The financial health of Social Security will be helped by deaths from Covid-19, Social Security Administration Chief Actuary Stephen Goss told Congress today.
As in most recessions, Social Security’s finances will be weakened by the increased burden from some people applying for benefits earlier because they have lost their jobs, Goss noted. “However, unlike in most economic recessions, the potential effects from increased Social Security benefit applications will be partially offset by increased deaths among our beneficiaries due to the pandemic,’’ he said. He added that it was too soon to determine how the pandemic will play out and the relative effects on the economy and longevity.
The actuary told the House Ways and Means Committee’s Social Security Subcommittee that the estimate he gave April 23 on the potential impact of reduced earnings this year by workers on the program may be too pessimistic.
In April, he forecast earnings and contributions to the payroll tax which funds the benefits would be down by 15 percent. Today, he estimated a reduction of 10 percent would be more likely.
“Assuming we do not have a substantial second wave of cases from the virus in the fall, with substantial closure of the economy, recovery during 2021 might be expected,” Goss said.
He warned, however, if closures go beyond 2021 or if there is a permanent reduction in the level of economic activity after recovery from this recession, the combined Old-Age & Survivors Insurance (traditional Social Security) and Disability Insurance Trust Funds could be depleted sooner than the early 2035 estimate the trustees gave this spring. The danger to the Social Security Trust Funds would be” significantly larger” with a delayed rebound, Goss said.
Depletion of the trust funds, unless Congress acts, would lead to about a 20 percent reduction in annual payments to beneficiaries.
But with a quick recovery, the combined OASI and DI Trust Fund reserve depletion date might change by less than one full year, from early 2035 to sometime in 2034, he explained.
The implications of the COVID-19 pandemic were not reflected in the 2020 Trustees Report which was prepared before the crisis was fully underway.
During the hearing, Social Security Subcommittee Chair John Larson (D-Conn) took aim at President Donald Trump’s proposal to cut payroll taxes, claiming the action would benefit the wealthy the most and will deplete the Trust Fund.
The Ranking Republican on the subcommittee, New York’s Tom Reed said the thing that would bring the greatest help to Social Security would be giving workers the opportunity to return safely to their jobs.