Millions of Californians Could Be Impacted by Looming Social Security Cuts

Millions of Californians Could Be Impacted by Looming Social Security Cuts

“Lawmakers need to take prompt action to strengthen the ... trust fund,” said letters sent last year to Congress by the Social Security trustees and signed by Treasury Secretary Janet Yellen. Above, Yellen speaks at IRS headquarters in Washington on Nov. 7, 2023. (Stefani Reynolds/AFP via Getty Images)

Travis Gillmore

Travis Gillmore

2/22/2024

Updated: 2/25/2024

Based on the number of individuals receiving Social Security benefits in 2023, more than 6.25 million Californians and about 67 million Americans will be impacted by impending cuts to Social Security benefits, according to the board of trustees that oversees the program.
Barring a prompt solution, Californians stand to miss out on about $193 million per year in benefits—based on the approximately $840 million paid to beneficiaries across the state in 2022.
Most recipients reside in the southern part of the state, with beneficiaries in the counties of Los Angeles, more than 1.4 million; San Diego, more than 500,000; and Orange, nearly 500,000 making up nearly 40 percent of the total statewide.
With Social Security revenues collected by taxes failing to cover costs, the program will be forced to cut benefits by approximately 23 percent in about 10 years, according to the latest report published by trustees last September.
Changing demographics are to blame, in part, for the issue, the report found, as aging generations are being replaced with fewer workers due to changes in birth rates.
After costs first exceeded tax collections in 2021, they are now expected to exceed revenues every year going forward, according to the report.
“Lawmakers need to take prompt action to strengthen the ... trust fund,” said letters sent last year to the U.S. Senate and House of Representatives by the trustees and signed by Janet Yellen—secretary of the Treasury and managing trustee of the trust fund—among others.
Social Security reserves of about $2.83 trillion at the beginning of 2023 are projected to decline to about $590 billion at the end of 2032, the report said, and would be depleted by 2034, becoming insolvent one year earlier than projected in the previous year’s report.
While reserves would be depleted, some money would be available for payout, as taxes collected each year cover a portion of the liabilities.
Long-term forecasts anticipate $22.4 trillion in unfunded payouts over the next 75 years, a $2 trillion increase from estimates made by the group in 2022.
Solutions include raising Social Security taxes, cutting benefits, or a combination of both. Such needs to be implemented quickly and transparently so those paying taxes and receiving benefits can prepare, according to the report.
“Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits,” the authors wrote. “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
A group of bipartisan lawmakers introduced a proposal late last year—known as the Fiscal Commission Act—which would establish a panel to stabilize the country’s various trust funds, including those related to Social Security benefits.
One co-author said urgent action is needed and that a bipartisan fiscal commission could help save Social Security by “breaking through the gridlock” that has prevented previous sustainable solutions from passing Congress.
After some colleagues advised that so-called “regular order”— where bills are allowed to traverse committees and receive amendments—would yield more effective solutions than appointing a commission, Democratic Rep. Scott Peters, from California, argued that such is an elusive concept that has failed to achieve benefits in the 11 years he has served in Congress.
“Regular order is the Congressional ‘Big Foot’—we’re all told it exists and none of us has ever seen it,” Mr. Peters said in a Congressional Budget Committee hearing last year. “I don’t even know what regular order is, and I’m being told it will solve this problem, and I don’t believe it.”
More oversight and immediate attention are needed to address the looming insolvency issue, he said.
“Nobody thinks, and there is no evidence to suggest that this issue will be taken up [without a commission],” Mr. Peters said.
Additionally, the board of trustees have lowered their projections for GDP growth in response to economic headwinds including inflation.
To remain fully solvent over the next 75 years, the board found that tax revenues would need to increase by 3.44 points to 15.84 percent beginning immediately, or benefits would need to be reduced by 21.3 percent.
If nothing is done before the funds are depleted, such changes would grow in magnitude, with taxes raised to 16.55 percent or benefits slashed by 25.2 percent, or some combination of the two approaches, according to the report.
Critics of the situation abound on social media, with many questioning a perceived lack of fiscal responsibility from the federal government.
“If social security ... [is] essentially insolvent, how are we able to pay Ukraine’s bills?” one person posted on X after the report was released last year.
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Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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