September 1, 2014

CBO Report Shows Need for Social Security Reform

  • Social Security, established in 1935, is the federal government’s largest program. It represents approximately one-fifth of the federal budget and...

Opponents of Social Security reform argue that Social Security has nothing to do with the federal deficit, and that any problems the system may have are decades away.

Since 2010, however, Social Security has actually been running cash deficits. A new Congressional Budget Office (CBO) report notes:

“In 2012, outlays exceeded noninterest income by about 7 percent, and CBO projects that the gap will average about 12 percent of tax revenues over the next decade.”

The government must find the money somewhere to cover these growing shortfalls, and other parts of the budget are already being squeezed. The Social Security trust funds are of no real help on this; they are simply an internal bookkeeping mechanism for the government.

Even if the trust funds represented extra ready cash, the Social Security trustees have warned that the Disability Insurance trust fund could be exhausted in 2016.

Lawmakers may be tempted to deal with this problem by shifting money over from the rest of Social Security. But that wouldn’t really solve the Disability Insurance problem, and would make things worse for the retirement and survivor benefit portions of Social Security.

Elected officials should reach for more comprehensive reforms that would make the entire Social Security program more sustainable.