The coronavirus recession is taking an axe to revenue streams for key government programs like Social Security, Medicare and highway infrastructure.
The high rate of unemployment during the pandemic means fewer payroll taxes are being collected to fund Medicare and Social Security, and less driving means the federal gas tax isn’t bringing in as much money for the Highway Trust Fund as it normally does.
Many of those programs, which Congress established with dedicated funding, were already on borrowed time before the pandemic hit, but the record economic downturn in the second quarter and the deteriorating labor market are accelerating their decline.
The Social Security retirement fund, for example, was previously projected to run out of money in 2036, according to the Penn Wharton Budget Model. Now, a worst-case pandemic scenario could bump that up to 2032.
The Highway Trust Fund, which was already set to run dry in 2022, is now on track to empty its tank next year, according to the Committee for a Responsible Federal Budget (CRFB). Funding for Medicare Hospital Insurance is expected to be depleted in 2024 instead of 2026.
The same CRFB model shows Social Security’s Disability Insurance fund running out of money in the coming decade instead of the 2030s.
A lack of funds would force Congress to choose between raising taxes, borrowing more, or cutting funds to other programs. Alternatively, lawmakers could just leave the programs insolvent, which would result in severe benefit cuts.
Republicans are hoping to tackle the issue by including legislation called the TRUST Act in the COVID-19 relief package under negotiation with Democrats.
The bill, sponsored by Sen. Mitt RomneyWillard (Mitt) Mitt RomneyTrump tests GOP loyalty with election tweet and stimulus strategy On The Money: GDP shrinks by record amount in second quarter amid virus lockdowns | Jobless claims rise for second straight week | McConnell tees up fight on unemployment benefits Overnight Defense: Pompeo pressed on move to pull troops from Germany | Panel abruptly scraps confirmation hearing | Trump meets family of slain soldier MORE (R-Utah), would require Congress to appoint bipartisan committees to come up with plans for each ailing fund starting next year. If the committees can agree on a plan, they would receive an up-or-down vote in each chamber.
“Among its many devastating effects, COVID-19 has threatened the fiscal health of essential programs like Medicare and Social Security,” Romney said.
“If Congress does not respond quickly, the day of insolvency for these programs will now come years sooner than expected.”
The legislation has support from centrist Democrats like Sens. Joe ManchinJoseph (Joe) ManchinOvernight Energy: Official says protesters not cleared from Lafayette Square for Trump | Trump administration blasts banks refusing to fund Arctic drilling | 2019 coal production hit lowest level since 1978 OVERNIGHT ENERGY: National Guardsman says removing protesters from Lafayette Square was an ‘unprovoked escalation’ | EPA watchdog kicks off probe after agency slashed fuel efficiency regs | Trump offers new FERC nominees Trump makes two FERC nominations, potentially rebalancing commission MORE (W.Va.), Kyrsten Sinema (Ariz.) and Mark WarnerMark Robert WarnerVirginia governor, senators request CDC aid with coronavirus outbreak at immigrant detention facility Hillicon Valley: House panel grills tech CEOs during much anticipated antitrust hearing | TikTok to make code public as it pushes back against ‘misinformation’ | House Intel panel expands access to foreign disinformation evidence House Intel Committee votes to give all members access to foreign disinformation evidence MORE (Va.), and even a few left-leaning organizations.
Alan Simpson and Erskine Bowles, who both co-chaired the National Commission on Fiscal Responsibility and Reform in 2010, are among those who have endorsed Romney’s bill.
“While most people in Washington would prefer to put — or leave! — their heads in the sand, the TRUST Act would create a truly bipartisan process to save these important programs,” they said in a joint statement.
Experts from the Brookings Institution and the Progressive Policy Institute also gave their nod of approval, as did the CRFB.
But House Democrats aren’t on board, posing a considerable roadblock to the bill’s inclusion in a final COVID-19 relief measure, particularly with Speaker Nancy PelosiNancy PelosiDemocrats reject short-term deal ahead of unemployment deadline GOP lawmakers comply with Pelosi’s mask mandate for House floor Trump tests GOP loyalty with election tweet and stimulus strategy MORE (D-Calif.) as one of the lead Democratic negotiators engaging with Treasury Secretary Steven MnuchinSteven Terner MnuchinDemocrats reject short-term deal ahead of unemployment deadline Trump tests GOP loyalty with election tweet and stimulus strategy Shaheen, Chabot call for action on new round of PPP loans MORE and White House chief of staff Mark MeadowsMark Randall MeadowsDemocrats reject short-term deal ahead of unemployment deadline Trump tests GOP loyalty with election tweet and stimulus strategy Senate rejects dueling coronavirus bills as unemployment cliff looms MORE.
“The TRUST Act is a shameless ploy to slash and burn Medicare and Social Security as we know it, under the guise of an allegedly innocuous commission,” said Rep. Rosa DeLauroRosa Luisa DeLauroLobbyists see wins, losses in GOP coronavirus bill Public health groups denounce new Trump move sidelining CDC Will Congress provide relief to the ailing child care sector? MORE (D-Conn.), who chairs the House Appropriations subcommittee on labor, health and human services and education.
“Leave it to Republicans to actively seek to harm our nation’s seniors and most vulnerable during a pandemic,” she added.
House Ways and Means Committee Chairman Richard NealRichard Edmund NealPelosi huddles with chairmen on surprise billing but deal elusive House approves two child care bills aimed at pandemic Top Democrat: Stimulus payments in GOP plan shortchange dependents MORE (D-Mass.) said he was “troubled” by the bill, saying closed-door commissions could not be trusted to protect vulnerable beneficiaries.
“In 2010, a similar closed-door commission made cuts to the Cost-of-Living Adjustment (COLA); hiked the retirement age (which is an across-the-board benefit cut for all retirees); changed the Social Security benefit formula to reduce the amount people receive each month; and made cuts to Medicare that forced seniors and individuals with disabilities to pay more for drugs, doctor visits, and hospital care by increasing cost-sharing like co-pays,” he said in a statement on the TRUST Act.
Supporters of the legislation argue such critiques are overblown and note that Democrats will have the power to appoint half the people on the committees, which won’t be allowed to report out their proposed fixes without bipartisan support.
The recommendations would need to clear a 60-vote procedural hurdle in the Senate and approval in the House.
Some experts aren’t holding their breath, even if Romney’s bill becomes law.
Charles Blahous, a fiscal expert at the right-leaning Mercatus Center, says the process is likely to end in failure.
“The track record of process-based solutions is not a good one,” he said, pointing to the Simpson-Bowles commission which was unable to advance a plan, let alone get it signed into law.
“One could not fairly say that the chances of success are high. But God bless them for trying,” Blahous added.
Paul Van de Water, a senior fellow at the left-leaning Center for Budget and Policy Priorities, also has doubts.
“The question raised by the TRUST Act is whether this is the right mechanism to do it. One of my concerns is that this is a very short process,” he said, noting the five-month timeline in the legislation.
“There’s not a lot of time to think through all the important issues,” he added.
Van de Water says that even without the TRUST Act, Congress is unlikely to simply let the funds run out.
“It would be better if something were done earlier, but we’re more likely to get something comprehensive through the normal process,” he said.
Proponents of action sooner rather than later argue that the normal process will create anxiety for millions of retirees and end up costing more.
“When today’s youngest retirees turn 73, they can expect an abrupt 23 percent cut in their Social Security benefits under current law,” said CRFB President Maya MacGuineas.
“This is no longer about saving these programs for our grandchildren. The benefits of our grandparents are vulnerable,” she added.
Updated at 10:00 a.m.