WASHINGTON—When the coronavirus pandemic plunged the U.S. into a recession last year, it portended another blow to the health of the Social Security system. An anticipated decline in payroll-tax revenue and increase in disability claims were expected to erode the program’s reserves and pile pressure on the government to respond.
Instead, the near-term finances of the federal government’s retirement and disability programs appear to have weathered the storm better than many policy analysts had predicted—taking some pressure off the Biden administration and Congress to reach a long-term solution to keep them solvent.
A faster-than-expected economic recovery has bolstered the payroll taxes that help finance the programs. And new benefit claims for disability insurance, which typically jump when the economy is weak, declined for some groups as the Social Security Administration’s field offices remained closed.
“I don’t think it’s going to be as big of a hit as many people, including me, feared a year ago,” said Kathleen Romig, a senior policy analyst at the Center on Budget and Policy Priorities, a progressive Washington think tank.
Longer term, though, the programs are being squeezed by rising costs and declining revenue as the population ages, and they are on track to deplete their trust fund reserves in coming years as funding shortfalls widen. After that, beneficiaries would face automatic benefit cuts unless Congress steps in to shore up the program, for example by boosting the payroll tax rate, trimming benefits or delaying the retirement age.