The One Fact About Social Security That Isn't.... Fact

There is probably only one widely accepted fact in the debate about Social Security reform.  The Social Security system will pay full benefits until 2035.  

Comically enough, that one fact is not true. The very bedrock of the debate about Social Security is a date that is taken out of context, and applied in ways that directly contradict the intent of the information.  2035 is not a guarantee. It is a warning about what might happen in a good economy.

The system’s ability to provide full benefits depends upon available reserves in the Social Security Trust Fund to provide a cushion for periods where the expense of the system exceeds the revenue collected. In the 2020 annual report, the Trustees estimated that the Trust Fund should last until sometime between 2031 and 2042. It says that there is roughly a 50% chance that Social Security Trust Fund will last until 2035.  

The media generally reports a very different story, one in which Social Security will pay full benefits until 2035 with certainty.  National Association of Plan Advisors suggests: “That means that until 2035, the trust funds will be able to pay full benefits scheduled under current law on a timely basis.”

The mistake is not limited to the press.  The US Treasury Department publishes a Facts Sheet, “Social Security, which pays retirement, survivor, and disability benefits, will be able to pay scheduled benefits on a timely basis until 2035, the same as reported last year.”  It is simply not true.

There is nothing certain about the projected date of insolvency for Social Security.  In 1977, Jimmy Carter gave America a guarantee that Social Security would pay full benefits for more than 50 years. “This legislation will guarantee that from 1980 to the year 2030, the Social Security funds will be sound”.  By 1982, the Social Security Trust Fund was within a year of exhaustion. 

The Trustees provide policy makers with three different hypothetical outcomes based on different economic and demographic assumptions.  The results range from an outcome in an economy unfavorable to Social Security to one that will make Social Security last longer.  The most commonly used estimate is the “intermediate”, which represents the Trustees’ best estimate “of likely future demographic, economic, and program-specific conditions”.

It is important to understand that this date has limited practical use. While the theoretical economy is built on reasonable assumptions, the probability that these assumptions will materialize in concert over the entire period is infinitesimally small. 

So the data is better suited to provoke a question than to provide an answer.

The date 2033 provides a general warning: even in a good economy, the imbalances in Social Security should start falling on retirees in roughly 20 years.  A person turning 66 today expects to live long enough to be affected.  The longer we wait, the higher the cost to fix.  The question is: is that general outcome acceptable?

The stated intent of these estimates is to show policy makers and the public at large the degree of uncertainty embedded in the Social Security system. Instead of providing a view of the uncertainty to the voters, the information is used to reassure them that reform is not an immediate priority.