Studio portrait of Sid Salter. (photo by Beth Wynn / © Mississippi State University)
Understanding the impact of Social Security on Mississippi’s economy and on our people is a heavy lift.
Let’s start with the basics. Nationwide in 2019, 54.1 million people received Social Security old age benefits, 9.9 million received disability benefits, and 61.2 million were covered under the Medicare program, that according to the Social Security Administration Trustee’s Report.
This past year in Mississippi, some 416,500 retirees received Social Security benefits averaging $1,420.12 per month or $17,161.44 annually. That means Social Security pumps $7.147 billion annually into Mississippi’s economy – in this the state with the deepest poverty in the nation.
Some perspective comes from the fact that Mississippi’s Fiscal Year 2022 state budget is close to $21 billion, but the state-funded portion is closer to $6 billion. The rest is paid by the federal government.
The current Social Security Trustee’s Report still holds that Social Security will be able to meet current obligations until 2035, at which time either Congress will act to shore up the program or recipients will see a 21 percent reduction in benefits that will grow to a 27 percent reduction.
Medicare is projected to be able to pay scheduled benefits through 2026, when a 10 percent reduction is projected without congressional intervention.
More perspective necessary? Social Security and Medicare accounted for 41 percent of total federal expenditures in 2019. In 2000, 12.4 % of the U.S. population was aged 65 or over. In 2019, that percentage increased to 16.5%. By 2050, that percentage is projected to rise to 22%.
A rapidly growing senior population, plus improvements in health care that increase longevity, will dramatically impact the future financial stability of Social Security and Medicare.
The Washington-based Committee for Responsible Federal Budget (CRFB) analyzed the 2020 Trustees’ Report and offered this dismal assessment: 1) Social Security will be insolvent in 2035, just 14 years into the future; 2) Trustees projected the Social Security program would run cash deficits of more than $2 trillion over the next decade, the equivalent of 2% of payroll or 0.7% of Gross Domestic Product (GDP); and (3) Social Security’s finances are deteriorating. Between 2010 and 2019, the program’s actuarial deficit grew by nearly 50% from 1.92% of payroll to 2.78%. Over the past year, it has grown by an additional 15% to 3.21% of payroll.
But what impact will the Covid-19 pandemic have on these programs? Potentially, a significant impact. According to financial journalist Mark Miller, Social Security’s chief actuary Stephen Goss told a recent Bipartisan Policy Center webinar that “a reduction in employment earnings and payroll taxes of 15% for an entire year would change the insolvency date from early 2035 to the middle of 2034. If a decline on that order continues for a second year, the depletion date would move up to middle or late 2033.”
So, pandemic impact or not, what’s the overarching problem? Why are the entitlement programs in fiscal danger?
In 1950, 120 workers were paying into the Social Security system for every individual drawing a pension from it. By the year 2035, it is projected that there will be 2.3 workers contributing to every worker drawing a pension. By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million as the Baby Boomers reach that milestone.
The current “woke” generation has embraced the issue of income inequality as a focus of their calls for systemic change. But how can any of us ignore the obvious threats to the Depression-era economic safety nets we call Social Security and Medicare? Those carping about extending unemployment benefits or stimulus payments either don’t understand those programs and haven’t considered the implications if those programs are not stabilized.
And accomplishing that will almost certainly involve higher payroll taxes, a concept that has left many of the “woke” asleep at the switch.