Q&A: Wake-Up Call to Save Social Security

Q&A: Wake-Up Call to Save Social Security

With U.S. Sen. Chuck Grassley

Q: What should Iowans know about the solvency of Social Security?

A: The Senate Budget Committee recently held a hearing to examine the facts facing Social Security that every American needs to know. According to the recent projections from the nonpartisan Congressional Budget Office (CBO), the Old-Age and Survivors Insurance (OASI) Trust Fund is on the brink of insolvency. In just six years, the fund's reserves will be depleted. Without changes in law, revenue collected from payroll taxes will be sufficient to pay only 72% of scheduled benefits.

Enacted 90 years ago in 1935, the Social Security Act has been amended over the years to include benefits for dependents, survivors and disability insurance. Since then, the ratio of covered workers to beneficiaries has shifted significantly. In 1940, the ratio between workers paying into the system and Americans receiving benefits was nearly 160 to 1. Today, the ratio is 2.7 to 1 and declining. Simple math explains why this demographic shift is straining the financial solvency of the program.

This fiscal cliff is a wake-up call for federal policymakers, candidates for federal office and grassroots leaders. At the Senate Budget Committee hearing, lawmakers and the panel of witnesses unanimously agreed the imminent financial shortfall needs to be addressed sooner, rather than later. Social Security is part of the social fabric of America. More than 70 million Americans depend on the program for monthly benefits. That's roughly 1 in 5 Americans. On top of that, more than 164 million Americans have earnings withheld from their paychecks through the 12.4% payroll tax that fund current benefits. Although ideological differences divide Americans on how to shore up Social Security, it's important to know that if no changes to current law are made, recipients could see a 28% reduction in monthly benefits from 2033 to 2036, according to the latest CBO estimates. That fact alone ought to inform the urgency of the situation. Kicking the can down the road will make policy choices even more difficult.

Q: What needs to happen to shore up Social Security?

A: History shows we can meet the moment. More than 40 years ago, President Ronald Reagan and House Speaker Tip O'Neill did just that. Facing a six-month window until insolvency impacted scheduled benefits, they set partisan politics aside and rolled up their sleeves to preserve Social Security. The 15-member National Commission on Social Security Reform issued a report in 1982 projecting the OASI trust fund would become insolvent within six months. The so-called Greenspan Commission made recommendations to Congress to secure solvency of Social Security for generations to come. Reagan and O'Neill threw their political weight behind the key principle that taxpayers and recipients would have skin in the solution. The bipartisan endorsement by the White House and the Speaker of the House helped pave the path for enactment of the 1983 Social Security Amendments. As the only currently serving lawmaker who was in the U.S. Senate during the historic Reagan-O'Neill agreement, I've urged political and grassroots leaders to take a page from history and stop kicking the can down the road. Critics who say Social Security is a Ponzi scheme are wrong. It's a social contract administered by the federal government that forges a generational commitment between workers and retirees. That promise also means structural reforms to ensure solvency for future generations shouldn't negatively impact current recipients or those nearing retirement.

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