It seems like we’ve heard this before. There is a crisis, a crisis that threatens us all. We have to deal with it right now, or in the future we will all suffer consequences. This time around, we must act now if we are to save Social Security. After all, it is on the verge of bankruptcy. Will we be too late to save this failing system?
Instead of taking the administration’s statements at face value, let’s review what they are saying about Social Security. President Bush says that if we do nothing, by 2042 Social Security will be “bankrupt,” meaning that unless something changes retirement benefits will have to be cut.
According to the Congressional Budget Office, a nonpartisan group that crunches these sorts of numbers for Congress, today’s 25-year-old would receive $19,700 at retirement instead of $20,500 in benefits, or a cut of $800. The Congressional Budget Office says that under Bush’s proposal this retiree would receive $13,097. That is a difference of $7,403, or about nine times larger than the cut that would happen if we do nothing. Some say the shortfall will be worse than this, but no one inside or outside of the Bush administration will admit the shortfall will mean more than a 25 percent cut in promised benefits by 2042. In fact, Social Security Administration analysts project that even if nothing is done the Social Security Administration will still be able to pay out 68 percent of promised benefits 70 years from now.
President Bush wants to cut guaranteed Social Security benefits, believing that private accounts will make up the difference. Instead of the government making up the difference in benefits, market forces will. And they might, but only if investment accounts grow at a rate of over 3 percent per year. If they do not, then people may make out worse than they would have if nothing were done.
All this will not come cheap. Over the next 10 years, the Bush administration plans to borrow $754 billion in order to finance the changeover. That might not be enough. On Fox News Sunday, Vice President Dick Cheney said that trillions more might have to be borrowed.
Let’s review again. The gang that knew exactly where weapons of mass destruction were now knows there is a Social Security crisis. They say they know how to fix the problem: let the market take care of it. They are so confident in the market that they are going to cut guaranteed benefits in order to balance the Social Security trust fund, preparing to borrow trillions in order to pay for the changeover.
What will the Social Security trust fund deficit be by 2075? According to University of Pennsylvania’s FactCheck.org, it will reach $3.7 trillion. The Bush administration will borrow trillions now in order to deal with a deficit of trillions later. I’m not an economics major, but this makes no sense to me.
I also find it interesting that few people mention the reason the Social Security trust fund exists in the first place. In 1983, a committee chaired by Alan Greenspan looked into the long-term viability of Social Security. The worry, then as now, was that when baby boomers reached retirement age, there would not be enough money coming into the system to pay for their retirement. The proposed solution was simple: have the boomers pay for their own retirement by a large raise in payroll taxes that would then be put away to meet future obligations. The trust fund is there in order to make up for a long anticipated shortfall in the early to mid 21st century. Yet now that the time comes for the trust fund to be used for its intended purpose, we are being told the system is in crisis.
Social Security has helped cut the poverty rate for seniors from 35 percent in 1959 to 9.7 percent in 1999. It is one program that, despite some flaws, is doing its job. It may need fixing, but it does not need the sort of overhaul proposed by the president. We could limit or tax benefits on wealthy retirees. We could increase the amount of income subject to payroll taxes to more than the current limit of $90,000. We could do a great many things to keep Social Security solvent so that it is able to meet its long-term obligations. Social Security is a safety net designed to help protect seniors form economic hardship, but President Bush’s plan will expose seniors to such turmoil. That is reason enough to reject the administration’s proposals.
William Lodge can be reached at email@example.com.