Bruce Krasting has noticed something interesting. In a footnote in a recent CBO report on the economy and the Social Security trust funds there’s this breadcrumb:
CBO projects that the DI trust fund will be exhausted during fiscal year 2016. Under current law, the Commissioner of Social Security may not pay benefits in excess of the available balances in a trust fund, borrow money for a trust fund, or transfer money from one trust fund to another. However, following rules in the Deficit Control Act of 1985 (section 257(b)), CBO’s baseline assumes that the Commissioner will pay DI benefits in full even after the trust fund is exhausted.
Said another way, the Congressional Budget Office is assuming that the Social Security Administration will divert money from the old age benefits fund, what most of us think of as Social Security, to the disability insurance side to prevent the disability side of the ledger from being unable to pay benefits. This, however, will hasten the OASI’s own point of insolvency.
OASI’s trust fund is already being drawn down, earlier than expected, and the CBO’s most recent projection is that it will be exhausted in 2033. That doesn’t take into consideration the amounts that will be tapped in coming years to make up for the shortfall in DI. Think much, much sooner for OASI’s trust fund to be exhausted. My thinking has been within the next five years, certainly within the next ten years.
What I think should happen is that the fiction of the trust funds should be abandoned and full benefits paid from general revenues, paid for by decreases in discretionary spending. Very few people other than Social Security recipients like any part of that prescription. I also think that the Social Security retirement age should be increased and that it should be means-tested in, essentially, the same way it is now. I’m an equal opportunity ox-gorer.
I don’t find either of the other alternatives—increasing the payroll tax or reducing benefits to match revenues—poliically credible. We can kick the can down the road, as Mr. Krasting suggests that we most likely will, but there isn’t a lot of road left.