by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Like many aspects of today’s fiscal environment, trends that were worrisome before the pandemic have been accelerated by the unprecedented nature of today’s crisis. This is true of Social Security, the looming funding imbalance of which has the potential to be exacerbated by an increased number of claimants and a decrease in revenues due to depressed economic activity.
The uncertain economic environment makes the debate over how to save Social Security that much more important. Trade-offs must be made, but the acute contraction of the employment landscape dictates that so-called solutions that harm employment will serve to undermine the nation’s economic recovery as well as the lasting health of Social Security.
With millions of people out of work and the infection rate remaining unsteady, it is obvious that the pandemic still requires a deliberate, targeted, and hopefully temporary response from lawmakers. Legislation that addresses Social Security’s funding shortfalls with permanent and damaging tax increases, or uses the crisis as a pretext to expand benefits through a program that already faces durable fiscal imbalances, would undermine the nascent recovery.
The ways in which the health of the workforce and the health of Social Security are inextricably linked are manifold.
First, downturns tend to increase dependence on social programs at a time when revenues fall, presenting dual pressures on solvency. In the case of Social Security, which relies on employment taxes, the scenario can be more worrisome: Data shows there are still 32 million people claiming some form of unemployment support, which represents tens of millions of workers not currently paying Social Security taxes.
Removing barriers for getting workers back to work then is key, both for the financial health of Social Security and for workers.