Because there was high inflation, that resulted in a high COLA, and those benefits affect the solvency of the Social Security trust fund.
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The director of the Congressional Budget Office (CBO) reported that Social Security funds will begin to have a deficit in the year 2032which would occur a year ahead of schedule.
“Social Security’s solvency date, the trust fund depletion date, is now well within the budget window,” said CBO Director Phillip Swagel, referring to the 10-year period covered by the agency’s annual report. .
Swagel said that if Social Security funds run out and there are no changes to current law, beneficiaries would experience a more than 20% drop in benefits, The Hill reported.
In the past two months, the CBO has issued its second update on Social Security’s insolvency date, after adjusting its estimate to 2033 in mid-December.
Swagel noted that the change in Social Security’s insolvency projection had a major impact on the cost-of-living adjustment (COLA) announced last year.
In October, the Social Security Administration granted an 8.7% increase in the COLA, which was the largest increase in 40 years.given the high level of inflation.
Swagel noted that high inflation can result in higher wages, which could ultimately benefit the solvency of the Social Security system, since it depends on wage taxes.
“There was high inflation, and that resulted in a high COLA, and then those benefits affect the solvency of the (Social Security) trust fund,” he said.
However, he added: “On the network, it led to a deterioration in the system, and that moves our depletion date forward by just one year, but within the budget window.”
Swagel did not provide an update on the Medicare trust fund, which is projected to start running a deficit in 2028..
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