Why Social Security must change now
True, it is not in as dire shape as Medicare. But this bedrock program is still a concern, and in 2010, it actually ran a deficit.
Don’t mess with Social Security. That was the clear message of Senate majority leader Harry Reid and other Democrats when they staged a rally on Capitol Hill on Monday. But Congress must mess with it in order to save this bedrock program and help head off a looming debt crisis.Skip to next paragraph
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A group of bipartisan lawmakers in the Senate is looking at Medicare, Medicaid, and, yes, Social Security, as federal entitlements that must be reformed in order to confront the nation’s building debt problem. House Republicans, too, say the nation’s retirement program can’t be exempt from change.
But Senator Reid is digging in his heels: “Let’s look at Social Security when it’s a problem; today it’s not a problem.” He and others point to the program’s $2.6 trillion trust fund, which is not expected to run out until 2037, at which point benefits will be reduced by 30 percent. The program is neither a debt threat today, nor a deficit buster, defenders argue.
It must be underscored that Social Security is an effective antipoverty program. Millions of Americans, especially low-income seniors, depend on these checks. The program needs to be protected.
Admittedly, the outlook for Social Security is not as dire as for Medicare, the health benefit for seniors. Medicare’s costs are expected to explode along with retiring baby boomers and skyrocketing health costs. The growth of Social Security and Medicaid, which serves the poor, looks more like a gentle rise over the next 60 years.
But just because Social Security is less of a fiscal threat than Medicare doesn’t mean it’s of no concern, or that reforming it should be put off.
Lawmakers had to shore up the 76-year-old program in 1983. For the first time since that repair job, Social Security is running at a deficit – an estimated $41 billion in 2010. That means that revenues from FICA taxes did not cover benefits paid to recipients.
The deficit drain has begun. Demographics will only make it worse. In 2037, when the trust fund is exhausted, the projected deficit is $329 billion.
As for that fat trust fund, it’s filled with special government bonds that are effectively IOUs. Over the years, the fund has bankrolled other government spending, and what’s in the “lock box” are merely promises to pay.
One can argue, as those who think everything is fine do, that the trust fund bonds have the full backing of the US government. But that does not change the fact that redeeming them will require the government to borrow, tax, or cut, even as the nation’s fiscal health deteriorates.
The encouraging thing is that Social Security is much easier to fix than Medicare – although politically it’s just as hard because of its popularity. The correction is a matter of solving the demographic equation; whereas bringing Medicare under control means getting on top of rising medical costs, whose causes are multiple and complex.
A number of modest solutions have been put forth to repair Social Security, including several by President Obama’s bipartisan commission on deficit and debt reduction.
The commission’s report – supported by a majority but not all of its members – suggested gradually raising the retirement age to 69 by 2075 to account for longer life spans. This would not affect current seniors.
The report also recommended that the most fortunate Americans should contribute more and receive less. It pointed to the need to actually strengthen support for low-income recipients.
Now is the right time to face Social Security’s weaknesses. Americans want Congress to get serious about the debt, which includes today’s crisis and the even bigger one that’s coming as the population ages. Retirees deserve a sound Social Security system.
Meanwhile, the debt debacle in Europe shows how quickly financial markets can frown on overspending. Making progress on entitlements now, including Social Security, would send a signal to the markets that the government is taking steps to get its fiscal house in order, just as its citizens have been.
“Unless we act ... immense demographic changes will bring the Social Security program to its knees,” the president’s commission wrote last year. That’s the cry to heed. Not Senator Reid’s appeal to do nothing.