Social Security payments are a major financial burden on the U.S. government. While in years past, the trust fund providing for benefit payments has taken in more in taxes than it has paid out in benefits, as the “Baby Boomer” generation has retired, this trend has reversed at an alarming speed. Most conventional estimates have suggested that the trust fund will run out of money by 2035, at which point Social Security benefits would need to be cut or Social Security taxes raised.
However, the 2035 date was proposed before the coronavirus pandemic, which upended markets and created a strange economic depression—during which the nation’s unemployment rate soared, but the stock market continued to outperform expectations. The former trend is significant for Social Security because unemployed workers are not paying any Social Security taxes—but even as the pandemic continues, the government is still obliged to make its regular payments to retirees. While there are other extenuating factors, it seems possible that this trend has sped up the approaching insolvency of the program.
More information will be made available after the Social Security Administration releases its 2021 annual report, expected in the coming weeks. The report will discuss the trust fund’s finances for the first time since the coronavirus pandemic began in the United States in March 2020; it was scheduled for release four to five months ago but has been repeatedly delayed.
Because the report has not been published yet, no one is certain what new information it will bring. Some have speculated, however, that it will move the insolvency date for the fund forward in response to the lack of funding caused by the pandemic.
Olivia Mitchell, the director of the University of Pennsylvania Wharton School’s Pension Research Council, suggested as much in a podcast on August 16. “It seems that the date of insolvency of SS has crept sooner,” the professor told Wharton Business Daily—“perhaps as early as 2029.” One reason she cited for this trend was the tendency of some Americans to use a job loss during the pandemic as an excuse to retire early, even at the cost of some percentage of their monthly benefits.
Mitchell warned that while the last official estimate of the program’s financial stability, which gave it a 2034 insolvency date, was outdated. The Congressional Budget Office has already revised its estimate forward, indicating that it would run out of money in 2032.
Trevor Filseth is a current and foreign affairs writer for the National Interest.