Statement of Robert Greenstein on the 2012 Social Security Trustees' Report — Center on Budget and Policy Priorities

Statement of Robert Greenstein on the 2012 Social Security Trustees' Report — Center on Budget and Policy Priorities

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Health Reform, Economic Downturn, Payroll Tax Holiday Have Affected Program

The 2010 trustees’ report showed a small but significant improvement in Social Security’s finances due to that year’s health reform law, which the actuaries expect will shift some employee compensation from (nontaxable) fringe benefits to (taxable) wages.  That’s no longer new but is worth reiterating.  Repealing health reform would not only leave many millions of people uninsured and abandon various cost-saving measures in Medicare, but also harm Social Security’s financial outlook.
As some commentators have noted, Social Security’s annual tax revenue has slipped below the benefits it pays each year. That was long expected to happen in the latter half of this decade, but the weak economy has taken a toll on Social Security, as on many other parts of the budget.  That imbalance, however, does not jeopardize Social Security benefits (and ought not to worry recipients), because Social Security can draw on its trust fund — which now stands at nearly $2.7 trillion and will keep growing until 2020 — to enable it to continue paying full benefits for some years to come.
Likewise, program participants need not worry about the payroll-tax holiday in 2011 and 2012 that temporarily reduced payroll-tax rates for the program by two percentage points, because the Treasury is compensating the trust funds for the resulting revenue loss (estimated at slightly over $200 billion for the two years’ holiday).  In short, the program is strong enough to withstand the economic downturn.