CBO: Social Security Stronger Than Thought
WASHINGTON – Social Security's (search) long-term prospects are better than previously thought, a congressional report said Monday, estimating the program won't become insolvent until 2052, a decade later than projected earlier this year.
The report by the nonpartisan Congressional Budget Office (search) still paints a bleak financial picture for the future of the retirement system, which faces significant strain as the aging baby boom generation retires.
It also provided election-year ammunition to opponents of President Bush's proposal to overhaul Social Security to allow personal investment accounts.
"Social Security is not in crisis, and the financial challenges facing the system are manageable," said Rep. Bob Matsui (search) of California, top Democrat on the House Ways and Means Social Security subcommittee.
White House spokeswoman Claire Buchan said the report is "another important piece of information that demonstrates that while Social Security is sound today, it isn't sustainable for the long term unless it's reformed and restructured." That, she said, "is what the president believes we need to do."
The bipartisan trustees who oversee Social Security predicted in March that the system's shortfall would be 1.89 percent of taxable payroll, or about $3.7 trillion.
But using rosier economic assumptions over the next 75 years on such things as inflation and productivity, congressional budget forecasters said the shortfall would be 1 percent of taxable payroll.
"While the differences in the estimates should be fully studied by economists and actuaries, they are not an excuse to delay strengthening Social Security," said Sen. Lindsey Graham, R-S.C., who has introduced legislation to overhaul Social Security to let younger workers invest some of their payroll taxes in the stock market through personal accounts.
"Even with the more optimistic assumptions used by the CBO, the long-term deficits facing Social Security do not go away," he said.
But Social Security isn't getting the election attention of years past. Democrat John Kerry (search) rarely discusses it while campaigning. Iraq and the economy have shelved White House plans for Bush to campaign aggressively for an overhaul, an issue once tagged as a second-term priority.
Buchan said Bush still considers changes to the system a priority. Nevertheless, supporters of personal accounts, out in force in the 2002 congressional races, have scaled back or abandoned fund raising and campaign efforts this year.
"We're not going to be spending millions of dollars on this issue" like in 2002, said Derrick Max, executive director of Americans for Worker Retirement Security. Even if Bush started talking regularly about personal accounts on the campaign trail, "we're running out of time."
The CBO report pegged 2019 as the year the system will start paying out more in benefits than it collects in payroll taxes — a year later than the trustees' report.
Analysts say that date is likely more significant because the insolvency projections count on funds owed the system by the government in the so-called trust fund. Those funds, however, already have been spent and must be repaid.
Opponents of partial privatization say the new report raises questions about the severity of system's finances and undercuts Republicans' arguments for change.
"The CBO report shows just how tentative estimates about the problems of Social Security are, and how absurd it would be for policy-makers to dramatically alter the program based on those numbers," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.