In a rare election-year show of bipartisanship, both houses of Congress recently passed bills allowing senior citizens who keep working past age 65 to earn as much as they want without losing any Social Security benefits.
Instead of patting itself on the back for lifting this earnings limit - a necessary but hardly courageous or critical move - Congress should be hanging its head in shame for once again having dodged even a debate of the essential reforms needed to avert a collapse of the Social Security system, and prevent an increasingly likely intergenerational war.
If members of Congress could put aside the stack of positive press clips and letters of praise from senior lobbies, they'd do well to read a startlingly candid four-page pamphlet I received recently from Uncle Sam. It proudly declared that I could expect at best a zero percent return on my Social Security investment.
Thumbing through the mail, I noticed that the government had sent me a plain white and black document titled "Your Social Security Statement." Up front, in an effort to allay my concern about whether Social Security "will be there when you retire...," it said "of course it will." The caveat: "But changes will be needed to meet the demands of the times. Seventy-six million baby boomers will start retiring in about 2010; and, in about 30 years, there will be nearly twice as many older Americans as there are today."
It went on: "Social Security now takes in more taxes than it pays out in benefits. The excess funds are credited to Social Security's trust funds, which are expected to grow to over $4 trillion.... In 2014, we will begin to pay out more in benefits than we collect in taxes. By 2034, the trust funds will be exhausted, and the payroll taxes collected will be enough to pay only about 71 percent of benefits owed."
Only 71 percent? Huh?
Here was the government, openly admitting that under the best of circumstances, it'd be able to pay only 71 percent of what I was promised. I say "best" because there really is no "trust fund" - it's just an accounting fiction, and there won't be any extra money lying around to cover the admitted shortfall coming up in 14 years, much less to provide benefits 30 years from now.
In fact, many experts strongly contest this bleak picture as overly optimistic. Pete Peterson, the former Commerce Secretary and a leading expert on entitlements, sums up the problem concisely: Between now and 2040, we will have to "confront the $17 trillion in unfunded entitlement benefits that have been promised to federal beneficiaries above and beyond the value of their tax contributions."
What exactly did this mean for me? I did a little back-of-the-envelope math. Using the figures the government provided for my projected taxable earnings and benefits, I discovered that even if they paid me 100 percent of what I'm owed, I would pay in about $400,000, and - if I live to 87 - I'll get out virtually the same amount in benefits.
That's a zero percent return on my investment - at a time when the stock market is delivering historically high, double- digit returns. Who would buy into a mutual fund explicitly promising no return on investment? And that's only if the government sends me everything I'm owed - not the 71 percent it says it'll actually have to give out.
What is the implication of such dismal returns? As one author writes in Cosmopolitan, "a single professional woman born in 1970 can expect to get $1,600 a month from the government compared with the $6,665 a month she could expect if she invested in the stock market." (Based on the average 11 percent annual rate of return.) That's scandalous - $60,000 a year is the difference between a decent or difficult retirement for most seniors.
To assuage my worry, the brochure promises that "we're working to resolve these issues." Not surprisingly, I wasn't comforted.
Resolving these issues is not up to the bureaucrats at the Social Security Administration. It's the job of our elected officials.
If this election does not involve some straight talk about the coming entitlements crisis, we will be one dangerous step closer to pitting generations against each other at a time when the only choices left will be quite painful: sharp cuts in benefits, drastic increases in taxes, a steep hike in the retirement age, or defaulting on the government's promises.
Governing should be about helping the country think through tough, unpleasant choices, not happy talk and handouts. Campaigns should be about winning a mandate - not just winning. It's time for a real, honest debate about the future of Social Security. Start that, and Congress would really have something to be proud of.
*Jonathan Cowan is co-founder of the Gen-X political group Lead ... or Leave, and co-author of 'Revolution X' (Viking-Penguin, 1994). He is a visiting fellow at Harvard University's John F. Kennedy School of Government.
(c) Copyright 2000. The Christian Science Publishing Society