Social Security's math problem is getting worse
One issue that's gotten much less attention than is deserves from anyone running for president is the growing crisis with Social Security. It appears the system is barreling toward a genuine fiscal crisis:
Next year, for the first time since 1982, the program must start drawing down its assets in order to pay retirees all of the benefits they have been promised, according to the latest government projections.
Unless a political solution is reached, Social Security’s so-called trust funds are expected to be depleted within about 15 years. Then, something that has been unimaginable for decades would be required under current law: Benefit checks for retirees would be cut by about 20 percent across the board.
For those who've followed the ups and downs of the trust fund, it's largely invested in federal debt. But even as the debt continues to grow, the number of workers paying into the Social Security system versus the numbers of reciepients of Social Securoty payments has rapidly diminished. And that's where the problems begin:
Social Security has a long-known basic math problem: more money will be going out than coming in. Roughly 10,000 baby boomers are retiring each day, with insufficient numbers of younger people entering the work force to pay into the system and support them.
And life expectancy is increasing. By 2035, Social Security estimates, the number of Americans 65 or older will increase to more than 79 million, from about 49 million now. If the program has not been repaired, they will encounter a much poorer Social Security than the one seniors rely on today.
Left unfixed, the consequences for future retirees -- and some today -- are potentially serious. But the fixes suggested are politically difficult:
John Cogan, a professor of public policy at Stanford, said Social Security’s fundamental problem was that benefits had been rising faster than revenue. Cuts, he said, will be unpalatable but inevitable.
“The solution, I think, is to slow the growth in real benefits promised to future recipients,” he said.
Democrats in Congress have suggested an increase in Social Security benefits, accompanied by higher taxes for the wealthy. In combination, the bill’s various measures would eliminate the program’s financial shortfall, according to projections by Stephen C. Goss, the chief actuary of Social Security.
Conservatives continue to push for sharp reductions in the size of Social Security as well as Medicare, saying the United States can’t afford the growing burden of the two “entitlement programs.”
“Entitlement programs in the United States have expanded more than tenfold since their inception, but workers are nowhere near 10 times better off as a result,” the Heritage Foundation said in a May 20 policy proposal. The conservative think tank favors cuts to benefits and siphoning money from payroll taxes into individual investment accounts. That echoes an initiative that President George W. Bush once embraced but Democrats blocked.
And so the fiscal clock continues to tick toward the time when a painful decision must be made -- and made very quickly. It's better to have the debate on what to do now, rather than wait until there's no time to left for alternatives.