The clock is ticking toward Social Security crisis and still no action

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In January, just before he left office, President Biden signed into law the Social Security Fairness Act, which repealed the Windfall Elimination Provision and the Government Pension Offset.

Together they impacted some 2.1 million workers – primarily government workers (teachers, police, firefighters) who did not pay into Social Security because of their state pension systems, including thousands here in Illinois.

By increasing Social Security benefits for those workers, the Social Security trust fund started to drain just a little faster.

During last year’s presidential campaign, President Trump made a lot of promises to eliminate taxes on tips, on overtime and on Social Security benefits.

The first two are in the just-passed House budget bill, but the promise to Social Security recipients was a bridge too far when one ran the numbers. It would have reduced revenue by an estimated $950 billion.

What is in the bill is an additional personal exemption of $4,000 for those over 65. It will help lower-income Americans – and reduce tax revenue.

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Now, fundamental changes to Social Security are not allowed in a reconciliation bill. And the Republicans have to use reconciliation to pass the budget bill because the narrow margins and the partisan nature of the bill mean there aren’t 60 votes in the Senate.

That said, the House bill seeks to establish the tax and spending priorities for the next decade. In the case of Social Security – and Medicare – 10 years is an auspicious number.

That is when the Social Security trust fund, built up during the Baby Boom generation’s prime working years, is projected to exhaust its resources, triggering a 17% cut in the average benefit. Other estimates predict a bigger cut.

Black swan events like a pandemic toss all these estimates in the dumpster.

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President Trump has suggested that tariff revenue will bring in so much money that Social Security/Medicare benefits will be protected well into the future. But one minute the tariffs are on and then they are off, and now the courts have stepped in to halt some tariffs.

In any case, several think tanks estimate that the tariffs will not bring in the kind of revenue the president has boasted about. The Economist lists a range of estimates from $290 billion (the Wharton Budget Model) to just $140 billion (The Tax Foundation), around 2% of the federal budget. All the models make different assumptions.

As one might imagine, trying to come up with a number is devilishly difficult. High tariffs will cause businesses to alter their behavior and suppliers. And now last week’s court decision throws everything up in the air.

For the moment, Republicans narrowly control both houses of Congress and the White House and the president has pledged he won’t touch Social Security, but taking a hands-off approach does nothing to stave off the ticking crisis.

Theoretically, the GOP has the power but, like previous Congresses, does not have the courage. If one didn’t know any better, you’d think that letting the cuts happen is their solution.

Both parties are to blame for the current situation. Everyone has long known that the clock is ticking and what has to be done – entitlement reform coupled with some tax hikes and doing what one can to increase economic growth.

Ask any reputable economist what happens if one slashes scientific research funding, reduces the flow of immigrant workers, bars the world’s brightest students from American universities and implements high tariffs. If you guessed lower growth, you’re smarter than the president.

As a result, the retirement security for tens of millions of Americans hangs in the balance.

Tick, tick, tick

• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86. His book “American Dreams: The Story of the Cyprus Fulbright Commission” is available from Amazon.com.