The Social Security system will be solvent until 2035, according to a new projection from the Congressional Research Service. The projection comes in CRS’ latest update of its assessments of the Social Security System’s finances, which takes data from 2019 into account.
In “Social Security’s Funding Shortfall,” CRS says that in 2019, Social Security had:
- total income of $1.062 trillion, 92.4% of which came from dedicated tax revenues;
- total expenditures of $1.059 trillion, 98.9% of which were for benefit payments; and
- trust fund reserves of $2.9 trillion (U.S. Treasury securities) available for future program spending.
In 2020, the CRS expects that Social Security’s expenses will be greater than its income.
“With these asset reserves, the trust funds are projected to remain ‘solvent’ until 2035,” says the report. That means that until 2035, the trust funds will be able to pay full benefits scheduled under current law on a timely basis. In 2035, however, CRS projects that the trust fund reserves will be depleted.
The report adds that the Social Security Board of Trustees has said that the program’s cash-flow deficit was $78 billion in 2019 and projects that it will be $457 billion in 2034 (in constant 2019 dollars).
Trends
It was not always this way, the CRS notes. “For many years, Social Security collected more tax revenues than needed to pay benefits, resulting in the accumulation of trust fund asset reserves (held in the form of interest-bearing U.S. Treasury securities) available for future program spending,” the report says.
Starting in 2010, however, things began to change. That’s when Social Security’s total expenditures began to exceed noninterest income, the CRS says, which required the program to draw on trust fund reserves to pay scheduled benefits.
The CRS attributes the shortfalls largely (but not entirely) to demographics: Declines in fertility and increases in longevity, resulting in a lower ratio of workers to beneficiaries. It attributes the system’s financial stresses to a variety of demographic, economic and program-specific factors:
- birth rates;
- death rates;
- immigration;
- employment rates;
- productivity gains;
- wage growth;
- price growth;
- interest rates;
- disability benefits claim rates; and
- program design features.
These factors, they say, affect the number of workers Social Security covers and their level of earnings, as well as the size and composition of the population of beneficiaries and their monthly benefits.
But Not the End
Even though the CRS projects that solvency ends in 2035, that does not mean the end of Social Security, nor even of benefits, according to the CRS. It says that Social Security would continue to operate through scheduled tax revenues, which CRS says are projected to cover approximately 80% of scheduled benefits through 2093, the end of the projection period, and still would cover 75% in that year. “It is unclear how the U.S. Treasury would handle the payment of scheduled benefits under such a scenario,” the CRS adds.
