Subcommittee Reviews Social Security’s Solvency

June 8, 2018 — Blog   

The Ways and Means Social Security Subcommittee, chaired by Rep. Sam Johnson (R-TX), held a hearing entitled “Examining Social Security’s Solvency Challenge: The Status of Social Security’s Trust Funds.”

This hearing followed the release of the annual report of the Board of Trustees for the Social Security Trust Funds. This year’s report found that Social Security’s combined Trust Funds will not be able to pay full benefits in 2034, at which point beneficiaries would face a 21 percent across-the-board benefit cut if action is not taken.

Chairman Johnson said at the start of the hearing:

“According to the Trustees, Social Security is now paying out more in benefits than it receives from all of its income for the first time since 1982. This means we must now tap into the Trust Funds principal itself to pay benefits. Colleagues, this is a big deal and is an important signal that time is not on our side.”

The Chairman emphasized:

“The longer we wait, the harder it gets. If we wait until the Trust Funds are exhausted, some options won’t even be available anymore. We must take this responsibility seriously. Americans want, need, and deserve nothing less.”

The Subcommittee heard from and questioned Stephen Goss, Chief Actuary of the Social Security Administration, about the findings of this report.

Chairman Johnson asked Mr. Goss if this year’s report took into account the improved economic projections for America following President Trump’s tax cuts:

“Due to the Tax Cuts and Jobs Act and all the good news that we’re seeing with the economy, CBO and JCT have recently increased their projections of payroll tax revenue. Can you help us understand why the Trustees Report is different from theirs and when do you finalize the economic assumptions for each report? Was it before tax reform?”

Mr. Goss responded:

“In fact, it actually was. … The Trustees plan on looking deeper into that for the purpose for the upcoming 2019 Trustees Report.”

Rep. Tom Rice (R-SC) also asked about the recent uptick in growth projections following tax reform:

“As of the time I got to Congress, I think they were, CBO, was projecting [growth] of about 2.9%, but every year it went down in its projections to the point that it got down to I think 1.9% about two years ago. And, since Mr. Trump’s been elected, which way are those projections going now?”

Mr. Goss said:

“I think the projections have been coming up in the near term.”

Rep. Mike Bishop (R-MI) noted that our country is seeing increased job creation and asked how important that is for Social Security:

“The CBO has estimated that the Tax Cuts and Jobs Act will create approximately 900,000 jobs for the next decade. … Can you describe to me the significance of all of the new jobs relative to Social Security’s solvency and their bottom line?”

Mr. Goss stressed that an improving job market is essential to the solvency of Social Security:

“New jobs, more people employed are absolutely critical because we are a pay-as-you-go system.  All of the benefits that are scheduled to be paid out derive basically from the payroll tax contributions that are made by the workers of the day. Jobs are absolutely critical.”

Rep. Bishop also asked how the absence of a strong economy affects the number of applications for disability insurance:

“Historically speaking…do applications for Disability Insurance go up when it’s more difficult to find a job?”

Mr. Goss responded:

“They do indeed. Applications historically, when we have a time of high unemployment [and] of a weak economy, we have an increase in applications.”

Rep. David Schweikert (R-AZ) asked what the impact of lower birth rates in the U.S. will have on Social Security:

“There are things happening in our society that do have long-term cascade effects almost immediately. You’ve seen our recent birthrate calculations. …that number seems to have fallen even during times of economic expansion.”

Mr. Goss emphasized that birth rates are incredibly important for determining the solvency of Social Security, but currently there are no tools in place to adjust Social Security as birth rates fluctuate:

“Birth rates…is really the much stronger driver on the cost of the program. And we don’t really have a direct mechanism for changing the program to reflect the change in birth rates.”

Rep. Vern Buchanan (R-FL) asked if time is of the essence in addressing Social Security’s solvency:

We’ve got to find a way politically to work together to resolve the viability of the program sooner than later. Would you agree with that?

Mr. Goss responded:

“I think we certainly agree with that, as do our Trustees. Enacting something to make changes that will be necessary sooner rather than later would be wonderful. It would give the American people an advance warning of what’s happening, and it would allow [Congress] more options to consider.”

By statute, the Trustees Reports are due to Congress by April 1st of each year. Rep. Darin LaHood (R-IL), who was participating in his first hearing as a Member of the Subcommittee, asked why there have been consistent delays in Congress receiving these important annual reports:

“Clearly this data that we get each year is extremely important. … Why does this delay in submitting the report persist and how can we change that? … Are there any other barriers that you see that relate to this delay?”

Mr. Goss admitted that the Trustees face several challenges in meeting the April 1st deadline for transmitting their report:

“We have to work with the Secretary of Treasury, Labor, HHS, and the Commissioner of Social Security to work through the assumptions and methodologies we’ll be using to get their approval and their acquiescence. … From time to time, as you all can imagine, getting a group of people together at a particular point in time and a particular place can sometimes be challenging by way of scheduling.  And one thing that has contributed in the past to some delays in the issuance of Trustees Reports has been getting all of the members of the board together. … Sometimes there are some delays.”

Chairman Johnson closed the hearing by reiterating his commitment to preserving Social Security so that it is here for generations to come:

“The news from the Trustees Report is clear. Time is not on our side when it comes to fixing Social Security. As I’ve said before, I believe that any Social Security solvency plan should meet the following principles: first, it ought to fix Social Security permanently, not just push out the Trust Funds’ exhaustion date by a few years; second, it ought to modernize Social Security to reflect today’s workers and their families; third, it ought to reward hard work; fourth, it should protect the most vulnerable; and lastly, it should improve retirement security…

“It is up to Congress to make the tough choices needed to ensure that Social Security is here for our children and grandchildren, just like it is for seniors and individuals with disabilities today. The American people expect and deserve nothing less.”

CLICK HERE to learn more about the hearing.