In their report of June 22, 2016, the Trustees of Social Security urged lawmakers to fix the program’s impending insolvency as the trust funds’ reserves will be depleted by 2034. This will be the policy and solution:
Mandatory spending that arises out of earned benefits from service and work (e.g. Social Security, military retirement, and federal civil pensions) are a top priority. I will call these expenditures “requirements” (as opposed to “entitlements” because that term is now commonly understood to mean payments out of government generosity). Requirements were bargained for in exchange for federal service (military and civil) and payroll contributions (to the Social Security trust funds) made by both employees and employers through payroll taxes. Requirements won’t be underfunded; they will be paid as promised.
Social Security benefits are paid from money deposited into the two Social Security trust funds; one trust sets aside savings for retiree benefits, the other for disabilities. Deposits are primarily from payroll taxes and self-employment taxes. A third, but vital source of trust fund deposits, is the interest earned on the US government bonds purchased when the Social Security has a surplus. The two Social Security trust funds own about $3.0 trillion in bonds. Today, these earn about 3.3 percent interest per year. Twenty years ago, interest earnings were over 6.5 percent.
The total amount paid each year to the Social Security trust funds depends on the number of workers and the amount they earn. Social Security pays benefits to all who qualify. In 2020, the amount paid out in benefits will be more than the incoming deposits from taxes and bond interest. For the first time since 1982, Social Security will run a deficit and will need to deplete its inventory of government bonds to keep up with benefits. Worker contributions won’t be enough. The experts predict the government bonds will be all gone in less than 20 years. Stopping this path to insolvency is the job of Congress.
As your Senator, I will draft the law that raises the Social Security bond interest earnings to a fixed 9.3 percent. Interest deposits to the trust funds will increase by $180 billion each year. This will replenish Social Security with enough reserves to carry the trust funds through the retirement of baby boomers and beyond.
The $180 billion of extra interest money will be moved to mandatory spending from some $310 billion of discretionary spending that Congress, every year, indefensibly pays for expired and unauthorized programs. There are hundreds of these, See Congressional Budget Office report, dated January 15, 2016, “Unauthorized Appropriations and Expiring Authorizations.”
My plan does not increase payroll tax rates. We won’t need to raise the retirement age, reduce benefits, or incur more debt. This way forward means Congress has to do the hard work of actually reading the appropriations bills and deleting money going to programs long-ago expired and never renewed. Senators and House members will have to inform the lobbyists, special interests, and contractors that they will have to get their revenue from the private sector because the Social Security trust funds are short of money.