The trustees for Social Security say the program’s long-term outlook for hasn’t changed much in the last year – but that’s ignoring any potential negative effects from the coronavirus.
The latest report from the Social Security trustees – officially called “The 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds” – was released Wednesday. Same as last year, the trustees calculated that the two Social Security trust funds are fully funded for another 14 years.
Separately, the Old-Age & Survivors Insurance trust fund will be depleted in 2034, while the Disability Insurance trust fund will last until 2065. Once the old-age trust fund is exhausted, the retirement program will be able to pay 76% of scheduled benefits, while the disability program will be able to pay 92% its benefits when its trust fund runs dry.
Over a longer time horizon – and assuming no changes are made on either the revenue or payment sides – the funding levels deteriorate. Taking the two trust funds together, roughly 91% of the costs are funded over 25 years, 85% over 50 years, and 82% over 75 years.
The trustees also said that the Medicare trust fund for hospital care is fully funded until 2026, the same as in last year’s analysis.
Coronavirus changes the picture: The trustees report comes with a warning: “The projections and analysis in these reports do not reflect the potential effects of the COVID-19 pandemic on the Social Security and Medicare programs. Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust their estimates accurately at this time.”
A Trump administration official told The Wall Street Journal’s Kate Davidson that the pandemic will likely darken the outlook. “The actual status of the program in the near term is almost certainly somewhat less favorable than is presented in this year’s trustees’ report,” the official said. “It’s clear that employment, earned income and payroll-tax revenue will be significantly affected, and lower for at least a portion of 2020 than estimated for the report. Additional claims for retirement, disability and survivors’ benefits might increase costs.”
Nancy Altman, president of Social Security Works, agrees that the coronavirus crisis will change the outlook, but not by much. “Even with what’s going on in the economy now, with such a large reserve the benefits will keep being paid and continued through the 2030s,” she told MarketWatch.
A new analysis from the Bipartisan Policy Center comes to a more pessimistic conclusion. If the current recession is similar to the downturn in 2007-2009, the retirement trust fund could run dry by 2028 and the disability trust fund could be tapped by 2024. “These projections reflect a substantial further deterioration in the finances of a program that was already facing a large mismatch between income and outlays, making the need for action by policy makers even more urgent,” the BPC report says.