Saving Social Security

This week's annual Social Security trustee report said the program would be unable to pay full benefits in the year 2033, three years earlier than projected in the same report last year.  Even so, if nothing was done, Social Security could pay its full benefits for 21 more years and then still be able to pay 75 percent of those benefits after that. So, we're talking about heading off a 25 percent spending shortfall more than two decades away.

Still, 20 years is not far off in terms of gradually implementing changes that would provide for the program's longer-term needs while not forcing jarring changes on people already retired or within 10 years of retiring. The program's smaller disability insurance component is only four years from insolvency.

Lastly, the options for dealing with Social Security's financial needs have been studied to death and then some. There are few surprises here. And there aren't serious ideological issues either, at least not by comparison with the intractable tax-and-spend tug of war that has paralyzed Congress of late. But compromises would be needed.

The three most prominently advanced reforms are to reduce the size of the annual cost of living adjustment, raise the retirement age, and lift the ceiling on earnings subject to payroll taxes. It's now at $110,100 a year, but because high earners have fared so well in recent years, the program taxes a smaller percentage of the nation's wage income than it used to.

The Simpson-Bowles deficit restructuring plan of late 2010 included these and other suggested Social Security reforms. They provide a well-researched starting point for changing the program. The Social Security components of that plan could be peeled off, introduced separately, and subjected to extensive House and Senate hearings.

If Congress and the White House were serious, the program could be put on solid financial ground again well before the elections. And because Social Security has historically been separate from the rest of the federal budget, its needs could be addressed without opening up that much bigger can of worms.

**US News-Money

Saving Social Security

Over 50 million Americans receive Social Security benefits.  Nearly 9 out of 10 are at least 65 years of age.  Those of us who fall in this range are being asked to cover the deficit passed to us by the politicians of the 1960's and find a way to fund our retirement years without becoming a burden to future generations.

According to Scott Rasmussen, our biggest challenge is to get the Political Class to follow the lead of the American people.  Social Security, after 80 years, still remains the most lasting and popular legacy of FDR's New Deal.  Sixty Four percent of voters nationwide still view it favorably.

President Franklin D. Roosevelt explained he set up Social Security benefits the way he did by saying, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.  With those taxes in there, no damn politician can ever scrap my social security program."  It should also be noted he envisioned a program that would grow to include a combination of "compulsory contributions," supplemented by voluntary contributions made in exchange for increased benefits. 

By a three-to-one margin, American people believe that no matter how bad something is Congress can always make it worse.  With that mind set, protecting an unsustainable status quo is less risky for voters than trusting congressional reform.  Even if Congress crafted the perfect reform plan, and even if voters loved what they heard, popular support would be withheld because voters don't trust Congress. 

Accordingly, 64 percent of Americans believe that any proposed change to Social Security should be submitted to a vote of the people before it could be implemented. For more than seventy-five years, Social Security has been presented to voters as a contract between government and individual American Workers. To change a contract lawfully requires approval from both parties. If the government wants to change the contract, it should be required to get approval from those on the other side of the bargain.  With the final product being submitted to a vote of American people, the process would be protected from political gamesmanship.

When the program began only 2 percent of an employee's income was paid into the system.  The figure has risen to 12.4 percent today, a total paid half by the employee and half by the employer in to what is euphemistically called "contributions" in exchange for a promise of future benefits.  To pay all current promised benefits, Social Security trustees estimate the taxes will have to be raised to just over 14.6 percent. 

The problem is how to achieve this.  Most Democrats say all that's needed is one more Social Security tax hike and the problem can be solved.  Most Republicans say that the promised benefits need to be cut either by raising the retirement age or reducing the growth of future benefits.  A few on each side would like to go further.  Some on the left would like to see taxes raised even more than is needed to make the system solvent.  They want benefits for retirees to go up even higher.  On the right, many advocate privatization of the program so that individuals can opt out of Social Security.  Neither of these ideas are popular with voters.  According to Rasmussen, 34 percent of voters say the retirement age should be raised for future generations, 30 percent say taxes should be raised, and 15 percent want benefits to be cut.  However, just about everyone agrees that something needs to be done.

The shame of this whole problem is that it did not have to happen.  During the 1960s, when economic growth was strong and the retirement program was young, politicians missed an opportunity to address the shortfall caused by the first generation of Social Security recipients.  (The first recipient was Ida May Fuller who paid a total of $24.75 into the system and received a total of $22,888.92 in benefits)  Deceptive accounting practices were implemented by President Lyndon Johnson making it easier for those who wanted to provide short-term benefit hikes while ignoring long-term costs.  This accounting trick also helped President Richard Nixon's reelection in 1972 when he announced he had "signed legislation which constitutes a major breakthrough for older Americans, for it says at last that inflation proof Social Security benefits are theirs as a matter of right."  As we now know that was not the fact.  According to government documents, the Social Security trust fund has a long-term deficit of $17.9 trillion.  They claim the trust fund has enough reserves to keep paying benefits in full until 2036.

Sixty-five percent of voters believe individuals should have the right to select their own retirement age.  Only 23 percent disagree.  Over the long term, people choosing later retirement ages could cut the cost of Social Security nearly in half.   It is an acknowledgement that one-size-fits-all solutions don't make sense in a society as big and diverse as that of the United States. 

Statistically, most Americans support FDR's concept of setting aside money during the working years to earn benefits during retirement years.  With that said, most are not happy with the current mix of taxes and benefits.  Everyone is looking for a better way to make Social Security beneficial for today's worker.  Many, including 53 percent of seniors, believe by freeing people to make their own choices, the long-term cost of social security benefits will be reduced far more than anybody in Congress would dare propose.  On top of that, it would be accomplished with the consent of the governed and in a manner that improves everyone's confidence in Social Security.

**Statistics taken from Scott Rasmussen's book "The People's Money"