Just listened to the Diane Rehm show on my car radio, and the consensus view was that our current budget problems are best dealt with by modifying a social insurance program that is solvent for another 30 years or so. It's infuriating the way Beltway pundits lump Social Security in with "the entitlements problem" and generally ignore the huge cost savings to be realized in Medicare reform. Specifically, a public option, as in "Medicare for all" would save huge amounts of money. But either way, we have an aging population, and we will need more revenue to pay for it. Obsessing on benefit cuts, while the income cap on payroll taxes exempts the wealthy from paying the same as everyone else, is the height of myopia. Here's the view from twelve years ago:
Last week the President stopped off here in Tucson to explain just how he intends to do that. The good news is, it could have been a lot worse. Clinton has been flirting with various "privatization" plans, but had to back way off in the face of opposition from labor unions and the AARP. The bad news is, with the GOP still running Congress and the Great Compromiser back in the saddle, the final product could still end up pretty bad.
We have been the targets of several years of unrelenting propaganda from right-wing think tanks aimed at convincing us that the Social Security system is in crisis. These efforts have been largely successful, especially amongst many young people, who are convinced that there will be no money left when it's time for them to retire. This is absolutely not true.
Even if nothing is done, the system is solvent for another 33 years. With very minor tinkering, it would be set for 75 years. All these drastic predictions about the system are based on some extremely unrealistic projections. The privatizers are using a forecast that predicts the US economy will grow at about 1.5% over the next 75 years - less than half the rate over the last 75. Just for comparison, the economy grew at 6.1% last year.
The privatizers are claiming that you could get much greater returns by investing your funds in the stock market, which has been booming the past decade or two. But guess what? If the economy grows at that sluggish a pace over the next 75 years, the market is gonna tank, too. And if the economy does well, then there's no problem with the Social Security trust fund. The real reason these rightwingers are agitating to get these funds into the stock market is so their clients on Wall Street could start taking a cut out of all those dollars.
They'd like us all to start setting up "private security accounts," from which various brokers would of course subtract their fees. This would create billions of dollars in new overhead costs (in contrast, overhead in the current system is less than one percent). But another thing they're not telling you is that this is gonna require a lot more taxes for the next 50 years or so, while they transition in their new system. That's because current FICA taxes have to go to pay current retirees - so setting up new accounts will need a new flow of funds.
Even if you forget all the new overhead and fees, the first folks to benefit from these accounts will be born in 2028, and would retire in 2095. Between now and then, the rest of us will be twice as screwed.
The fact is, Social Security ain't broke - so don't fix it. It's been one of the most successful anti-poverty programs in history. Without it, the poverty rate among the elderly would be 50%, instead of the current 11%. And because Ronald Reagan signed the largest tax increase in history (adjusted for inflation) in 1983, the SS fund is currently running huge surpluses. In fact, without that surplus, the rest of the budget would still be in deficit.
For 30 years, the government has been borrowing from the trust fund to pay for corporate welfare, weapons systems and other boondoggles. Now the President wants to use the "surplus" to pay it back. That's a good thing. But that money has been extracted from working Americans by way of one of the most regressive taxes on the books. If anything needs to be reformed, it's the cap on payroll taxes that exempts any income over $72,600 - and all unearned income. Some 70% of the population pays more in FICA taxes than they do in income tax - that's the real crisis.
For more information, contact the National Committee to Preserve Social Security and Medicare at 202-216-0420.