Many young Americans say they don't expect Social Security when they retire, but it is today's older workers who may see their first benefit cuts.
The Congressional Budget Office released an updated budget outlook on Wednesday, originally released in July to reflect the impact of the pandemic on the economy. In the report, the agency said the budget deficit will hit a record $ 3.3 trillion this year – and $ 13 trillion over the next decade. National debt, which is expected to account for 98% of gross domestic product this year, is also expected to surpass WWII levels next year when it is projected to hit 104% in 2021.
Among the many adverse effects of the current crisis is the sharp spike in expected bankruptcy dates for Social Security and Medicare programs, which are projected to run out of money 11 years from their previous forecast of 15 years.
See: Social security recipients could experience a rude awakening later this year
The programs rely heavily on wage taxes. The CBO expects reported wage tax receipts to increase this year despite the record unemployment in recent months. However, this will change in the following years. Lower interest rates and price levels will also cut costs on social security and other related health programs, according to the Federal Responsible Budget Committee, which conducted an analysis of the CBO's updated outlook.
Still, social security is in trouble. The two trust funds that support the program and provide retirement, disability and survivor benefits are already in danger of running out of money for the next two decades. Given the impact of the pandemic under study, the CBO estimates the bankruptcy date for Social Security Disability Insurance to be 2026 and the Social Security Retirement Program, known as Old Age and Survivors' Insurance, to be 2031. Medicare health insurance is set to bankrupt until 2024 if nothing is done to to correct these projections.
"In other words, today's youngest retirees will face a sharp 25% drop in benefits at the age of 73," the CRFB said in an analysis of the CBO report. The cut is due to lower tax revenues, an aging population that inevitably draws on social security benefits and trust fund assets that grow at a lower interest rate.
Other research and political organizations have even less conservative assessments – the Bipartisan Policy Center, for example, assumes, according to an analysis from April 2020, that the two trust funds will be exhausted by the time of the 2028 presidential election.