Social SecurityÕs Financial Outlook: The 2020 Update in Perspective

The 2020 Trustees Report, which was prepared before the onset of the COVID-19 pandemic and shutdown of the economy, shows an increase in the programÕs 75-year deficit from 2.78 percent to 3.21 percent of taxable payroll. The depletion date for the trust fund remains at 2035. The increase in the deficit is attributable to four main factors: 1) the repeal of the tax on high premium health plans, resulting in lower earnings and payroll taxes (as total compensation shifts more toward health benefits); 2) a lower assumed total fertility rate, resulting in a higher ratio of retirees to workers; 3)lower inflation, producing an immediate reduction in earnings and payroll taxes and only a delayed reduction in benefits; and 4) a lower interest rate, which means less discounting of large future deficits. On the administrative side, this report once again reflects the continuing absence of public trustees since 2015. These slots should be filled. Public trustees play an important role in overseeing the program and communicating its status to the public. Their continued absence reflects a failure with the political process, not with the program itself. This brief updates the numbers for 2020 and puts the current report in perspective. It also discusses how the COVID-19 pandemic might affect benefits for new retirees, future cost-of-living adjustments, and overall program finances. The bottom line is that while the deficit is larger, Social Security has once again demonstrated its worth during these tumultuous times, when Ð in the face of economic collapse Ð it has continued to provide steady income to retirees and those with disabilities. The program faces a manageable financing shortfall over the next 75 years, which Ð once COVID-19 is under control Ð should be addressed so that Americans will have confidence that the program will be able to pay the full amount of promised benefits.