Can Social Security go bankrupt and stop paying pensions or benefits? It's unlikely but it will quickly have to find a way to finance itself before falling into crisis. · Notitia
Can Social Security go bankrupt and stop paying pensions or benefits? It's unlikely but it will quickly have to find a way to finance itself before falling into crisis.
Faced with the widening deficit and the budgetary impasse, the Court of Auditors is sounding the alarm on the financing of Social Security. With current debt rules, Social Security is in an impasse. Solutions exist,…
Will pensions, family allowances or housing assistance be paid in the coming years? Concern over Social Security's cash flow is increasing, and budgetary discussions are not helping the situation since MPs rejected the first part of the Social Security budget last Friday. The hemicycle expects a Social Security budget which will be passed through force, either through the use of article 49 paragraph 3 of the Constitution, or through budgetary orders.
Two unpopular scenarios, which could lead to censorship. To avoid this, the executive will try to negotiate and accept some concessions, while avoiding a slippage in the Social Security deficit. Because the Court of Auditors warned last week: without an adjustment of the accounts, “the financing of Social Security today has no lasting solution”.
“Before the long-term debt of the State causes us problems, it is the short-term cash flow (of social security organizations) which can quickly catch up with us. We are in an extremely significant risk zone,” supported the general budget rapporteur, Thibault Bazin, during a meeting organized by the association of social information journalists (Ajis). Acoss to manage short-term debt Because the financing of Social Security differs from that of the State.
“Secu was not made to carry debt,” explains Thibault Bazin. In fact, Social Security was created in 1945 after the Second World War. Economic growth then allowed the accounts to be in surplus for several years before the multiplication of deficits at the beginning of the 1960s, linked largely to the rise in healthcare costs.
It was then that the Central Agency for Social Security Organizations (Acoss) was set up in 1967, allowing the payment of social benefits while accumulating debts. This fund can thus carry out short-term loans in order to fill the gap between the payment of certain social benefits, such as pensions at the beginning of the month, and the receipt of contributions at the end of the month, but also to repay its debts. Cades is financed by a specific tax But little by little, Acoss accumulates too much debt.
In 1996, the State then created Cades, the social debt amortization fund, in order to transfer the short-term Acoss debt to a long-term loan fund at lower rates. It also decides to create a tax specific to the operation of this fund: the Contribution for the repayment of the social debt (CRDS) at an amount of 0.5% of income. Cades is also financed by part of the general social contribution (CSG).
Method: reports are grouped by the words of their headline and summary; each newsroom counts once; figures are read from the reports as published. Nothing here is written by an AI.
A financial mechanism which allows him to repay his debt as well as the interest on it and which was only supposed to last a few years. As a reminder, the State only repays the interest on its debt each year. Thirty years later, Cades still exists and must repay more and more debts.
In 2020, it had amortized all of its previous debts. But the exceptional expenses linked to the Covid pandemic, followed by numerous deficits since, have required more and more borrowing. The government therefore decided to extend its existence to December 31, 2033 by a law adopted in 2020.
Three imminent dangers Today, three imminent risks present themselves. First, the debt ceiling that Acoss can manage. The latter is set at 85 billion euros for 2027.
However, if the Social Security budget is voted on as it is presented by the government in its initial version, that is to say by reducing the deficit to 12 billion euros, the cash requirement would peak at 82 billion euros in December 2027. A scenario which would leave only 3 billion euros of margin before reaching the debt ceiling. Problem: this deficit to be achieved is very ambitious and requires 10 billion euros in savings.
Without a majority, many measures risk not being voted on. Especially since this deficit set by the executive is based on uncertain growth and payroll assumptions, particularly in view of the unstable macro-economic situation and ongoing social movements, continued the budget rapporteur. To avoid a risk of possible lack of funding, it would be necessary to “increase this ceiling”, asked Thibault Bazin.
A measure which can only be taken in the event of a voted budget, the government not being able to raise the ceiling by order. The Court of Auditors, for its part, is asking for the transfer of 100 billion euros of debt by the end of 2027 from Acoss to Cades. But such a transfer necessarily requires a voted Social Security budget or an ordinary law.
In both cases, the absence of a majority in the hemicycle makes this scenario uncertain. Then, the budget rapporteur underlines the importance of extending the end date of Cades to take over the deficits of Acoss. The latter is currently set for December 31, 2033.
Here again, this measure requires the adoption of an organic law, which is difficult to obtain without a parliamentary majority. “The future majority in place will have to move the end date of the Cades within 12 to 18 months,” he warned. Finally, Thibault Bazin is concerned about the financing of Cades in the long term.
Because it is easier to borrow on the markets when you are in good financial health. Otherwise, either borrowing rates will be higher and higher, or markets will favor countries in better financial health. “If, tomorrow, more virtuous countries ask for help from the financial markets, it could be a downfall for us,” worries MP LR.
Social contributions in the viewfinder Could it then be that social benefits such as pensions or family allowances are no longer paid? “This seems very improbable to me,” says Ana Carolina Cordilha, lecturer and teacher-researcher at Rennes 2 University. “There will be continuity of public service, but under what conditions?
", added Thibault Bazin. If the markets become more and more cautious about lending money, then interest rates could increase and Acoss will have to pay more of its revenue to interest... therefore less to social benefits.
For the researcher, the solution to financing Social Security lies in social contributions. And for good reason, the reductions in social contributions on low wages, reinforced by Emmanuel Macron in recent years, represent around 80 billion euros per year in less revenue for Social Security. “We have no study to know whether these reductions have had an impact on employment,” she says.
Especially since the Bozio-Wasmer report speaks of a “low-wage trap” mechanism, with reductions in charges which push employers to recruit at the minimum wage level. These low salaries lead to reductions in contributions and therefore reductions in income for Social Security. A feeling shared by the budget rapporteur: “There is a way to go in terms of general reductions,” he conceded.
The researcher is also exasperated by the payment of very high remuneration which escapes social security contributions, in the form of free shares or stock options. "These are forms of remuneration that did not exist at the time of the creation of Social Security." The budget rapporteur questions, for his part, several expenses allocated to Health Insurance: real estate, such as work in hospital buildings, or the financing of the School of Advanced Studies in Public Health, in Rennes.
The executive still believes in a way forward to maintain the deficit at 12 billion euros in 2027 and avoid an untenable situation regarding the financing of Social Security. “In the coming months, even if it’s the big night for no one, let’s avoid it being nighttime for some,” concluded Thibault Bazin.
