On the latest Facing the Future, I was joined by Nicko Gladstone, a research analyst with the Bipartisan Policy Center, Concord Coalition Executive Director Bob Bixby and Policy Director Tori Gorman to discuss how the pandemic might impact Social Security and the latest on Capitol Hill.
[Note: Portions of this week's Facing the Future can be seen in the video clips posted below.]
The Social Security trustees issue an annual report on the health of the program, but Gladstone said the COVID-19 pandemic and economic downturn happened too recently to be factored into the trustees’ analysis. So, he and his colleagues at BPC filled in the gap and assessed how this health crisis might impact the nation’s primary retirement security program.
“The finances of the program largely depend on the strength of the economy, mostly because Social Security is financed through payroll taxes,” Gladstone said. “And obviously when someone is out of work, they don’t pay payroll taxes, and millions of people are out of work right now.”
He said BPC ran a series of stress tests to outline possible scenarios on how the economy might weather this storm over the next few years and how economic performance could affect the Social Security trust funds.
“We found that if we were to suffer a recession identical to the Great Recession again, Social Security’s trust funds would be gone in 2029, a full six years earlier than the trustees had projected,” Gladstone said.
And Social Security’s trust funds could be completely depleted by as early as 2026 if the nation experiences a recession twice as severe as the Great Recession.
“The program will owe more in annual benefit payments than it gets in annual income, and the program at the point, can dip into its trust funds to fill the gap and make sure that everybody is getting the benefits that they’re promised,” he said. “That works fine until the money in the trust funds is gone; at that point, Social Security can only pay people’s benefits out of the revenue that it takes in every year … it’s going to be inadequate to pay for the benefits that everyone is owed.”
You can read Gladstone’s co-authored analysis by clicking here.
Gorman provided an update on Capitol Hill legislation, including the latest on additional COVID-19 relief packages being considered by Congress.
“We’re not going to see any kind of legislation moving this week, and even before legislation starts to move, we need the parties to start talking to each other,” Gorman said. “The timing is a little bit up in the air right now, but … it’s hard for me to see how members of the House and Senate leave for the fourth-of-July recess next month without putting forward another package.”
She added that it is hard to put a finger on exactly what would be in a fifth relief package because not everyone is talking about the same ingredients that would go into it.
“The centerpiece of the House Democrats package was about $1 trillion in relief for state and local governments, as well as a lot of direct aid to individuals and small businesses,” Gorman said. “Senate Republicans are focusing their attention on, number one, stimulus measures, but also limiting the liability for employers as workers go back to work and patrons reenter storefronts.”
“And then the White House has their own set of priorities,” she said. “They are talking about payroll tax cuts, reinstating certain tax deductions and even a capital gains tax cut … it’s kind of hard to see where the Venn diagram of policy intersects on a compromise measure.”
Read more of Gorman’s analysis on a bevvy of legislation working its way through Congress by clicking here.
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition YouTube channel.