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Employers need to fight “fake news” about Social Security with facts

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With the publication of the 2019 report from the Social Security Trustees, I noticed a number of online reports with headlines like, “Social Security Trust Fund to Go Bust in 2035” or “Social Security Gets Short Reprieve.” These articles remind me of cotton candy; it appears substantive but upon closer examination there is nothing much there.

Look at what the report actually says.

Given the gravity of the situation, I wanted other sources of information beyond my LinkedIn feed. So I read the report’s 22-page overview instead. Here is what I learned:

  1. In 2018, the Trust paid more than $80 billion in old age, survivor, and disability benefits than it collected from tax revenue.
  2. Since the Trust Fund is required to be self-sustaining, the Trustee’s report explains the deficit is being financed from the surpluses accumulated in prior years as well as interest on these balances. But there is no bank account, asset pool, or lock box where these assets are held. These so-called “surpluses” are just an accounting entry; the money was previously spent on other governmental programs.
  3. In reality, this deficit is financed by government borrowing.
  4. In 2034, the Trustees project the “surpluses” in the separate trust financing old age and survivor payments will be exhausted. At that point under current law, these benefits can’t exceed the dedicated taxes collected. And in 2034, the Trustees estimate that the taxes collected in 2034 will only finance 77% of projected benefits.

These headlines create inaction.

Few of these facts are communicated in most media reports. As a result, most millennials see the word “bankrupt” and conclude they will receive no benefits. And the public believes the projected 2034 “deadline” is fixed – like the appearance of a solar eclipse – so no pressure is put on politicians to act now.

Of course, the ability to pay benefits at current levels until 2034 is predicated on continued deficit spending. If the U.S. Government is forced to begin addressing its structural deficits sooner, more immediate action may be needed. And if you think this impossible, remember as recently as 1990 the Congress was forced to cut spending and raise taxes to calm turmoil in the financial markets over rising U.S. debt.

Employers are well placed to inform.

I believe headlines reporting Social Security will be bankrupt in 2034 lead to a perfect storm of procrastination by politicians and nihilism among many young people about the futility of saving. But I have given up hope that media accounts can ever be more than “clickbait” on this issue. So I have been considering other ways of how the public might become better informed:

  • Employers might want to start educating participants about the role Social Security plays in their future financial security, the potential issues with the Trust Fund, and the importance of individual savings.
  • Currently, employers and financial service companies continue to project benefits past 2034 assuming 100% of scheduled benefits will be paid. What if, instead, they updated projections based on the most recent estimates on when the Trust Fund will be exhausted, with an explanation of the change?  This would surely be the most straightforward depiction of the current situation and people could start planning now on the savings needed to make up the benefit cut. And I can’t imagine any media accounts or advocacy ad more effective than personalizing the cut in benefits required if no action is taken.
  • Since young people are heavily impacted by the projected shortfall, I dream of the day when someone with a huge social media presence posts a video explaining the issue, outlines what benefits are at risk, and makes the case that policy makers shouldn’t wait until 2034 to act. (In considering potential spokespeople, I nominate one of the Kardashians. If Kim K can help drive criminal sentencing reform, why not this?)

Put Social Security on a sound footing.

Upon reflection, it’s too easy just to blame the media for failing to report the subtleties of this situation.  All of us – citizens, employers, industry, politicians – are just putting off until tomorrow what should be done today. There has been a lot of talk recently about economic anxiety and the fear of future decline. I can’t think of a better way to address this than to put the Social Security system on a sound actuarial system, whatever that entails.

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