AEI’s Andrew Biggs, CRFB’s Marc Goldwein and CBPP’s Kathleen Romig break down what Social Security’s “crisis” really means—because it’s not simply “bankruptcy.” The core issue is a funding timing problem: the program’s trust fund is projected to run down, and by around 2032, there likely won’t be enough dedicated revenue to pay the full level of scheduled benefits.
Jeffrey Snyder, Broadcast Retirement Network
Kathleen, Andrew, Marc, it’s great to see you. Thank you to all of you for joining us on the program this morning.
Thank you. Yeah. It’s great to have executives who are really knowledgeable about Social Security.
And there’s been a lot of information that’s kind of been flowing out there about the Social Security Trust Fund. It’s most likely going to be depleted in a period of time and a lot of different remedies. Kathleen, I want to start with you, if I may.
I want to get your perspective. You read the popular press, I’m sure. You read the trade publications.
What’s your sense for the Social Security Trust Fund and where things stand today?
Kathleen Romig – Center on Budget and Policy Priorities
Where things stand today is that we know the Social Security Trust Funds are nearing depletion. And what that means is not what people always think it means, which is like they’re going bankrupt, they’re totally running out of money, but simply that we won’t have enough to pay promise benefits probably around 2032. And so we need to figure out a way to either get more money into the system or spend less money so that people can get the benefits that they’re counting on.
Jeffrey Snyder, Broadcast Retirement Network
So that, Marc, that’s an excellent summary. I’m sure you would agree because you and Kathleen and Andrew all know each other. But let’s talk about the process.
And, you know, I’ve been reading different approaches from Senators Moreno and Warren to Senators Durbin and Cassidy, who we actually had on the program last week. I want to get your perspective on some of these remedies. How are you seeing the remedies?
And are there any clear opportunities to do this without inflicting any pain on anyone today, tomorrow and in the future?
Marc Goldwein, Committee for a Responsible Federal Budget
Right. So there is a gap that’s equal to about a quarter of benefits between how much we’re taking in revenue and how much we’re spending out. And so really, you know, Social Security doesn’t have a lot of fraud.
It doesn’t have a lot of administrative costs. So really, to close that gap, we either need to reduce our scheduled benefits, increase our scheduled revenue or some combination. Now, if we were smart and we did this, say, 15 or 25 years ago, we could have done it in a way that everybody’s benefits keeps growing, maybe just a little bit slower than otherwise they would.
We’re probably past that point. We’re past the point that we can phase things in over 30, 40, 50 years. And if we want to keep the system integrated, we’re going to make some fast changes.
Nonetheless, we can target those changes. Right. We can target changes both on the benefits side and on the revenue side towards the higher earners.
For example, the richest couples now collect one hundred thousand dollars in benefits. We could cap that. As you know, Senator Warren and Moreno mentioned, the amount of income you pay subject to the tax is only about one hundred and eighty five thousand.
We could increase that. These are some changes we could do that might feel less painful. But there’s no sort of secret magic option to make Social Security solvent.
Jeffrey Snyder, Broadcast Retirement Network
So, Andy, no magic wand, unfortunately. It’s going to it’s going to I mean, you know, unfortunately, Congress and the American people let him. But by the way, we’re all voters.
We let them kind of kick the can. But, Andy, I think Marc’s right that it’s kind of a shared responsibility at this point. How are you kind of perceiving this?
I know you’ve been on the show before. I know you saw Senator Cassidy and you’ve looked at all these proposals. But what do you what are your thoughts?
Andrew Biggs, American Enterprise Institute
Well, I was thinking yesterday. It’s been twenty five years since I served on the staff of President Bush’s Social Security Reform Commission back in 2001. At that point, the actual deficit for Social Security was about one point nine, one point eight percent of payroll.
Meaning if you do, you know, one point nine percentage point increase in the payroll tax, that would have kept the system solvent for seventy five years. Today, it’s the trustees say four point four, I think, are more reasonable guesses. Four point six.
By the time we get to twenty thirty two, you’re looking at five percent of payroll. And one of the one of the things I worry about is people still talk about reform as if it were twenty five years ago, that we can do some minor tweaks phased in over time. And it’s we’re just not you know, we’re not in that in that that that zone anymore.
And so it’s it’s going to be more of a hard landing than a soft landing. And, you know, again, this is the result, as you said, of the American people wanted to put off reform. They didn’t want to pay higher taxes and get lower benefits.
And politicians accommodated them because they didn’t want to make tough choices. And so we are where we are. It is, you know, to a certain degree, I think we want to say the system has failed.
The things we should have tackled decades ago, we didn’t. And now we’ve got some much more difficult decisions to make.
Jeffrey Snyder, Broadcast Retirement Network
OK, so, Kathleen, you established the problem or you didn’t create the problem, but you helped kind of lay it out for the audience. Let’s talk about the process to, you know, as I said or intimated that, you know, several senators and others have come up with proposals. But I would imagine that folks like yourselves, very influential people who can help shape policy.
There’s a give and a take here that has to happen. How does that maybe shed a little bit of light on the process? I mean, you meet with the staffers, you talk about the pros and cons.
But how does it all kind of unfold, I guess, is my first question.
Kathleen Romig – Center on Budget and Policy Priorities
I think the only way a solution unfolds is with real engagement from the principals involved. So the administration that’s in power when a deal is struck, as well as the leadership from both parties, there’s just no substitute for that. And so often, you know, when we talk about things like commissions like and Andrew can speak from experience about the commission that he served on 25 years ago.
And there have been others. The only way those commissions actually work is if you have that engagement. And part of our problem now is we haven’t had that engagement from principals in quite some time.
That, you know, various White Houses really haven’t put forth, you know, in recent years. I mean, since the George W. Bush years haven’t put forth, you know, comprehensive solvency proposals.
Congressional leaders generally have not, certainly not from Republicans in the past decade. Democrats have a couple of different, you know, ideas on the table. So, you know, without that, we’re just not going to get anywhere.
And that’s kind of what we’re lacking right now.
Jeffrey Snyder, Broadcast Retirement Network
So, Marc, I think Kathleen makes a really good point. A lot of it is if the American people want reform, they would put they would go to their their their representatives and say we need to do something. So there’s about there’s an engagement part here.
But let’s talk about in particular, you know, I’ve seen that President Trump has mentioned the Australian retirement system as a framework. I’m not sure where that what that means for the retirement industry. But do you think that there’s engagement on this particular issue from this White House and from your relationships in the Congress, from both the House of Representatives and also the Senate, U.S. Senate?
Marc Goldwein, Committee for a Responsible Federal Budget
Now, look, to some degree, the politicians are reflecting the voters, right? The voters would rather keep their taxes low and have no changes in their benefits. But to a large degree, the voters are reflecting what they’re being told by the politicians and what they’re being told by the special interests on both sides.
Right. And our current president, as the last president, has basically said, I’m not going to touch Social Security. It’s a sacred promise.
And what that actually means, if we really don’t touch Social Security, is I’m going to allow a 22 percent across the board benefit cut in six years because that’s what don’t touch it means. And I think that people are being sold a bag of goods that just isn’t real, that they can keep their current level of taxation, the current level of benefits. We won’t have to add more money to the debt and everything will just magically work out.
It’s just not the case.
Jeffrey Snyder, Broadcast Retirement Network
Kathleen, I mean, one of the things that I’ve been reading about in the trades and also the popular media press is about the Trump accounts, which launched July 4th. So not not too long ago. And they could particularly maybe serve as a mechanism.
I brought up the Australian superannuation plan. Maybe that’s more for the private retirement system. 401K is defined contribution.
But is that a potential solution? I’m asking this as a layperson. I’m not.
Kathleen Romig – Center on Budget and Policy Priorities
I’m really glad you brought that up because that’s that has entered the conversation. And like Marc said, there’s really no substitute for these hard choices, you know, for this short term problem that Social Security faces. There are only two solutions, either more money in or less money out.
And those Trump accounts aren’t changing that. Like it could change things for the retirement of these babies who are getting them right now. That is possible, but they’re not going to retire for 65 more years.
So that’s not going to help us with our problem right now. And even if we expanded those accounts, you know, President Trump mentioned in the State of the Union, for example. An idea of like having more retirement accounts for working age people.
You have the same timing problem and you also have a big transition cost problem, because if you are putting money into those accounts and in the hopes that you can somehow reduce investment in Social Security. Well, how is how does the math add up? How does the timing add up?
And that’s kind of what sunk the George W. Bush plan as well. Just how do you grapple with those enormous transition costs when current workers today are paying for current beneficiaries?
If you’re asking them also to prefund their own retirements on top of that, it’s something’s got to give.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. Andrew, Andy, excuse me, Dr. Biggs, you know, is this I think they’re good points. I mean, it sounds like it’s go ahead.
I’m sorry.
Andrew Biggs, American Enterprise Institute
Well, I mean, I think I mean, Kathleen is exactly right. Let me touch on the Australian example for a second, because there are both good news and bad news. I mean, the good news, and I’m a big proponent of an Australian style system where the government benefit is really focused on poverty protection.
And then you have universal, you know, essentially retirement accounts on top of that. Everybody is offered a retirement plan. Everybody is enrolled in it.
Their employers pay into it. So I think it’s a very good system. And if we’re inventing Social Security from scratch today, I’m confident that’s the sort of thing we would come up with.
Nobody would give you a plan today that pays $100,000 to a high income couple. There’s simply no reason for it. Here’s the problem.
You’d think I’d be happy. Oh, this is a system I like. The president is saying good things about it.
I see no evidence the Trump administration is engaging with the typical choices. As Kathleen said, you know, people can save more for retirement. People have been saving dramatically more for retirement today than they were in the past.
That doesn’t fix Social Security. You still have to change the amount of money going in or the amount of money coming out. I don’t care how many accounts outside of Social Security you set up until you make those decisions about more money in, less money coming out.
You’re simply not doing Social Security reform.
Marc Goldwein, Committee for a Responsible Federal Budget
Well, one thing I will say sort of in favor of these kinds of saving mechanisms is they can make it easier to make the changes to Social Security, knowing that many seniors have other sources. And so they can be part of the solution of the retirement solution in this broad sense. But again, they don’t automatically replace the need or they don’t have all replaced the need to make the changes to Social Security.
Andrew Biggs, American Enterprise Institute
You know, what we have today is the combination of increased private retirement savings, which we have, and no cuts to Social Security. We have a very, very rich seniors today. I mean, seniors have gone from disproportionately poor being disproportionately rich.
Hey, good for seniors. But the problem is we have this $30 trillion Social Security gap, which we’ve done nothing to get on top of. And in fact, it made worse the past couple of years.
And I really do have to start grappling with the tough choices.
Kathleen Romig – Center on Budget and Policy Priorities
I agree with Andrew as a whole that seniors are certainly much wealthier than in the past as a whole. But there’s also the inequality among seniors has really skyrocketed. As we move from more like defined benefit pensions to defined contribution pensions like 401ks, we had a huge divergence among seniors of how much wealth people have.
And there are plenty of seniors out there who don’t have very much at all.
Marc Goldwein, Committee for a Responsible Federal Budget
And I’ll just add to that. That’s when we’re thinking about how to design Social Security reform, we want to consider that. Right.
And so there are some seniors as a population are now the richest cohort in the history of the known universe. Maybe maybe Monaco seniors are richer, but like of any kind of reasonable place in the entire in the entire world. But not all of them.
Right. And meanwhile, Social Security, the more you earned in your lifetime, the more you get in your benefits. We may want to flatten that curve some.
So as you’re a higher earner, you’re getting less more. We may even want to flatten it overall. These are these are choices that have tradeoffs associated with them.
But we ought to consider the distribution of income among the whole population and among seniors as we’re making these choices.
Jeffrey Snyder, Broadcast Retirement Network
We’ve got about three minutes left, but I want to continue the conversation. So if you would be amenable to it, we’ll bring you back again in the near future. But let me ask you about jumpstarting the process.
So I feel like a lot of people, maybe this goes above their head, not because they’re not intelligent, but because they don’t do this stuff every day. They’re not thinking about their retirement. They’re thinking about their kids or thinking about other day to day activities.
Do we need to maybe jumpstart the conversation and make this a larger national conversation? I mean, retirements, we’re going to live, most of us and especially the newer born kids are going to live maybe into the triple digits. So, I mean, I’m hoping to live as long as I can.
But this is a this is an issue. So do we need to have a national conversation about saving retirement? And that includes Social Security, some of these other reforms that are being talked about.
Andy, I’ll start with you and I’ll go down the line.
Andrew Biggs, American Enterprise Institute
We absolutely do. And a ton of my work, just to echo what Marc had said before, is highlighting that, you know, the rest of the retirement system is actually working pretty well. High income seniors in particular are doing very, very well.
That opens up opportunities in the Social Security side. So I really think having a broad picture where things stand is important. But to be honest, even having that is is a difficult conversation to do.
Jeffrey Snyder, Broadcast Retirement Network
And Kathleen, a national conversation. We’ve had national conversations before about other issues. It would seem to me that if we can bubble this up to a broader conversation, we have a better chance of solving the issue and people understanding what the issues are.
Kathleen Romig – Center on Budget and Policy Priorities
Very much. I think for one thing, there’s a lot of ignorance. And so just simple public education is really important.
And I also think engaging younger people, you know, working age people and younger in this conversation is so important because the changes are going to affect them. They’re not going to affect current retirees. They’re not paying taxes anymore for at least payroll taxes because they’re not working.
Very unlikely that politicians are going to cut their benefits that they’re already receiving. So any of these changes are going to fall on today’s and tomorrow’s workers. And so it’s really important that we engage them in the conversation.
Jeffrey Snyder, Broadcast Retirement Network
And Marc, to you, the kind of the same question, your perspective. How do we jumpstart this and get in front of the American people?
Marc Goldwein, Committee for a Responsible Federal Budget
Look, a national conversation on retirement security would be great. But I worry it would be a little bit of distraction from the big emergency, which is Social Security and Medicare, by the way, are running out of reserves in six years. Right.
And so that is the people that are running for Senate right now. They’re going to be in office when the Social Security Retirement Trust Fund runs out of money. The next president will be in office when the Social Security Trust Fund runs out of money.
So we need a national conversation really fast on what we’re going to do about that emergency. I’d love to include other things about retirement security in that, but needs to be not a distraction. Rather, it needs to kind of help facilitate this real crisis that we’re facing.
Jeffrey Snyder, Broadcast Retirement Network
To end on a, I don’t know, kind of a this is kind of a quip. Did you I don’t know if you’ve ever seen the movie Timecop with Jean-Claude Van Damme. Do you ever wish you could go back in time?
There actually was a scene where they went to when I think Wall Street had crashed back in the 1930s. You ever wish you could go backwards and back in time and just say, hey, you know, you probably don’t want to do X, Y and Z when it comes to Social Security. I’ll start with you, Andy.
We’ll go to go down the line for like 15 seconds.
Andrew Biggs, American Enterprise Institute
Yeah, no, I think I looking back, I think Republicans oppose say things that Bill Clinton had talked about on Social Security of saving the surplus, which eventually got dissipated in tax cuts that I in retrospect was an error. I think President Bush’s work on Social Security reform should have been more bipartisan from the get go. I think that was an error.
It’s just it’s very, very difficult to do. I mean, and certainly, you know, I think Democrats probably made errors as well. But I think it’s really hard to do on a partisan basis.
Jeffrey Snyder, Broadcast Retirement Network
Kathleen, same question. You could you want to go back in time and maybe change things if you could?
Kathleen Romig – Center on Budget and Policy Priorities
Yeah, I wish like, you know, last time policymakers seriously address this was in 1983. And one thing they did not anticipate was the huge growth in inequality since then. And I you know, that undermines both Social Security’s finances directly.
And as we’ve been talking about the retirement security picture more broadly. And I wish we had a crystal ball back then to have seen that and accounted for it.
Jeffrey Snyder, Broadcast Retirement Network
And same question for you, Marc. Time cop part two.
Marc Goldwein, Committee for a Responsible Federal Budget
Yeah, there have been tactical errors and there have been changes we didn’t anticipate. But fundamentally, back in 1998, we knew what to do. Bill Clinton and Newt Gingrich got in a room and they sort of came up with a plan that would have done it.
Right. And then the Lewinsky scandal happened. It fell apart.
So I guess I would time cop that, you know, Clinton and the Lewinsky thing. But we actually knew how to fix Social Security back then. Pretty good enough.
We just didn’t do it.
Jeffrey Snyder, Broadcast Retirement Network
Well, I am proposing time cut, time cut part two. Jean-Claude Van Damme, we want you back and we want you to go back to 1998 at least. Kathleen, Andrew, Marc, it’s great to see you.
Thanks for joining me. And we look forward to having you back on the program again very soon.
Marc Goldwein, Committee for a Responsible Federal Budget
Pleasure.