Social Security Trust Funds at Heightened Risk, Analysis Warns

There are many consequences when an economic downturn happens, and a recent analysis warns that accelerated depletion of the Social Security trust funds may result from this one.

 

In “COVID-19 May Deplete Social Security Trust Funds This Decade,” the Bipartisan Policy Center argues that the current economic downturn that has resulted from the sudden onset of the Coronavirus may result in those trust funds being depleted far faster than the Social Security Trustees have projected in their recent report. It also notes that the effects of the pandemic had not been factored in to the Social Security Trustees’ report, which the trustees themselves had observed.

 

The report, which the Bipartisan Policy Center calls “preliminary,” is premised on assumptions that the current economic situation will be as severe as the Great Recession and its aftermath and have similar effects. It suggests that the Old Age and Survivor Insurance Trust could be depleted by 2029, and the Disability Insurance Trust Fund even sooner, in 2024.

 

The Bipartisan Policy Center argues that a variety of factors spell trouble for the trust funds:

 

Further, all of these effects will make the trust funds smaller, which in turn will further reduce their interest income, the center notes. “Almost the entire effect of another recession on the OASDI trust fund would come through reduced revenue,” they say. In addition, the point out that recessions increase the amount of money Social Security disburses and can force early retirements, further increasing outlays.

 

“These projections reflect a substantial further deterioration in the finances of a program that was already facing a large mismatch between income and outlays, making the need for action by policymakers even more urgent,” says the Bipartisan Policy Center.