Get Ready for an All-Out Assault on Social Security by Washington in 2017
The first assault of the new Trump administration and Republican Congress upon Social Security has been launched. It comes in the form of release of a new report by the Congressional Budget Office, which of course these days is a wholly owned subsidiary of the Republican Congressional Caucus.
Using some financial sleight-of-hand, this CBO report pushes forward by two years the date at which its ideologically driven experts claim Social Security benefits will exhaust the Trust Fund, and since the Social Security program is required to be self-financing, the date at which, barring adjustments by Congress in the program’s funding and/or benefit payment levels, promised benefits would have to be cut by what the CBO claims will have to be 31%.
Such a cut would clearly be a staggering blow to the finances and livelihoods of nation’s retirees, dependents and the disabled.
This end-of-the-year CBO report is at odds with a report issued earlier this year by the Trustees of the Social Security Administration, which projected that the Trust Fund, barring any changes in taxes or benefit payments, would be tapped out in 2033, and that at that point benefits, barring some fixes in Social Security financing, would have to be cut by an also horrific but far lower 21% (with the remaining 79% of benefit payments being covered by current employee FICA taxes being paid into the system).
How did the projection on Social Security move from a cut in benefit payments of by just over a fifth being required in 17 years to a cut by almost a third being required in just 15 years?
Well, the CBO decided, in its wisdom, that the estimates of economic trends being used by the SSA’s Trustees -- a group about evenly divided between Republican and Democratic appointees, with Democrats having a slight edge -- were too optimistic.
Specifically, for example, the CBO gnomes are projecting that the interest rate on 10-year Treasury notes will only be at 1.7% in 2026, rising to just 2.3% in 2046. Since the Trust Fund -- composed of FICA taxes paid by workers -- is invested by law entirely in these 10-year notes, that’s a pretty low rate of return to be projecting. In contrast, the Trustees, in their 2016 report earlier this year, projected 10-year rates in 2016 of 2.4%, rising to 2.7% in 2031. For the record, the 10-year rate today is 2.51%, well above even the Trustee’s projection, and almost a percentage point higher than the latest CBO figure for the year.
The CBO is also projecting a slower rate of wage growth than did SSA Trustees, and thus is predicting a lower amount of FICA tax payments into the fund, as well as a further decline in labor participation rates and productivity growth, and other factors that all point to reduced contributions to the Trust Fund going forward.
Remember, though, that the Trump campaign and the Republican Senate and House candidates running for election, have been all about boosting jobs, raising incomes and lowering taxes, all of which should logically, if it were to come to pass, improve Social Security finances, not worsen them.