The short-term effects of the coronavirus pandemic are inescapable and evident everywhere in the U.S., while its long-term consequences will emerge over time, in particular for the federal budget, including the Social Security program's finances.
On April 22, the Social Security Board of Trustees published its annual report, in which it projected that combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds would become depleted in 2035, absent congressional action before then.
However, the report did not take into account COVID-19's effects on the program's finances.
"Given the uncertainty associated with these impacts, the Trustees believe it is not possible to adjust estimates accurately at this time," Andrew Saul, Social Security's commissioner, said in a statement.
"The duration and severity of the pandemic will affect the estimates presented in this year's report and the financial status of the program, particularly in the short term."
The Penn Wharton Budget Model, released Thursday, sought to fill that gap by including the pandemic's effects in its latest projections of Social Security's financial outlook.
PWBM is an independent research organization housed at the Wharton School of the University of Pennsylvania.
According to PWBM, under the "U-shaped recession" it projected, the pandemic will bring forward the OASDI trust fund depletion date by four years, from 2036 to 2032.
This will happen, it said, because reduced Social Security revenue from pandemic-induced job losses, lower earnings and low interest rates will outweigh corresponding reductions in costs from lower total benefits paid.
PWBM said that under a quicker recovery, or "V-shaped" recession, the OASDI trust fund would instead run out two years earlier, in 2034.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Michael S. Fischer
Michael S. Fischer is a longtime contributing writer for ThinkAdvisor. He previously reported on trade and intellectual property topics for the Economist Intelligence Unit and covered the hedge fund industry for MARHedge and Reuters News Service.
