The nonpartisan Congressional Budget Office has sounded the alarm once more. The CBO reminds us that the current bipartisan consensus of enacting zero reform to Social Security means that the Old-Age and Survivors Insurance Trust Fund program is projected to hit insolvency at the start of fiscal 2032, or in fewer than four years from now (the start of fiscal 2032 is likely the end of calendar year 2031). By law, the OASI trust fund — otherwise known as Social Security’s retirement program in common parlance — is legally prohibited from borrowing by the Social Security Act. Thus, the CBO ascertains that if Washington’s bipartisan consensus gets its way and refuses to raise the retirement age or enact any other embarrassingly overdue reform, federal law automatically mandates that Social Security benefits are slashed across-the-board by 7% in fiscal 2032 and then by an average of 28% annually from fiscal 2033 to fiscal 2036.

Although budget wonks have been warning politicians for decades that Social Security’s looming insolvency has always been inevitable, Washington has actively worsened the program’s financial health. On his way out of the Oval Office, Joe Biden made sure to sign one more insult to the people in the form of the ironically named Social Security Fairness Act. With only 20 brave Republicans willing to vote against the bill, the bipartisan SSFA unilaterally allowed government workers to double-dip into the program, tacking on another $200 billion shortfall to the program overnight. Now, the CBO concedes that the OASI trust fund’s bankruptcy is coming one year earlier than the office projected in 2025.

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The coming crisis is not just about the 28% benefit cut itself. After all, Social Security spending as a share of GDP will still increase from 5.2% today to 5.9% in a decade (and that’s up from a 4.5% average over the past 50 years). Spending on Social Security Benefits in absolute terms will increase by 66% over the next decade, rivaled only by Medicare’s projected 88% explosion.

Already, more than $1 of every $2 collected by the federal government goes to Social Security and Medicare. By the time insolvency hits, 60% of all federal revenue goes to Social Security and Medicare.

No honest Keynesian believes we have much room to raise taxes to fill the shortfall, even if that shortfall — a continued generational wealth transfer to the wealthiest generation in history from a shrinking generation of workers who cannot afford to keep births from outnumbering deaths starting in 2030 — were one worth filling. Individual income tax revenue amounted to 8.7% of GDP last year, and corporate income tax revenue another 1.5%, both significantly higher than they were before President Donald Trump passed the 2017 Tax Cuts and Jobs Act.

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On top of the political headache of the impending 28% benefit cut, the real crisis is that the bond market has zero confidence that the next bipartisan consensus to emerge will be to simply borrow new debt to backfill the insolvency gap. And based on current actions by Congress, neither should Treasury’s investors have any confidence. Just earlier this month, a bipartisan group of senators sent a letter to the Social Security Administration haranguing the SSA for not being even more generous in sending free cash not to retired government workers, but to their unemployed spouses.

The grand irony of all of this is that the sort of austerity that Milton Friedman dreamt of is the overwhelming base case. If Congress tries to get cute and authorize new borrowing to prevent the 28% benefit cut, our annual trillion-dollar interest bill on the national debt will multiply, as will mortgage rates, credit card borrowing costs, and all the other interest rates that the Federal Reserve no longer controls thanks to Washington’s profligacy.

Any politician who does not endorse a proactive reform to Social Security’s spending should be understood as endorsing austerity to the highest measure, a 28% automatic benefit cut, and a permanent impairment of the American Treasury and consumers’ ability to borrow for the century to come.

© Washington Examiner