Future of Social Security Threatened as Cost of Living Rises

Source: AS

The Social Security Administration announced on October 13th that benefits would increase by 5.9 percent in 2022 due to inflation and rising costs of living. This increase is the largest the country has seen in about 40 years. Particularly compared to last year’s 1.3 percent increase, the upcoming hike is quite the jump. And while the increased payout may seem attractive to current Social Security recipients, the benefits won’t be as drastic as they hope. The adjusted cost of living only comes in response to rising prices of rent, gas, utilities, and food. Furthermore, increases in Medicare premiums will eat into the additional 5.9 percent recipients are due to receive.

The surge in Social Security payouts also highlights a long-term issue for the American people and government; since 2010, the Social Security Administration has spent more money than it has taken in and covered the deficit with its reserves. However, current projections expect Social Security funds to be exhausted by 2034. In this scenario, the government would only be able to afford around 78 percent of promised benefits. The Congressional Research Service predicts that the U.S. will continue to experience demographic aging, meaning that the age of the average American will increase, and the burden of a larger elderly population will fall on a shrinking base of young taxpayers.

To solve this lurking crisis, Congress will have to make numerous adjustments to the program, likely including raising taxes and reducing the base of eligible recipients. According to Eric Kingson, Professor at the Syracuse School of Social Work, Congress will likely need to continue to increase the age of retirement beyond 67. In 1983, Congress approved legislation to gradually increase the age of retirement from 65 to 67. Right now, the age of retirement for those born in 1955 is 66 and two months. According to Kingson, that number may move up to 67 and six months or even longer. While that shift may seem minute, Kingson asserts, “that’s a change that could keep the system viable.” Congress may also opt to increase payroll taxes or eliminate the cap on taxable payroll contributions. Both of these actions would substantially address the Social Security shortfall.

Despite all of these potential options, the fact remains that Social Security will be less beneficial for young people today than it is for currently retired people in America. Demographic trends mean that the tax base will inevitably struggle to support an increasingly bloated system. Yet Social Security is politically almost untouchable, and both Republicans and Democrats know that a reduction in benefits is practically a non-starter. Unfortunately, as it stands now, America is trending towards a massive fiscal gap: the money it plans to spend grossly outweighs the money it is projected to take in in revenue. This gap is equal to 10 years’ worth of U.S. GDP. In an article from The Hill, John Goodman states it plainly: “This is fiscal child abuse, pure and simple.”