The coronavirus crisis will reverberate for years, including hastening the depletion of Social Security’s trust fund and bringing ever closer the scheduled date when the venerable program will have to cut benefits, according to a new analysis Thursday.
With tax revenue sharply down the trust fund will have to spend more to cover benefits right now, say researchers at the Penn Wharton Business Model. Low interest rates, meanwhile, mean the trust fund itself won’t grow as quickly as earlier projected.
On the other hand, the 100,000 deaths and counting, in a very grim way, reduce the population that will be collecting Social Security, the business model says.
But the economic devastation swamps that, meaning the trust fund will drop more quickly, the analysts said.
The faster the recovery — dubbed the V-shape option — the less the impact.
“PWBM found that under their projected U-shape recession, the OASDI trust fund will run out four years earlier than anticipated, moving from 2036 to 2032. If the recovery is V-shaped, the depletion date moves two years earlier, from 2036 to 2034,” the researchers said.
The trust fund is the pool of money built up over decades as payroll taxes outstripped yearly costs from Social Security.
But with the baby boomers retiring, payroll taxes are no longer enough to cover those yearly costs, and Social Security has had to dip into the trust fund.
The depletion date is when the trust fund will no longer have money and Social Security will only be able to pay out benefits based on the case it has coming in through payroll taxes.
Analysts say that will mean an immediate cut in benefits paid, unless Congress steps in.
Before the coronavirus pandemic, Social Security’s trustees said the trust fund would run out in 2035. The business model’s own calculations said it would probably be a year later, in 2036.
Now, it could be as early as 2032 — little more than a decade away, the researchers said.
