Social Security Trustees Will Report Large, Growing Surplus: Advocacy Group

The Campaign says the trustee report will also help put to rest the “misunderstanding” that Social Security has entered a cash deficit situation where it is paying out more in benefits than collecting in income. “Social Security is prohibited by law from doing that. It can only pay benefits if it has sufficient income to cover all costs. If there were less income than outgo this year, the Trustees would be reporting that benefits would not be able to be paid in full during the remainder of 2012!,” the Campaign says.

The Report will also likely project that Social Security’s benefits and administrative costs in 2012 will exceed the amount of payroll tax contributions collected, the Campaign says, “but that is not surprising in light of the stagnation of average wages and continued high unemployment. Indeed, it has happened 18 times since 1958, according to the Social Security Administration.”

The Campaign also argues that “Congress could eliminate Social Security’s entire projected shortfall, which amounts to around 0.8% of gross domestic product (about the size of the Bush tax cuts going to the top 2% of the population), by raising the Social Security tax cap so that the 6% of workers that make more than $110,100 a year pay taxes on all of their wages just like everyone else who makes less than that amount. This would guarantee full payment of Social Security benefits for the next 75 years and beyond.”

There are many other ways to address the projected shortfall without cutting benefits which are already very modest, the Campaign says, averaging just $14,781 a year for retirees–less than is paid in a year of minimum-wage work.

Two-thirds of seniors, the Campaign says, rely on Social Security for half or more of their incomes. “Our view is that we’re facing a retirement income crisis and we need to be increasing social security [benefits] because it’s the most stable source of retirement income,” Altman told AdvisorOne. “The last thing that should happen is to cut benefits.”

Altman also said that Congress should address Social Security’s funding gap—“although modest in size”—away from the deficit reduction discussions. By law, Social Security cannot borrow, the Campaign says. “If it lacks the revenue to cover benefits its only recourse is to cut benefits. Thus, it does not contribute to the federal deficit. Cutting its modest benefits does not reduce the federal debt subject to limit by a penny. Discussing Social Security in the context of the deficit debate risks reinforcing the widespread misperception that the government is stealing the contributions of hardworking Americans.”