Many of you may have heard about the 1981-1983 Greenspan Commission (National Commission on Social Security Reform) it was a group appointed by President Reagan, chaired by Alan Greenspan and formed the backbone of the 1983 amendments to the Social Security Act. They proposed measures such as increasing payroll tax and raising the retirement age from 65-67. At the time, there was a critical insolvency crisis in Social Security, these amendments extended Social Security solvency by decades. The Social Security Amendments of 1983 were passed in January of 1983 while predictions were that the Social Security Trust Fund would run out of money as early as August of 1983. Yes, you read that right the amendments were passed with months to spare.
Imagine for a moment that you were a senior citizen receiving retirement benefits at that time. The alarm bells had been sounding for years that the Social Security Trust Fund was going to run out of money and that benefits would be cut starting in August 1983. (Remember that cuts are automatic if no action is taken. This is not a ploy for press coverage or to scare seniors, its the law.) How could you budget when you were at risk for losing 23% of your scheduled benefits? If you had other money coming in, perhaps you could absorb it. What about the 21,700,000 for whom social security made up 90% or more of their budget or the 14% for whom social security was their sole source of income? What about if you were nearing retirement, how would that have impacted you?
There is no debate that the Social Security Amendments of 1983 took political courage and critical evaluation of priorities by both parties, and provided stability to the system for 50 years, however it is time to address the current crisis. We cannot wait until the final few months before insolvency to to come up with a solution, this is not 1983.
1983 was a crisis that was marked by sudden cash insolvency due to high inflation and unemployment and a deep economic recession. Today’s crisis has been looming for decades due to the aging Baby Boomers, increased life expectancy and drops in birth rates. There is no excuse for letting it get this bad in the 2020’s. Particularly as all of the issues of today are not going away, in fact will only cause a greater difference between money coming in and money going out. As it is, there is already a larger required adjustment today than 1983, from about 2% of taxable payroll to 3-4% of taxable payroll. Every month we delay, there are fewer years to phase in any adjustments, the tax hikes and/or benefit cuts will need to be greater, but one of the most concerning is that we are unlikely to build up reserves in the future.
By ignoring the upcoming cliff and jeopardizing the future of our seniors, we also impact the entire economy. While social security is about 5% of our economic Gross Domestic Product (GDP), a 20% cut would remove roughly 1% of GDP in household income instantly. Our nation would be thrown into a recession overnight. An avoidable recession with no end in sight. This would not just impact our seniors, but all of us.
Congress must take action, there is no other choice. They must do the hard work as they did in 1983 and work across the aisle to find a meaningful solution. Our seniors deserve it, our country deserves it.
