What should be done about Social Security, and what will?

A lot of people are familiar with the concept of a “black swan,” Nassim Taleb’s coinage for rare and unpredictable outlier events.

Less well-known to date is Michele Wucker’s concept of a “gray rhino,” a highly probable, high-impact, yet still neglected threat.

In the United States, the solvency of the Social Security system is a classic gray rhino: We’ve seen this problem coming slowly from a mile away, but are doing nothing about it yet. Here’s the 2021 Social Security and Medicare Trustees summary of the current situation:

The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.

The Disability Insurance (DI) Trust Fund, which pays disability benefits, will be able to pay scheduled benefits until 2057, 8 years earlier than in last year’s report. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 91 percent of scheduled benefits.

The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2034, one year earlier than reported last year. At that time, the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 78 percent of scheduled benefits.

The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2026, the same year as reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 91 percent of total scheduled benefits.

The Supplemental Medical Insurance (SMI) Trust Fund has two accounts: Part B, which helps pay for services such as physician and outpatient hospital care, and Part D, which covers prescription drug benefits. SMI is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.

Some notes:

For the past several decades, even before the 1981 legislation that extended the solvency of the program for another half century, Republicans have been lying constantly about the situation, in the pursuit of their goal of destroying the program altogether, or, failing that, turning it over to Wall Street.

The two big lies, that I’ve heard a million times from my generational peers (I’m a tail-end baby boomer) are:

(1) Social Security is going to go bankrupt, so there won’t be any benefits at all for people our age when we’re eligible for them.

(2) The whole thing is a “Ponzi scheme.”

As the material quoted above illustrates, Social Security would be able to pay out more than three-quarters of scheduled benefits after the “trust fund” is exhausted, even if literally nothing were done to fix the coming fiscal shortfall.

As for the Ponzi scheme nonsense, this is just typical GOP projection, since the right wing in this country is pretty much nothing but Ponzi schemes. Social Security is an income transfer program, which is what it’s always been and will always be. The notion that it’s a “pension plan” is a noble lie, that had to be told to sell the program to a nation that has a significant plurality of the population in the grip of Apocalyptic Calvinism on Meth.

Fixing it isn’t complicated, or, in a minimally rational system, particularly painful: You just tweak tax rates a little, and maybe play with eligibility requirements for higher earners a bit, although the retirement age is already way too higher for anyone who has a real job, as opposed to say a law professor.

In other words, we’re in trouble. Obviously nothing is going to be done about this before 2030 at the earliest, at which point all bets are off, given the increasing dysfunction of the political system and the culture that undergirds it.