Reform Social Security now? Demographics of electorate say yes.

Republicans and Democrats seem to be talking past each other on Social Security. Republicans are unwilling to consider tax increases, and Democrats don't want to cut benefits.

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    Commisioner of Social Security Michael Astrue speaks alongside Secretary of Labor Hilda Solis and Secretary of Health and Human Services Kathleen Sebelius on Friday May 13, as the Social Security Board of Trustees announces that the Old-Age and Survivors Insurance and Disability Insurance Trust funds will be exhausted by 2036, one year earlier than projected last year.
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Social Security is in bad shape financially, and federal efforts to reform the program seem to be on a slow track – or no track at all.

Those two facts have emerged recently in separate quarters.

On Thursday, the Social Security Trustees released their latest annual report on the program's long-term outlook. They said that, unless changes are made, the program's trust fund appears likely to run dry in 2036 – a year earlier than was projected last year.

After that, tax revenue for the program would allow beneficiaries to receive just 77 cents for each dollar of promised benefits.

Even as the warning was given, however, Republicans and Democrats seem to be talking past each other on the issue. Republicans are largely unwilling to consider tax increases, and many Democrats nearly as adamant about steps that could be construed as cutting benefits.

Social Security looks like an issue that may be side-stepped in tense bipartisan talks over the federal budget and deficits.

That isn't a recipe for disaster. Annual shortfalls in the program aren't expected to exceed 0.5 percent of America's annual gross domestic product (GDP) before 2020, for example.

But some independent finance experts say delay is not a good thing, either.

"If there is one central message among all of the findings from this year’s Trustees report, it is that the time for Social Security reform is now," the nonpartisan Committee for a Responsible Federal Budget, headed by Maya MacGuineas, wrote in a report Friday.

"With each year’s updated projections we learn that we have less and less time to implement gradual changes," the report said. "Whether for the sake of the budget or for all current and future beneficiaries ... lawmakers must implement changes."

The sooner action is taken to shore up the program, the easier it will be to fix, fiscal specialists say. That's because of the aging profile of the nation, with longer life expectancies and a wave of baby boomer retirements.

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Other arguments for seeking to fast-track fixes for Social Security are pragmatic and political.

The program's looming deficit, while large, isn't as difficult to patch as the similar gap faced by Medicare. Action on Social Security could build bipartisan trust for the much more difficult task of enacting changes to the health care system. (An alternative to bipartisan deal making would be for one political party to sweep both the White House and Congress, then muster the will to pursue reforms without the ability to share blame with the other party.)

A second political factor is demographics. With the nation's average age moving higher, the politics of enacting entitlement reform may not get any easier over time.

Recently the nation crossed a kind of tipping point, with more than half of voting-age Americans now 45 or older. By comparison, that group accounted for just 46 percent of the voting-age population in 2000 and 42 percent in 1990, according to Census data compiled by the Associated Press.

Even some lawmakers who resist a hard push for Social Security reform say that acting soon would be desirable.

"It is an issue that should be addressed sooner, rather than later, to give workers time to plan for any changes," Sen. Max Baucus (D) of Montana said in a May 10 hearing on deficit reduction.

But he appeared to argue that Social Security should be moved off the table in current bipartisan budget talks that include the White House and congressional leaders.

"Social Security is not responsible for the deficits we face in the general fund today," he said. "Our deficit and debt, on the other hand, is clearly a crisis."

Sen. Orrin Hatch (R) of Utah quickly fired back, in the same hearing: "If someone wants to tell me that question [of Social Security] has nothing to do with the current deficits and debt, I think I've got a fine old bridge linking Manhattan and Brooklyn that I'd like to sell."

Social Security expenditures exceeded the program's non-interest income from payroll taxes in 2010, for the first time since 1983, the trustees reported Friday. Another deficit approaching $50 billion is projected for the current fiscal year.

Longer term, the report shows the mismatch between income and paid benefits continuing, with the gap totaling about 2 percent of taxable payroll income, and more than 1 percent of America's GDP.

Various ideas have been floated to close the gap.

A bipartisan fiscal commission, including some current members of Congress, outlined options including:

• Making the benefit formula more progressive and less generous to higher-income workers. The commission said future beneficiaries would continue to have inflation-adjusted benefits larger than those received by equivalent people today.

• A gradual rise in the retirement age, boosting it perhaps 1 month every two years (with a "hardship exemption" for some workers like manual laborers).

• Raising payroll taxes on higher-wage workers by lifting a cap that kicked in last year at $106,800 in income.

• Refining cost-of-living adjustments to be less generous.

One Democrat on the commission, Rep. Jan Schakowsky (D) of Illinois, offered an alternative plan to close the gap mostly through taxes on high-income earners.

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