Social Security delivers mixed punches to our recent Presidents. For those who want to be better informed on this essential government program, here’s a brief squint at the evolution of the program through recent administrations. I’d suggest pursuing your own research into the ground rules, recommendations/reports, and debates over proposals. Links are provided here as a starter.
Each presidency in my adulthood (age 73 at the moment) has had unique challenges and opportunities, but the sheer mass of Baby Boomers first contributing to and now drawing on Social Security varied the context of each Presidency in ways little appreciated by the voting public. Here are the most notable ways.
The Reagan Presidency
Social Security, always a pay-as-you-go program, faced short-term funding insufficiency in 1983. President Reagan appointed a commission to examine short-term issues and the long-term viability of the program. Headed by the Chairman of the Federal Reserve at the time, the 15-member commission was therefore called The Greenspan Commission. Responding to the Commission’s report, Congress passed legislation to make several changes to Social Security, expanding coverage to Federal workers for example. Taxation of Social Security benefits began in 1984, based upon the Amendments passed by Congress in 1983 with overwhelming bi-partisan support. The impact of the Baby Boomers’ retirements was decades away, but fully in the 75-year Social Security model.
This Commission unanimously recommended that “Congress, in its deliberations on financing proposals, should not alter the fundamental structure of the Social Security program or undermine its fundamental principles.” This was a program established to address poverty among elderly citizens.
The Clinton Presidency
The Clinton Presidency enjoyed the greatest benefit from Social Security. The Baby Boomers were deep into the economy and contributing OASDI taxes on earned income to the program. Income into the program exceeded payouts to retirees. The growing surpluses were deposited into the “Trust Fund”. The Trust Fund invested those surpluses, as required by the Act, into U.S. Treasury securities. Under law, the interest on these securities provided additional income to pay benefits to eligible retirees.
The less-understood impact of these surpluses and how they were invested was on the appearance of the U.S. annual budget. The Clinton Presidency has been described as having produced budget surpluses. But an examination of government budget data reveals that that surplus was in only two years and rather small.
Here is a table of budget inflows and outflows. “On-budget” is the presentation method showing what Congress deemed being “on-budget”. It’s the on-the-surface, you-can’t-argue-with-this version of the budget. The “off-budget” includes Social Security. The “total” shows the income and expenditures in a year, regardless of how Congress has decided to allow the presentation. For more details on Federal budgeting, search under “unified budget.”
The George W. Bush Presidency
With the impact of the Baby Boomers’ retirement nearer on the horizon, President George W. Bush appointed a Presidential commission to study Social Security reform in 2001. It was the second major bi-partisan examination. While the idea of greater reliance upon private savings accounts was a key idea considered by the commission, their work commenced with the understanding that Social Security Trust Fund assets would not be invested in the stock market. This commission’s work revealed how contentious the Social Security reform issue is. It has so many angles attracting widely divergent views. Once again, however, the commission began with the understanding that the major structural elements would be retained.
The Obama Presidency
The third major bi-partisan reform initiative was a Presidential commission appointed by President Obama in 2010 to address the Federal budget deficit. Named Simpson-Bowles after its co-chairmen, it too developed recommendations that attracted push-back from many sides. Its recommendations weren’t supported by Congress — or the President. The idea of reform of either Social Security or the Federal budget outlook was beginning to look like an impossible task for any Presidency. Meanwhile, not only years, but also decades were passing in which to gradually address the issue of the Baby Boomers’ retirement.
Also, in four successive Trustees Reports, the Disability program was forecast to become insolvent in 2016. Congress passed a 2015 budget bill reallocating a portion of the OASDI payroll tax from Social Security to Disability until 2023.
The Trump Presidency
The Trump Presidency was holding an even shorter straw — having to address looming Social Security and Disability funding insufficiencies. The Social Security Act requires Congress to act with very specific targets and processes. If the Social Security 75-year model (the required modeling time horizon) estimates funding insufficiency to pay full promised benefits within ten years, Congress is required to act.
A major, but unsung accomplishment of the Trump administration was addressing the solvency of Disability. Reading the Trustees Reports’ descriptions of the Disability Insurance operations in recent years shows that the Trump administration tightened up administration of the DI program, with bi-partisan Congressional support. They made many small changes that resulted in a combined strengthening of that program’s finances. The need had arisen (as described above) and was examined during the Obama administration. The Trump administration presented recommendations to Congress in the 2020 budget proposals. As the DI program had had two episodes of insolvency which were addressed by pulling resources out of Social Security, this effort at least made DI less of a threat to Social Security going forward.
The Biden Administration
The Biden administration faced the challenge of national recovery from the Covid pandemic. In addition to the multitude of issues surrounding the world’s first global pandemic, the Trustees had to forecast how immigration would rebound. Between COVID and border issues, immigration numbers have been very volatile in recent years. And hard to reasonably estimate, as the Trustees note in their reports. Each OASDI program — Social Security (OASI) and Disability (DI) — has its own cash flows. Benefits are paid with cash. A stronger economy produces higher OASDI payroll taxes. Immigrants joining the labor force over our recent four decades have added additional workers contributing the payroll tax. This pushes the year in which the program will become insolvent further into the future. Details on the immigration issue can be found in other Social Security posts.
The Biden administration has an even shorter straw regarding Social Security. The 2024 Trustees Report estimates that Social Security will become insolvent in 2033. That is within the 10-year deadline imposed by the Act requiring Congress to address the insolvency. Clearly, this is going to be an interesting election year for both the Presidency and for Congressional seats.
It’s All of Us
Each Presidency has attempted to deal with this national issue. In the three-legged stool of the Social Security Blame Game (Presidents, Congress, and We the People), each Presidency needs to be put into context. The program will become insolvent at some point. The longer the body politic waits to make the needed compromises, the more severe the crisis will become.
Two points merit repeating. Every Presidential commission started with the assumption that the major structure wouldn’t change. The reason FDR appointed the initial commission that established the law was to address poverty among seniors. That policy goal remains.
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