Nearly everyone who doesn't have blinders on agrees that the country simply has to make some changes in Social Security and Medicare, and President-elect Obama has already put the issue front and center. Budget analysts often use the same word to describe the programs' financial condition: "unsustainable." Unless there are reforms in Social Security and Medicare, by 2040 or so, every tax dollar collected will be needed to pay for entitlement programs and interest on the debt. By the way, the 2040 estimate in that nifty little factoid was made before the current budgetary unpleasantness introduced the concept of a trillion-dollar-plus deficit.
Most liberals are eager to have the government take on health care reform, and believe that it will help with the costs of Medicare. But why not put Social Security on the back burner? Why should liberals who have fought so passionately to preserve Social Security as it is now be eager to take this on as soon as possible? Let's leave the substantive arguments aside for now. In terms of sheer politics, the best answer is that Social Security's strongest supporters have the upper hand right now. We're not saying that people on the left necessarily have the right answers on Social Security, but we are saying to liberals that if we were you, we'd see this as a "seize the moment" moment. Things may not get much better, for several reasons:
Reason No. 1: The public's appetite for private accounts is probably in the basement. In the Bush Administration, efforts to reform Social Security stalled because the president and fellow conservatives pushed hard for private accounts. Conservatives are uncomfortable with large government entitlement programs and see private accounts as a better long-term solution, one that lets people build their own nest eggs and bequeath leftover money to their families. For liberals, private accounts are an anathema. They see private accounts as the thin edge of a wedge that will undermine one of the most successful and popular government programs in history. Most Americans don't focus that much on the ideological battles in the debate, but the allure of putting most or all of your retirement savings in stocks took a body blow when the Dow lost a third of its value in 2008. For liberals who want to make their case that you can't depend on the stock market, and that middle class Americans need Social Security too, the timing has never been better.
Reason No. 2: We might be able to avoid a generation war. Some people who quite reasonably want to reform Social Security seem to take a lot of unnecessary glee in casting baby boomers as greedy geezers dumping unconscionable debt on the defenseless young. They often play up the intergenerational conflict angle in Social Security and fan fears among the younger generation that their Social Security taxes are going into a program that won't even be there by the time they retire.
The downside is that this old versus young rhetoric inevitably conveys the idea that someone will win and someone will lose. That scares older people who are terrified at the thought of having the financial rug pulled out from under them when they're no longer able to work. It makes younger people cynical and angry. The truth is that if we don't fix Social Security, everyone will lose, and frankly, most Americans don't see other generations as the enemy. We're talking about grandparents and grandkids here. Generally, they love each other. Soon-to-be President Obama seems to like consensus politics, so he's well positioned to tamp down the generation wars. Given his popularity and credibility with younger Americans, he can reassure them they aren't getting screwed in the deal.
Reason No. 3: It's easier than health care. No question, most Americans are really worried about health care, and no question our health care system is broken. Costs are skyrocketing and millions lack insurance. In fact, Medicare dwarfs Social Security as a budget problem, and the main reason is that overall health costs keep going up. Lots of people argue that means we should attack health care reform first, and there are good arguments for that. But consider this: compared to health care, Social Security is simple. It's just a question of how many people are paying in versus how many are taking out. The solutions are mostly straightforward. Health care, by contrast, is incredibly complicated, with lots of different factors and lots of different interest groups. Arguably it's more important, but it's also much harder to pull off. Taking on Social Security -- successfully -- would also build badly needed credibility in the government's ability to take on these "third rail" policy problems.
Reason No. 4: There is a Democratic Congress and a Democratic President. By its very nature, fixing Social Security is going to require some wheeling and dealing and compromise. Those compromises are probably going to veer much closer to keeping Social Security in its existing form if the Democrats are in power. The Democrats' numbers in Congress might get better in 2010, and then again, they might not.
There are other reasons to move sooner rather than later on Social Security. A lot of solutions pack a more powerful financial punch if we start them while most of the boomers are still in the work force. Fixing Social Security is one area where financial and benefit adjustments can and should be into introduced gradually, so a reform package could be designed to kick in slowly as the nation pulls out of the recession. The long-term payoff would still be enormous. And don't feel too comforted by those projections showing Social Security's trust fund will last another 30 years or more. As a matter of accounting, it's true. People will still be getting checks, and the system isn't going bankrupt. But the government has borrowed from the trust fund money to pay its regular bills, which means that future Social Security money is actually going to come out of general revenue. That's not a calming thought given all the country's other priorities and the huge debt we're building up as we speak.
Given the economy's fragility, we won't be balancing the budget in the next few years. Most economists caution against raising taxes or cutting spending right now -- the economy needs the money out there flowing around. But we could get down to business reaching an agreement on how to address Social Security's long-term financial problems, and phase the changes in slowly. The nation's future would look a lot brighter if we could pull this off.
From the first sentence this post is misleading. First and foremost not "everyone without blinders"
agrees with the premise of the post. That is especially true when the authors begin by joining Social Security and Medicare at the hip. These are two vital programs that both serve people over the age of 62, for the most part. They are otherwise totally independent of one another beyond the fact that Social Security benefits provide for the individual's payment of the Medicare premium. Medicare is funded throough the general budget and, therefore, may be said to be a factor in our Federal deficit. On the other hand, Social Security has a funding stream which is totally independent of the general budget
funds. What is often referred to as the payroll tax that supports SS is in fact the FICA payment that all wroking people and their employers make to the Social Security system. SS is in the black now and is projected to remain balanced for at least another forty years. At that time the SS Trust Fund will begin to supplement the expected short fall in FICA collections.
Not distinguishing these two programs feeds into the confusion over the viability of each and how each effects the over all budget process.
Social Security is in good shape. The boomers paid in a surplus so we would be able to retire, even when there are less workers, by using the surplus.
The government can come up with money for the banks, they can come up with money to pay back Social Security as it is needed in the future. They plan to tax 401ks at regular tax rates, anyway. They can use that to pay back the money they owe Social Security.
If a lot of people get laid off, that means less paid into social security but they can raise the cap to tax higher incomes.
Social Security will be there for the younger workers. They say that in 32 years SS will be paying out 78% of what it should, unless we do something beforehand. So the republican answer is to cut benefits now and raise the retirement age to 70. Many people die before 70.
If someone told you that unless you increased your income within the next 32 years, you will only be able to spend 78% of what you do now, would you panic and cut your income now? No, you would keep your regular income and look for ways to increase your income by 22% in the future.
Just a half percent increase in the social security tax will fix the 22% problem down the road.
This is a manufactured crisis designed with the end result of a privatized SS system. The truth is we have plenty of time to close this future gap in payments, and we can do so with a relatively small divergence of funds. There is no problem with Social Security.