Cuts to Social Security are not inevitable
Blog ››› ››› ZACHARY PLEAT
Fox Broadcasting Co. used a 2017 report by the Social Security Board of Trustees nearly a year after its release to scare its viewers into thinking benefit cuts and further increases to the full retirement age are inevitable. In at least 93 news segments on May 21, dozens of Fox affiliates warned of an approaching time when Social Security tax revenue would be outpaced by its spending on benefits, without once mentioning that a modest revenue increase would solve the problem.
On just May 21, Fox affiliate stations aired at least 93 news reports on the 2017 trustees' report. Many of the segments had generally the same content as the one aired in the 4 a.m. hour on WXMI (FOX17) in Grand Rapids, MI:
ANCHOR: The Social Security Board of Trustees said [in] its 2017 annual report that 2022 will make the first time in more than 40 years that Social Security pays out more in benefits than it takes in. And so deficits are going to continue to be depleted out of the roughly $3 trillion in asset reserves. Now what does this exactly mean? A cut in benefit payouts of up to 23 percent might be made by then, just to keep the payouts going through 2091 if Congress doesn’t take stronger measures.
Now, reasons for the problems include people are living longer, lower interest rates affect the yields on special issue bonds, and more baby boomers are going to be entering the system with really not enough workers to cover for them. One trend for sure to continue is raising the age at which you get full benefit retirements.
These reports are misleading in multiple ways. Their claims that in the next few years, benefit cuts of over 20 percent might be necessary are flat-out false. Social Security has built up a nearly $3 trillion surplus so that full benefits could be paid out when there’s a large increase in new retirees, as America is currently experiencing with its retiring baby boomer generation. As the 2017 trustees' report (which all these Fox reports are citing) explains: “Social Security’s combined trust funds increase with the help of interest income through 2021 and would cover full payment of scheduled benefits on a timely basis until the trust fund reserves become depleted in 2034.” So, contrary to Fox’s fearmongering, there will be enough money to pay out full benefits for nearly two decades. Beginning in 2034, as the trustees' report notes (not 2022 as the FOX segments claim) Social Security faces a problem of not having enough revenue to pay out full benefits -- but it can be addressed without cutting benefits by simply raising additional revenue.
The other outcome mentioned in this Fox report (and in nearly two dozen others) is a continued increase in the retirement age to earn full Social Security benefits. But such a change is also not inevitable -- nor would it address the full problem. As a 2015 Congressional Budget Office analysis of policy options on the 75-year balance of Social Security demonstrated, raising the full retirement age to 70 (it is currently 67 for people born in 1960 and after) would not have as much positive effect on Social Security’s balance as, say, eliminating the taxable maximum limit on income (currently, income above $128,400 is not taxed for Social Security). Taxing income above the current maximum without increasing the benefits for those specific high-income earners would improve Social Security’s balance sheet even more. As the Center on Budget and Policy Priorities explained in reaction to the 2017 trustees' report, the payroll tax currently “covers only about 83 percent of covered earnings, well short of the 90 percent figure envisioned in the 1977 Social Security amendments.”
Fox’s failure to suggest increasing Social Security revenue is even more glaring because it’s discussed as a solution in the very report Fox is citing. In its conclusion, the trustees' report states that “an immediate and permanent payroll tax rate increase of 2.76 percentage points” would be enough to keep the Social Security trust fund fully solvent through the next 75 years.
Furthermore, Fox is presenting the upcoming deficit in Social Security as a sudden crisis, but in fact it’s been anticipated for decades. The 1984 trustees' report explained that “income will generally exceed outgo, developing a substantial surplus each year. After about 2020 the reverse is true, with outgo exceeding income.” That report also anticipated the demographic issues the country is currently experiencing:
Several important long-range demographic trends, already under way, are anticipated to raise the proportion of the aged in the population in the next 75 years:
- Because of the large number of persons born shortly after World War II, rapid growth is expected in the aged population after the turn of the century.
- At the same time, low birth rates would hold down the number of young people.
- Projected declines in mortality rates also would increase the numbers of aged persons.
Methodology: Media Matters used iQ media to search for local news reports for the week of May 21-25 featuring discussion of possible Social Security benefit cuts using the search terms “Social Security” together with “2022.” The vast majority of results were from Fox affiliates on May 21