(USA Today Editorial) The time to fix Social Security is sooner rather than later

President Obama’s budget director, Jacob Lew, said as much last week during his briefing on the president’s budget. Obama wants to find ways to “work together to find a solution to the long-term issues in Social Security,” Lew told reporters, but the program “does not contribute to the deficit in the short term.”

That would be nice if it were true. It’s not.

Social Security is a cash-in/cash-out program. It went into the red last year, when payroll tax revenue came up about $37 billion short of the benefits paid to retirees. Initially, that shortfall seemed a temporary consequence of the recession. But new projections from the Congressional Budget Office show that factors such as the payroll tax cut Obama and congressional Republicans agreed to last year mean that Social Security will instead come up short every year from now on ”” at least $45 billion this year, and a staggering half a trillion dollars over the next decade.

Read it all.


Posted in * Culture-Watch, * Economics, Politics, Aging / the Elderly, Budget, Credit Markets, Economy, House of Representatives, Office of the President, Politics in General, President Barack Obama, Senate, Social Security, The National Deficit, The U.S. Government, The United States Currency (Dollar etc)

37 comments on “(USA Today Editorial) The time to fix Social Security is sooner rather than later

  1. A Senior Priest says:

    Take the top off SS taxation.

  2. Archer_of_the_Forest says:

    Well, for someone in the under-40 crowd, I hope they fix it but realistically, I never expect to see a dime in social security.

  3. Creedal Episcopalian says:

    [blockquote] In reality, the trust fund is no more than a collection of IOUs. The money went out the door as soon as it was collected to pay for roads and bridges and aircraft carriers and food inspection and everything else the government does. While they lasted, the Social Security surpluses made deficits seem smaller. But they didn’t get saved.[/blockquote]

    What this means is that SS has gone from being a retirement savings program (albeit relying like a Ponzi scheme on a constant flow of new government compelled suckers) to a wealth-transfer welfare program.
    Thanks LBJ.
    The time to fix it was 1935. Now is the time to end it. Hopefully we can devise a soft landing for those poor rubes who relied on the word of the government.
    It would be a lot different if the program had been voluntary.

  4. David Keller says:

    #1–That would be a huge tax increase on businesses in the middle of a recession (businesses pay 1/2 of FICA), which thanks to the President’s planning in the Middle East, and his use of the corn crop to make ethanol, may end up being a depression yet. It is also penalizing successful people because our government is worthless. There are two things that could be today that I can think of right off the top of my head which would cause very little pain–and if I thought of these two just sitting here, I bet there are lots of possibilities. First is freeze benetfits for all people who have an AGI of less than $75K. The second is to reduce the payments by 5% of those over $75K. Also, we should get rid of early retirement at 62 to 64 altogrther. Will that solve it? No, but its a start. These are 2 more ideas than any body in the White House has come up with. The prez might also want to at least
    consider the suggestions of his deficit reduction panel, which he has, so far, totally ignored. And no one is even looking at the costs of SS Disability. I know from personal experience that there are a lot of people who are milking that system.

  5. Septuagenarian says:

    Social Security currently has a $2.5 TRILLION trust fund. It is not bankrupt. It is good until 2035—for nearly a quarter of a century!

    Yes, current expenses exceed current revenue. That is what the trust fund is for.

    How do we “fix” Social Security? Let me count the ways.

    1. We can reduce unemployment. That will increase Social Security revenue.

    2. We can increase the income of low and middle income workers. That will increase Social Security revenue.

    3. We can increase the GPD by maintaining, developing and improving infrastructure. That will increase Social Security revenue.

    4. We can let the temporary reduction in FICA taxes expire or even repeal it. That will increase Social Security revenue.

    5. We can raise the cap on earning subject to FICA taxes. That will increase Social Security revenue.

    Actually most of these will also help fix Medicare (that has a $300 million trust fund) and Medicaid.

    In the case of Medicaid, the Patient Protection and Affordable Care Act will help reduce its expenses.

    The condition of Medicare can be improved by eliminating the subsidies to private insurance companies offering Advantage plans, allowing competitive bidding for prescription drugs and prosecuting to the fullest (with restitution) the fraud perpetrated by businesses selling medical devices and services. But it is doubtful that we will hear any of this from the GOP.

    The “problem” with both these programs lies in the discretionary budget and the fact that since their inception their trust funds have been used as a source of borrowing to fund defense, wars, tax breaks and cuts, space, and other programs rather than levying taxes to pay for those activities for which we, the people, voted. It hasn’t helped that we seniors are living longer, the boomers didn’t make enough babies to pay for their retirement and we have had a couple of major recessions in the past decade.

    We can start by repealing the tax 2001 and 2003 tax cuts for the top 2% of the taxpayers. That will bring down the need for the federal government to borrow for current expenditures. But we also need to figure out how we are going to deal with the reduction in government revenues when millions of federal, state and local government employees are laid off or had pay substantially cut.

    And, seeing the actual problem has been 130 years in the making–it was something like 1835 since the U. S. government had not debt–it isn’t likely to be totally solved in the immediate future.

  6. Marie Blocher says:

    Not to worry. SSA’s “$2.5 TRILLION trust fund” is invested entirely, by law, in US Govt
    bonds. The very fact that SSA has had a positive cash flow until this year has encouraged Congress to spend more than
    was coming in from income taxes, in order to provide more bonds/IOUs for SSA to buy.
    BTW, it was Reagan who brought the SSA “on budget” in order to hide the magnitude of his deficits.

  7. Creedal Episcopalian says:

    [blockquote] Social Security currently has a $2.5 TRILLION trust fund[/blockquote]

    Well, maybe on paper
    http://www.actuary.org/pdf/socialsecurity sstrustfund_1200.pdf
    (sorry. link doesn’t want to format)
    American Academy of Actuaries: Social Security Reform:Trust Fund Investments

    [blockquote] Under current law, Social Security trust fund assets are invested in nonmarketable special-issue U.S.
    government securities, which represent loans to the U.S. Treasury’s general fund.[/blockquote]

    In other words, we spent it.

  8. David Keller says:

    #5–The “trust fund” is on paper. Congress started borrowing against it in the 1960’s. Congress owes the social security system $2.5T. That’s on top of the official national debt. Why can’t we cut something out of the current $3 + T budget, instead of always raising taxes? BTW the last Bush Budget was $2.66T. We seemed to be doing just fine on that measly figure. Why do we now need #3.82T?

  9. Cennydd13 says:

    Unless and until we have a Congress that will act to fix the problem, we’re not going to see a fix that’ll take care of the ‘problem’ with Social Security.

    After all, why should Congress do anything about it when [i]they’re[/i] not enrolled in it; they’ve exempted themselves, just like they exempted railroad employees, with their own retirement plan; not to mention teachers’ unions, etc.

    Where’s the incentive for them to actually do anything that might improve the situation? It isn’t there!

    Are individual retirement plans the answer? Sure……for many, but what about those who aren’t self-employed?

  10. Cennydd13 says:

    And furthermore, what about those who, because of 100% physical disability which keeps them from finding gainful employment, and who are under the retirement age…..a good many of whom are either retired from the military because of that disability (such as myself) and receiving VA Disability Compensation? Is it fair to put a cap on their compensation while knowing that they’ll never be able to work?

  11. Septuagenarian says:

    I am fully aware that we have been borrowing the trust fund to pay for defense, wars, tax breaks and cuts, space, and other programs and said so in my previous comment. The “problem” isn’t with Social Security, the problem is with discretionary spending–and the need for general revenues to repay the notes owed to us retirees.

    Cutting spending is only part of the solution. The sort of major cuts that are being proposed actually could easily increase the deficit because when you cut government spending, you also reduce revenue. Contractors who have their contracts cancelled lay off workers and cut spending. Unemployed workers do not pay income taxes. Unemployed workers do not have disposable income to spend. Unemployed workers line up for unemployment benefits.

    If we are going to reduce the budget deficits we will have to cut spending sensibly, but we will also need to increase revenue. There are two ways to increase revenue: 1) increase the GDP and consequently employment and 2) raise taxes. One way to increase GDP in to invest in things such as infrastructure and research. We might even have to borrow to do that–after all, that is exactly what businesses do when they want to increase revenue, they borrow capital to invest, to hire and to do research and development. We can also cancel the tax cuts voted for the top 2% earners. It has been demonstrated repeatedly that those cuts do not result in jobs or productivity increases.

  12. Creedal Episcopalian says:

    Fair? Social Security and it’s stepchild Medicare have become an unfunded statutory entitlement. The point being that their simple existence make the entire government insolvent, based on assets against liabilities.

    Fair would be means and ability based programs to support those who are truly in need, especially those whose problems are rooted in military service.

    Fair would also be the destruction of our government due to bankruptcy, followed by anarchy, war, and conquest, which would impact everyone equally. Sort of a national reset button.

    We can be compassionate about the less fortunate among us without encumbering the nation with laws intended to enforce socialism on it.

    Re revenue: the three presidents to increase revenue in the last half of the 20th century ( Kennedy, Reagan, and Clinton) did it by cutting taxes. government spending is by nature NOT revenue generating.

  13. Septuagenarian says:

    I’m sorry, David, but Bush does NOT get a pass. He was as big a borrower/spender as anyone–even the blessed Reagan. Bush managed to double the national debt in 8 years. And the policies of those 8 years are major contributors to the current deficits on all government levels–federal, state and local.

    Placing the blame on Social Security and Medicare (and the VA) are smokescreens generated by politicians and “conservative think tanks” to distract the clueless from the real problem which has to do with revenues not covering expenses and the refusal to do anything about the former in order to allow a few plutocrats to engorge themselves at everyone else’s expense–the same plutocrats who fund political campaigns, think tanks and the media.

    Cennydd13, when is a tax not a tax? A cap or cut on “entitlements” is a tax on those who are entitled. Or, to be specific, they are taxes levied on seniors and disabled who, in one way or another, have actually earned the pensions to which they are entitled. Certainly disabled veterans have paid dearly for their entitlement.

    Private retirement plans are another ruse of the plutocrats to steal from middle income workers. Anyone who had IRAs, 401(k)s and the like in 2001 knows full well that private retirement plans are less secure than Social Security, with all tis warts. The move to “privatize” Social Security is, in point a fact, a plan to put more money in the pockets of fund managers, insurance executives, investment house executives–money taken from the pockets of middle income workers. It is also an attempt to destroy Social Security.

  14. Branford says:

    Social Security was NEVER meant to be a “retirement plan” – anyone who relies on it for retirement has no idea how much it pays out or how much it costs to live. We’ve been saving 20-25% of income for years now in order to fund our retirement. Private retirement plans have their pluses and minuses, but at least you get to invest your own money in something – unless you think the government is better at it than you are (and just look at California’s pension funds to see that that’s not true). I don’t need the government to plan for my retirement – I need lower taxes (get rid of or raise the AMT limits) and more choice. (And a “tax break” is not a break – it is getting to keep more of your own money instead of sending it to the government). Taxes are necessary and people will always complain about them, but until and unless Congress deals with the entitlement issue, our debt will only increase.

  15. Septuagenarian says:

    Social Security and Medicare are not “unfunded.” Social Security has a $2.6 trillion trust fund that funds Social Security to 2035. Medicare has a $300 billion trust fund that funds Medicare to 2017. Yes, the government borrowed from those funds and the notes are now due in part. But that is NOT Social Security’s or Medicare’s fault; that is the fault of federal discretionary funding over several decades.

    The question is not how to “fix” Social Security and Medicare. That is a political smokescreen generated by the plutocracy that is running the country now. The question is how to fix discretionary funding (actually on the federal, state and local levels) without literally wrecking the economy. And that is going to involve spending cuts–including defense, wars, farm subsidies, tax subsidies and all those things that the politicians don’t want to talk about because that affects the plutocrats who are paying for their political campaigns.
    And tax increases. And mind you capping and/or cutting Social Security, Medicare and veteran benefits IS a tax on seniors, the disabled and veterans–who in many cases are the least able to afford such taxation.

    Clinton actually raised taxes–and managed to have two balanced budgets which the GOP quickly transformed into deficits in 2001.

    Reagan managed to cut his way to deficit budgets. The national debt as a percentage of the GDP rose sharply in the Reagan years. Quite possibly the only tax cuts that actually increased revenue were those of JFK–and that involved cuts in the top marginal rate from around 90% to 70%. Neither Reagan nor Bush were able to duplicate that feat because the top marginal rate was much, much lower.

    Oh, and there are means tests involved with Social Security. The more income a social security recipient has, the heavier the tax on his Social Security benefits he pays. And there is a means test involved with Medicare. The more income a Medicare recipient has the higher the rate he pays on Medicare Part B.

  16. David Keller says:

    #13–I wsn’t praising Bush. I was merely pointing out that we were getting by on over $1T less three years ago, and there is no reason we couldn’t do that right now.

  17. David Keller says:

    #15–I have in the back of my mind that something happened in 2001 that caused some budget changes. But, I am very curious why you would have said in post #5 that SS had a $2.5 trust fund, when you admit in #15 that you knew that wasn’t the truth. I hope you aren’t getting your talking points off some DNC website–because I know about that. And, BTW, you would be waaaaay off base if you don’t think I blame politicians for the mess we’re in. I probably blame Democrats more than you do, but the RINOs who fed at the trough from 2001 to 2008, who didn’t follow their principles and said nothing to stop the spending madness are the most to blame.

  18. Septuagenarian says:

    #17-most accounting treat treasury notes as assets. Social Security has $2.5 trillion in treasury notes. The problem isn’t with Social Security, it is with the general fund that owes Social Security $2.5 trillion. It is the treasury that is “unfunded,” not Social Security.

    #18-now it’s time for us to repay some money we borrowed from the trust funds.

  19. Marie Blocher says:

    And when you’ve been living on borrowed money for so long, it is painful to pay it back.

  20. Br. Michael says:

    19, that’s brilliant. An entity that depends on a worthless asset for solvency is in fact underfunded. I put many an insurance company into receivership that had plenty of “assets”. They just weren’t worth anything. As a famous con artist once said, “You don’t need cash, just assets.” Alan Teal was great at manufacturing assets.

  21. Eastern Anglican says:

    I haven’t done the math, so it may not work, but seeing that the debate is really centered around “I paid in, now pay me” I have a proposal that is simple and might work, although the national debt would increase, but what’s a few more billion/trillion?

    1. All workers under the age of 50 stop paying into Social Security as of this moment. Each year they must, on their tax returns, supply proof that they, or their employers, have reserved (saved) the amount equal to or more than the current Social Security “contribution.” This can be saved in gumballs, special edition Shirley Temple collector plates, put in a Hills Bros coffee can and buried in the back yard, or hid under the mattress for all I care.

    2. All workers over the age of 50, and have contributed to Social Security, receive a one time payout of the sum of their contributions adjusted for inflation with the addition of interest at the average rate of growth for a conservative investment plan (think CD) for the period of their contributions, less any payments they have received to this date.

    This would seem to be a “fair” plan. No one gets more than they contributed and would have earned with a risk adverse investment plan, since it is investment income on pre-tax dollars the payout would be subject to income taxes, and the money would be available to be reinvested as the worker saw fit. Social Security is off the books, a program would need to be developed for disability of course, but that should be easy.

    Now, I’m waiting for my check. QVC is running a special on Shirley Temple collectible plates.

  22. Eastern Anglican says:

    Is collectible or –able?

  23. Branford says:

    #22, Eastern Anglican – I would go for that in a heartbeat. But you know it ain’t gonna happen – nice thought though.

  24. Septuagenarian says:

    One obvious error in #22’s proposal is that the “adjustment for inflation” translates into capital gains and “interest” is taxable. So while the principal would be “pre-tax dollars” the increase and interest would not.

    The other obvious error is simply that this plan would not promote the general welfare–other than for the makers of Shirley Temple plates.

  25. deaconmark says:

    And then there is the fact that the money is not there to make the payment to all those folks but i guess we could ask China for more?

  26. Creedal Episcopalian says:

    Bankrupting the government does not promote the general welfare. On the contrary.
    As far as taxing interest, Washington taxes whatever they want, they can exclude whatever they want just as easily.

    Any situation that cannot go on (like exponentially growing entitlements) will eventually stop in on fashion or another. This is one we need to get a handle on before it stops by exploding in our faces, presuming it is not too late. If we don’t, those who foolishly or otherwise are relying on SS and Medicare will still wind up holding an empty bag.

  27. Eastern Anglican says:

    #25 you are correct if it is treated like a Roth IRA, but if it is treated like a standard 401k or Traditional IRA then anything over the “contribution” at withdrawal is taxable, I believe.

    I would even forfeit anything I’ve paid in to this point, as someone under 50, to be freed from the obligation of paying into the scheme if it helps solvency. At some point the gravy train must stop, and we all must pay a fare. Unless we wish to continue transfering wealth from the next generation to pay today’s bills.

    I often hear that if we had “full employment” there would be no crisis, except for the fact that Boomers outnumber the following generations and will be drawing more money in benefits than would be put in as contributions even if we had full employment of those under retirement age.

    As for general welfare, I agree with #27. General welfare is what is good for the country as a whole entity, and must never be confused with welfare generally. Of course, we could always means test Social Security, and take into account all assets.

  28. Septuagenarian says:

    First of all, the United States isn’t bankrupt. Nobody is about to foreclose on the U.S. government or the nation. It probably is prudent to reduce deficit spending (i.e., borrowing) for the long term. It is probably prudent to develop a plan, such as that proposed by the National Commission on Fiscal Responsibility and Reform in December. Trying to bring the federal budget into balance (much less generate surpluses to pay down the debt) in two years is no more realistic than a family with a $50K annual income attempting to pay off their $100K mortgage in two years.

    Balancing the budget will require, at the very least, increasing taxes and cutting expenses. But that is not the simple solution which anyone makes it out to be. One of the major factors in the current budgetary problem at all levels of government is that 9% unemployment, significant underemployment and idle productive capacity. The sorts of budget cuts that the GOP and Tea Party are pushing [b]will[/b] increase unemployment. Increasing unemployment [b]will[/b] result in reduced government revenues as well as increased government expenditures–at all levels of government. “Making government smaller” quickly translates into adding at least a million government workers to the unemployment lines. That [b]will[/b] affect government revenues, offsetting much of any “savings.” It will also have a ripple effect; those unemployed government workers will cut back on spending–they will be forced to do so. Those cut backs will affect businesses and result in layoffs in the private sector. It simply snowballs. There are probably things which can be cut, but $100 billion on the federal level, $25+ billion here in Texas and similar cuts in other states, a few $100 millions here in the City of Dallas and similar cuts in other cities [b]will[/b] have disastrous consequences.

    So that leaves us with the revenue side. Across the board tax increases undoubtedly will have a negative effect on the economy and employment. Again, how taxes are cut is important. We should have learned by now–there is ample empirical evidence–that tax cuts on the most affluent members of society do not create jobs or do very much to stimulate economic activity. The upper level tax cuts given in the Reagan and Bush years did not result in investments and job creation. “Supply side” or “trickle down” economics does not work. Repealing the 2001 & 2003 tax cuts for the top 2% income groups will not cause a double-dip recession; it will instead raise something like $400 billion more in revenue to deal with the problems [b]of the general fund budget[/b]. That was a mistake made by Congress in December. The fact is that currently wealthy individuals and large corporations are sitting on huge amounts of idle capital. Taxing those accumulations might very well encourage them to put it to work. On the other hand, cuts in “entitlements” are taxes; they are taxes on those who can least afford increased taxes. They will also have a negative impact on government revenues at all levels and, like unemployment, show up on the expense side of the ledgers as well.

    But there is another way to increase revenue–create jobs, increase worker income and stimulate economic activity. That will increase revenue even if taxes aren’t raised. Yes, in the current situation it means borrowing. We are going to be borrowing no matter what we do. But it will be like the business that deals with the revenue side of their balance sheet–how? By borrowing to invest in capital equipment, human capital and research and development with the view to increasing productivity and revenue. That is what IPOs of corporate stock and bonds are all about.

    Yes, we can shut down public education. We can make college education unaffordable for most Americans. We can let the nation’s infrastructure continue to deteriorate. [b]That[/b] will bankrupt America and turn it into a third world republic.

    If you want to see the direction in which we are headed see [url=http://eutychus.us/wordpress/]Scenario, not necessarily rosy[/url].

  29. Branford says:

    Meanwhile, the moratorium on drilling is still in place, even though ruled illegal, so drilling companies are going bankrupt or moving to South America. As we see the Middle East once again imploding, concerns on oil production play havoc with the stock market and gas prices. Yet our own oil fields, in Alaska and the Gulf of Mexico among other places, remain undrilled and idle. That would not involve borrowing by the government, that would involve private industry providing good paying jobs and a needed commodity – but that makes too much sense for the government to okay it – just keep buying oil from the Middle East and eliminating jobs here.

  30. Cennydd13 says:

    Is it time to open those fields? Yep, it sure is! And this time, let’s not give in to those who want to keep them closed!

  31. Creedal Episcopalian says:

    I’d be happy with 40 acres and a mule.

  32. Septuagenarian says:

    Sure. Drill here and now.

    BP, Halliburton, etc. would love that. Transocean would love it too, but they went bankrupt to avoid the liabilities.

    Do it on the cheap and fast. Pay no attention to the fishermen along the coast. Just rake in the dollars and run with the loot before anyone notices.

  33. Branford says:

    Come on, Septuagenaria, no one said anything about that. Meanwhile, the administration continues to defy a court order, lose jobs to other countries, and help bankrupt others, while the Chinese and others have no problem bankrolling drilling in the Gulf of Mexico. At least, we’ll do it more carefully and environmentally than they will. And the Middle East continues to burn – but let’s shut down coal, not build nuclear, and refuse to drill. That will help our economy and help make SS solvent!

  34. WarrenS says:

    Septuagenarian, I know I’m in the minority here, but what you’re saying makes a lot of sense to me.

  35. Cennydd13 says:

    There is a huge oil field in the Dakotas. Why are we not fully exploiting it yet?

  36. Cennydd13 says:

    I refer, of course, to the huge Bakken field, which holds an estimated 410 billion barrels of crude.

  37. Septuagenarian says:

    I hadn’t heard of it so did a bit of Google research. The [url=”http://en.wikipedia.org/wiki/Bakken_Formation”]Wikipedia[/url] and [url=”http://www.snopes.com/politics/gasoline/bakken.asp”]Snoopes[/url] articles, as I read them, is that maybe 2% of that estimate is “technically recoverable.” Both articles indicate that there are difficulties in extracting the oil. (There is also mention of similar fields in western U.S. with possibly trillions of barrels, but with similar difficulties.) Texas has oil that isn’t economical to extract. Its easy oil has pretty much been exhausted.

    The articles indicate that extracting the oil isn’t simply a matter of poking a hole into a pool of oil that is under pressure which then comes gushing out. It isn’t the kind of oil field we had in Texas–or, for that matter, what BP had tapped into last summer in the Gulf of Mexico–where the problem is how to stop it from gushing out once drilled into. Both articles mention “fracturing.”

    I have a little bit of knowledge about fracturing, as I live on the eastern edge of the [url=”http://en.wikipedia.org/wiki/Barnett_Shale”]Barnett Shale[/url] which contains huge reserves of natural gas. But again, this isn’t a matter of simply tapping into a gas pocket, but must be extracted by fracturing. That is being done a few miles from where I live. It is problematic. Of course, one of the problems is that much of this exists under the Dallas-Fort Worth metroplex and some folks don’t want this going on in their backyards–for a reason. That might not be a problem in the Dakotas.

    Fracturing involves pumping huge amounts of water and chemicals into the rock formation, fracturing the rock to cause it to release the natural gas (in the case of the Barnett Shale) or oil (in the case of the Bakken Shale). So there is the problem of water, which is a scarce resource here. Furthermore the water is mixed with proprietary chemicals (i.e., its a company secret so no one outside the company can find out exactly what is being pumped into the ground). But we do know that this stuff is getting into the ground water–which is a problem. (There are reports here of people in some of the rural areas nearby whose water wells have become so polluted that they can actually ignite the water coming out of them; some of those are in the courts right now.) Since the producers won’t reveal what they pump into the ground there is concern from those people involved in agriculture who rely on ground water for irrigation, etc. about what effect this will have on their operations.

    In addition, there seems to be a problem that the process destabilizes the rock formations. Earthquakes were rare around here until the fracturing operations in the Barnett Shale began. Since then there have been numerous minor tremors which have people concerned that these could become more serious as the natural gas operations continue.

    So I suppose you can blame the environmentalists. Just as you can blame the environmentalists for us not tapping reserves off the east and west coasts. And, last summer we learned in the Gulf of Mexico that those concerns are real. We are still finding crude on the gulf floor that is killing life and will have an impact on fishing for years to come.