(Washington, D.C.) – Today the Social Security Trustees released their Annual Trustees Report for 2011. The following provides comment and analysis from the Strengthen Social Security Campaign, a coalition of more than 300 organizations representing more than 50 million Americans:
(Click here for a complete pdf of the press release)
“The trustees’ report found that Social Security's surplus will be $69.3 billion in 2011. Those who say that Social Security is in deficit this year are flat wrong,” said Nancy Altman, Co-Chair of the Strengthen Social Security Campaign. “By law, Social Security cannot deficit-spend and cannot borrow, so it is obvious that Social Security cannot add a penny to the federal deficit.”
“The trustees’ report states that Social Security will be able to pay all benefits for the next quarter century, even without congressional action. Bottom line, Social Security works,” said Eric Kingson, Co-Chair of the Strengthen Social Security Campaign. “Even in a bad economy, Americans continue to receive the full benefits they have earned for themselves and their families. The trustees report makes clear there is no reason to cut benefits—not for today's seniors; not for any generation.
The 2011 report has two critical findings:
1. Social Security is projected to have a surplus of $69.3 billion in 2011. This is based on revenue of $807.7 billion and outlays of $738.4 billion (See Figure 1). Social Security has three revenue sources: Payroll contributions from employers and employees, interest earned on Social Security’s U.S. Treasury bond assets, and income taxes on the Social Security benefits paid by those with higher incomes (see Figure 2).
It is true—but of no consequence—that the $738.4 billion in benefits paid and administrative costs estimated for 2011 exceed the amount of payroll tax contributions. But that is not surprising, especially in an economic slump. It has happened 17 times between 1958 and 2011, according to the Social Security Administration. More important, the program continues to have a large annual surplus even during a major economic downturn when more than 13.7 million Americans are officially unemployed and countless more were forced to retire early and begin collecting Social Security benefits due to the lack of job opportunities during the Great Recession.
2. Social Security is projected to be able to pay all benefits until 2036. Social Security’s surplus is projected to be $2.7 trillion in 2011, and the surplus is projected to peak at $3.7 trillion in 2022. With no action Social Security will have sufficient income and assets to pay all monthly benefits in full and on time until 2036.
This data shows that Social Security is not in crisis. It also does not contribute to the federal deficit. By law, Social Security cannot borrow and it cannot make benefit payments if it lacks the revenue to cover them. Its only recourse is to cut benefits. That is why Social Security should not be part of any deficit-reduction deal.
The Trustees Report reminds us that lawmakers do need to address Social Security’s long-range funding gap but there is no need for haste. Even if Congress does nothing to address the projected shortfall, the program can pay all promised benefits for the next quarter century, and thereafter 77 percent of benefits through 2084. Moreover, considering Social Security at the same time as the deficit debate risks reinforcing the widespread perception that the government is illegally commingling Social Security’s dedicated revenue with general fund revenues and stealing the contributions of hardworking Americans. Social Security should be considered in the sunshine after the current deficit debate is concluded and after the federal debt limit has been increased.
This long-range funding gap can be closed relatively painlessly by scrapping the payroll tax cap. Congress could raise the Social Security tax cap so that the 6 percent of the population that makes more than $106,800 a year pays taxes on all of their wages just like everyone else who makes less than that amount has to do. This will guarantee that full Social Security benefits can be paid for the next 75 years and beyond.