WASHINGTON -- There's nothing like waiting until the last minute -- as long as waiting doesn't make the problem worse.
Therein lies the conundrum facing lawmakers and 2020 presidential candidates when it comes to Social Security, which last year paid out retirement and disability benefits to some 63 million Americans.
Social Security's moment of truth, when the money runs out to pay full benefits, isn't until 2035, according to the latest official forecast released Monday.
The main Old-Age and Survivors Insurance Trust Fund would run out of cash a year earlier than that. But the program's trustees say that if legislation is enacted to raid the far-smaller Disability Insurance fund -- which wouldn't go bust until 2052 under the latest projections -- and divert the resources to retirement benefits, it would only buy one extra year.
So once the theoretical combined reserves, which now sit at nearly $2.9 trillion, are depleted in 2035, every current and future beneficiary at that point would be forced to take a 20% haircut from what they'd ordinarily receive.
That 16-year lag is a blessing in some ways for the Trump administration and members of Congress, who aren't facing much pressure to act now to fix the program's finances. President Donald Trump has shied away from proposing any benefit changes or tax increases to put Social Security on sounder footing, and it's not a top-tier issue for either the Democratic leadership in Congress or the myriad 2020 presidential candidates from that side of the aisle.
But the Social Security trustees' findings are also a curse, since if policymakers wait too long, solutions may involve politically unpalatable options such as current retirees absorbing benefit cuts, or hitting working-age Americans with large and sudden tax increases to avoid such cuts.
According to the Census Bureau, by 2030 all of the baby-boom generation of Americans will have reached retirement age. One out of every 5 U.S. residents will be aged 65 or older at that point.
By the trustees' reckoning, taking action today to fix the programs' finances for the next 75 years would require either a 22% increase in the payroll taxes paid by about 176 million workers and their employers; a 20% cut to all scheduled payments for future beneficiaries starting this year; or some combination. Waiting to act until 2035 would require a 29% payroll tax increase, 23% cut to all benefits for current and future beneficiaries, or a mix of options.
The legislative fix favored by most of the 2020 Democratic presidential candidates currently serving in Congress is spearheaded by Sen. Bernie Sanders, I-Vt.