Social Security Disability Fund Might Face Reserve Depletion in 2016

I can’t quite remember the first time somebody told me that Social Security was going to run out of money someday, but I feel like it might have been in high school. Certainly by college we were talking about the end of Social Security the way 19-year-old college students often talk about everything — mostly speculative and a little misinformed. (Please don’t ask me to dig up the paper I wrote on what I thought the government should do about capital punishment.)

Our misinformation included the assumption that there was just one kind of Social Security. There are two major Social Security funds: the Old Age and Survivors Insurance fund and the Disability Insurance fund. I’ll let SocialSecurity.gov explain the next part, which they presented this morning as a kind of good news/bad news:

The [Social Security annual report] shows that, combined, the funds now have an additional year — from 2033 to 2034 — before their reserves are depleted. The Old Age and Survivors fund alone also gets an extra year from 2034 to 2035.

Some factors that led to this improvement include (1) faster growth in average wages in the future, because of slower growth in employees’ private health insurance cost — due at least in part to provisions of the Affordable Care Act, and (2) improvements in how we project the earnings of American workers by age.

The DI fund is still projected to deplete its reserves late in 2016. After that, the income collected through taxes will be enough to pay only 81 percent of the scheduled benefits. So, an adjustment to maintain full disability benefits is needed soon.

You can read the full 2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds if you want (full disclosure: I haven’t). Meanwhile, SocialSecurity.gov notes that they’re working on solutions to the reserve depletion issue:

The Social Security program is sustainable, but needs some adjustments. To keep the program solvent after 2034, Congress could choose to increase payroll taxes by about one-third, reduce benefits by about one-fourth, or make some combination of these or other adjustments.

That doesn’t exactly sound like a win-win, but I am in support of Social Security and I am especially in support of providing Social Security funds to people with disabilities, so maybe I’m rooting for the one where they increase taxes a little bit so that everyone can get their scheduled benefits. (And yes, I say this knowing I’m responsible for paying both the employer and the employee’s portion of Social Security tax.)

But beyond that I still feel like any of my thoughts on Social Security are mostly speculative and probably still a little misinformed. So… what about you? What do you think the government should do to prevent Social Security reserve depletion? Or should we be focusing on building something new, to take the place of Social Security? Is it finally time for a basic income plan?

Photo credit: Alamo’s Basement

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