Social Security Risk

Social Security Seemed Like a Future Problem. The Virus Changed That.

The pandemic has clobbered the global economy so there is less productivity everywhere. Governments, all of them, city, county, state and federal are looking for ways to stimulate the economy and also balance budgets.

One option chosen has been to stop collecting payroll taxes for most workers through the end of 2020.

The idea is that everyone with a biweekly salary of $4,000 or less would have a bigger paycheck so more money would be circulated in the economy.

The taxes due are not forgiven,. The lack of deduction is a temporary loan. Unless Congress decides to forgive the taxes, the money will have to be repaid early next year.

However there is talk of making permanent cuts to the payroll tax.  This would reduce Social Security funding as the 6.2% tax helps pay for Social Security.

This would make a Social Security shortfall a more current event.

An article at, “Social Security Seemed Like a Future Problem. The Virus Changed That” (1) explains that even before the pandemic, Social Security’s finances were under growing pressure.

The article says: The next president and Congress will play a crucial role in what happens.

Social Security has always seemed like a future problem, with experts long predicting a benefits squeeze in the decades ahead. But the coronavirus has put tens of millions of Americans out of work, and economists are predicting that the recovery will take years.

If nothing is done to shore up the program, all benefit checks would need to be cut by roughly one-quarter in perhaps 11 years — or, if the recession is protracted and severe, maybe even sooner.

“We thought we had more than a decade, and now it could be less than a decade,” said Kathleen Romig, a senior policy analyst at the Center on Budget and Policy Priorities. “That makes a big difference both psychologically and in policy terms.”

The pandemic has hastened the cash crunch’s arrival by wiping out jobs and the payroll taxes — Social Security’s dedicated source of revenue — that they provide. Fewer people are paying into the retirement trust fund, and the longer they’re out of work, the deeper the problem becomes. (Even more pressing may be a fix for Social Security’s disability program, which has a trust fund of its own. A report issued by the Congressional Budget Office last month projects that fund could be exhausted in 2026.)