“Today’s program looks at the future of Social Security. Mike, millions of retirees rely on Social Security to provide at least a portion of their income during the golden years, but I heard troubling reports that Social Security in the not-too-distant future may not be able to pay what it promised. Is there an easy solution?”
“Well you’re right about Social Security having a long-run problem. It’s estimated by the middle of the 2030’s decade Social Security will face a shortfall. They will not have enough money to payout the promised amounts. Retirees at that point may only get about two-thirds of what they were expecting to get. So there is a problem.”
“We’ve been through this before; that’s the good news. In the early 1980’s, Social Security was facing the same situation. What happened then was a commission was convened made up of politicians, people in business, people in labor, all sorts of people. It was actually hosted by Alan Greenspan who later became head of the Federal Reserve.”
“They made some tweaks to Social Security that actually worked out very well. Social Security built up big surpluses, but now we’re running down those surpluses so I think we’re going to have to have another set of tweaks. Fortunately the Congressional Budget Office outlined dozens of things that could be done to save, if you will, Social Security.”
“Now a lot of people ask me, ‘Walden, why don’t we do that now?’ Well I think it’s just too soon. In politcal terms, the mid-2030’s is a long way away, and these tweaks will not necessarily be popular. So my guess is we’re going to see Social Security continue to run off of it’s built up surpluses until we get a couple years ahead of roughly 2035 when the problem will start. There’ll be a commission set up. There’ll be new fixes to Social Security, and then we’ll go on. Hopefully that will happen.”
Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.