(CNSNews.com) – Reince Priebus, incoming White House chief of staff, said Sunday on CBS’ Face the Nation that President-elect Donald Trump will not “meddle” with Social Security even though the non-partisan Congressional Budget Office (CBO) warned that the entitlement program’s trust funds will be “exhausted” within 12 years.
“I don’t think President-elect Trump wants to meddle with Medicare or Social Security,” Priebus said. “He made a promise in the campaign that that was something that he didn’t want to do. But what he wants to do is grow the economy, help shore up Medicare and Social Security for future generations.”
Last week, Sen. Bernie Sanders (I-VT) displayed on the Senate floor a poster-sized copy of Trump’s May 7, 2015 tweet in which he stated: “I was the first only potential GOP candidate to state there will be no cuts to Social Security, Medicare Medicaid.”
Social Security is the largest single program in the federal budget. It has two trust funds: one for its Old Age and Survivors Insurance (OASI) program and the other for its Disability Insurance (DI) program.
The vast majority (96%) of revenue going into the two trust funds comes from dedicated payroll taxes on 169 million American workers, according to a December report by the CBO.
However, in 2016 total outlays exceeded total revenue ($859 billion) by 7 percent. “As more people in the baby-boom generation retire over the next few decades and as longer life spans lead to longer retirements, that gap will widen,” the report warned.
“If current laws governing taxes and spending stayed the same and if benefits were paid as scheduled,” the combined balances of the two trust funds “will be exhausted in calendar year 2029, requiring a 29 percent reduction in benefits payable in 2030,” the report added.
CBO’s latest projected shortfalls for the Social Security Trust Funds are 1.5 percent larger than last year’s projections.
Its estimated date of trust fund depletion also comes five years earlier than predictions by the Social Security trustees, whose 2016 report stated that “the combined OASI and DI Trust Fund reserves diminish until they become depleted in 2034.
”Social Security recipients’ payable benefits would be less than their scheduled amounts “because annual outlays would be limited [by law] to annual revenues credited to the program.” So a retiree expecting to receive $2,000 a month in scheduled benefits would only receive about $1,580.
The fast-approaching depletion of Social Security’s Trust Funds was largely ignored by Trump and his opponent, Hillary Clinton, during last year’s presidential campaign. Trump promised that he’s “not going to cut Social Security like every other Republican” and Clinton said that she was against raising the retirement age and cutting middle-class benefits.
But experts agree that time is running short to fix the program, and that some combination of raising payroll taxes and reducing future benefits will be needed to keep the New Deal-era entitlement program afloat for future generations.
“To illustrate the magnitude of the deficit,” the trustees’ report continued, “consider that for the combined OASI and DI Trust Funds to remain fully solvent throught the 75-year projection period:
(1) revenues would have to be increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.58 percentage points to 14.98 percent;
(2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 16 percent applied to all current and future beneficiaries, or about 19 percent if the reductions were applied only to those who become initially eligible for benefits in 2016 or later; or
(3) some combination of these approaches would have to be adopted.”
“Sustainable solvency… has been achieved when the projected trust fund ratio is positive throughout the 75-year projection period and is either stable or rising at the end of the period,” the trustees’ report noted.
But the CBO pointed out that even if the program is rescued from insolvency, Social Security will wind up being a net loss for younger workers, who will not get back in benefits what they pay into it via payroll taxes.
“For the program to be self-supporting, current and future generations would need to pay more in taxes than they receive in benefits to offset earlier participants’ larger benefit-to-tax ratios,” the CBO report stated.