pay for it themselves. SS is not really a “tax”, though it is called that.  It is workers paying for their own needs. An increase in the payroll tax of another two percent would provide about a twenty percent increase in benefits.

Meanwhile the two tenths percent per year increase actually solves the SS actuarial deficit 100%,  while the plans put forth by both Republicans and Democrats look like they were designed to NOT solve the deficit, while creating more enemies for SS, or leaving worker with inadequate retirement insurance.

Beyond fixing the SS acturial deficit, the best way for workers to improve their income both while working and in retirement would be with a minimum wage that is a living wage. This is doable if the politicians and “defenders of Social Security”  would put their effort into that instead of trying to create welfare for all people, for all seasons, for all reasons.

While the bad guys are trying to destroy income security for workers for their own reasons.

The big threat to Social Security now is the “payroll tax holiday.”  It’s as if the man in the suit talked you into taking your retirement savings and buying a new car, or a sure thing on the market.