Social Security Insolvency Just 13 Years Away: Report

Social Security Insolvency Just 13 Years Away: Report

By Yuval Rosenberg and Michael Rainey
Thursday, June 2, 2022

Good Thursday evening. President Biden is about to deliver an address to the nation on guns after yet another mass shooting, this time in Tulsa, Oklahoma. The White House said the speech, slated for 7:30 p.m. ET, will focus on “the recent tragic mass shootings, and the need for Congress to act to pass commonsense laws to combat the epidemic of gun violence that is taking lives every day.”

Here’s what else is happening.

Forecast for Social Security and Medicare Brightens a Bit, but Time Still Running Out

The financial outlook for Social Security and Medicare improved a bit this year as the result of a stronger-than-expected economic recovery from the Covid pandemic, according to annual reports released Thursday by the program’s trustees. But both still face financing shortfalls that threaten their ability to pay full benefits in the not-too-distant future.

Among the key data points in the reports:

• Social Security’s Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivors benefits, will be able to cover promised benefits until 2034, one year later than projected last year. After that, with the fund’s reserves depleted, it will only be able to pay 77% of scheduled benefits.

• Social Security’s Disability Insurance Trust Fund is no longer forecast to be exhausted within the 75-year timeframe used in the projections — a significant improvement over last year’s report, which said that the fund would only be able to pay scheduled benefits until 2057. This is the first time since 1983 that the disability reserves are not depleted within the 75-year projection period.

• While the two Social Security trust funds are separate entities, the report also looks at the combined reserves to provide a sense of the actuarial status of Social Security as a whole. (The programs would likely become more tightly linked in the event of a shortfall.) The combined trust funds are now projected to run out by 2035, one year later than reported last year. After that, the program will be able to pay 80% of scheduled benefits.

The Social Security report concludes: “Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”

• The Medicare trust fund that covers inpatient hospital care for beneficiaries will be able to pay full benefits until 2028, two years later than reported last year. The program would then be able to pay 90% of expected costs. “The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges,” the health insurance program’s trustees wrote, calling on Congress and the White House to act with a sense of urgency. “The sooner solutions are enacted, the more flexible and gradual they can be.”

Biden touts the new numbers: President Joe Biden issued a statement touting the improved forecast for the programs. “Today’s report from the Trustees of the Social Security and Medicare trust funds shows that the strong economic recovery driven by my economic and vaccination plans has strengthened programs that millions of Americans rely on and has put our nation in a better fiscal position,” he said. He also used the opportunity to take another swipe at a plan released earlier this year by Republican Sen. Rick Scott of Florida, which proposed to have all federal programs, including Social Security and Medicare, sunset after five years unless renewed by Congress. “That’s not the way to strengthen these programs,” Biden said.

The bottom line: Despite the projected improvements in this years’ report, Social Security faces insolvency in 13 years; Medicare is just six years away. The trustees continue to warn that lawmakers must act to address the long-term shortfalls both programs face — and that continued inaction could mean more dramatic and painful benefit cuts.

“Policymakers need to get their heads out of the sand and stop pretending these vital programs’ funding issues will fix themselves,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Who’s Keeping an Eye on $40 Billion in Ukraine Aid?

Congress quickly passed a $40 billion aid package for Ukraine in May, but according to a report at Politico, worries about how well that money is being monitored and spent could delay future efforts to assist the war-torn country.

“Concerns are mounting on Capitol Hill about the Biden administration’s ability to properly account for the unprecedented wave of cash and to track the thousands of U.S. weapons heading to Ukraine for its war with Russia,” Politico’s Andrew Desiderio, Lara Seligman and Connor O’Brien write.

The concerns are coming from both sides of the aisle. Sen. Rand Paul (R-KY) briefly delayed the aid package in a failed effort to appoint a dedicated inspector general to oversee the spending, and eventually joined 10 other GOP senators in voting against the bill.

Far to Paul’s left, Sen. Elizabeth Warren (D-MA) also wants to see a full accounting of how the aid is used. “The U.S. government is sending billions in humanitarian, economic, and military assistance to help the Ukrainian people overcome Putin’s brutal war, and the American people expect strong oversight by Congress and full accounting from the Department of Defense,” she told Politico in an email. Warren added that she was not pleased with the information provided by the Pentagon so far, charging that the department “has not complied with the law” by failing to provide full reports on various issues for years.

Some protections in place: The aid package does include provisions related to oversight. It requires the Pentagon inspector general’s office to review the spending, and it calls on the State Department to work with the Pentagon to report to Congress on how weapons are being transferred to Ukraine.

A Pentagon spokesperson told Politico that the department is “committed” to being open and transparent, but also noted that war always involves uncertainty. “Risk of diversion is one of many considerations that we routinely assess when evaluating any potential arms transfer,” Marine Corps Lt. Col. Anton Semelroth said.

Rep. Ruben Gallego (D-AZ), who sits on the Armed Services Committee, said that while military aid has been siphoned off in some places, “Ukraine is a different story” due to the long-standing relationship between the two countries. “Obviously, we always have to be on the lookout, but this is not the same scenario that we have in the past,” he said. “There have been agreements between our governments about [some of the weapons’] usage. And I believe so far Ukraine has abided by all of them.”

Biden to Wipe Out $5.8 Billion in Student Debt From Corinthian Colleges

The Biden administration plans to eliminate all federal student loan debt associated with Corinthian Colleges, a for-profit educational chain that closed its doors in 2015 after 20 years of operation amid accusations of fraud and mismanagement. The largest student loan discharge in history, the move will affect about 560,000 borrowers, who owe a collective $5.8 billion on their student loans.

Corinthian, which operated multiple schools under various names throughout the country, had long been accused of misrepresenting its status in the labor market and the earnings potential of its graduates, and its behavior played an important role in the administration’s decision to eliminate the debt.

“We’ve reached a determination that every borrower who attended Corinthian was subject to illegal conduct at Corinthian,” a senior administration official said Wednesday, according to Politico.

Separately, the administration is still reportedly considering eliminating as much as $10,000 of student debt for all borrowers, though no final decision has yet been reached.

Quote of the Day

“The 50-50 Senate sucks.”

Sen. Mazie Hirono (D-HI), as quoted by Alan Fram of the Associated Press in an article about the continuing standoff in an evenly divided Senate that has stalled billions of dollars in additional pandemic funding, among other legislation.

Republicans, skeptical of the need for new funding, continue to demand that the Covid bill be accompanied by a vote on an amendment keeping in place Trump-era pandemic immigration policy making it easier to prevent migrants from entering the country. The prolonged fight over the new aid package threatens to hang up additional funding until the fall or later despite warnings from administration officials that the delay could cost lives.

“Optimists hope the measure could start rolling once Congress returns next week,” Fram writes. “Pessimists say without quick resolution, Democrats may not have enough leverage to push the money to passage until early fall. That’s when they could stuff it into legislation that will probably be needed to finance government — a bill that would avert a federal shutdown, a pre-election distraction Republicans will be desperate to avoid.”

Number of the Day: $3.5 Billion

As part of its plan to replace the bulky space suits American astronauts have been wearing for more than 40 years, NASA awarded two companies a design contract that could be worth as much as $3.5 billion over the next 12 years. The new suits are expected to fit a wider array of body types while providing more mobility on spacewalks and during an expected return trip to the moon. “History will be made with these suits,” Vanessa Wyche of NASA’s Johnson Space Center said. “When we get to the moon, we will have our first person of color and our first woman that will be wearers and users of these suits in space.”

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