SOCIAL SECURITY Changes are politically tough

Associated Press

WASHINGTON

Despite Social Security’s long-term problems, the massive retirement and disability program could be preserved for generations to come with modest but politically difficult changes to benefits or taxes, or a combination of both.

Some options could affect people quickly, such as increasing payroll taxes or reducing annual cost-of-living adjustments for those who already get benefits. Other options, such as gradually raising the retirement age, wouldn’t be felt for years but would affect millions of younger workers.

All of the options carry political risks because they have the potential to affect nearly every U.S. family while raising the ire of powerful interest groups. But the sooner changes are made, the more subtle they can be because they can be phased in slowly. Each year lawmakers wait, Social Security’s financial problems loom larger and the need for bigger changes becomes greater, according to an analysis by The Associated Press.

“Certainly, in the current environment, it would be very difficult to get changes made,” Social Security’s commissioner, Michael J. Astrue, said.

Social Security is ensnared in the same debate over taxes and spending that has gripped Washington for years. Liberal advocates and some Democrats say benefit cuts should be off the table. Conservative activists and some Republicans say tax increases are out of the question.

Others, including a deficit commission created by President Barack Obama in 2010, have called for a combination of tax increases and cuts to future benefits, including raising the retirement age again.

Janice Durflinger of Lincoln, Neb., is still working at age 76, running computer software programs for a bank. Still, she worries that a higher retirement age would be tough on people with more physically demanding jobs. “No matter how much you exercise, age takes its toll,” she said.

Social Security’s finances are being hit by a wave of demographics as millions of baby boomers reach retirement, leaving relatively fewer workers behind to pay into the system. About 56 million people get benefits today; that is projected to grow to 91 million in 2035.

For nearly three decades Social Security produced big surpluses, collecting more in taxes from workers than it paid in benefits to retirees, disabled workers, spouses and children.

But Social Security trustees project that the surplus, now valued at $2.7 trillion, will be gone in 2033. At that point, Social Security would collect only enough tax revenue each year to pay about 75 percent of benefits, unless Congress acts.

After the surplus is spent, the gap between scheduled benefits and projected tax revenue is big.

The options for closing the gap fall into two broad categories: cutting benefits or raising taxes.