Few issues get my blood boiling like the government-mandated Ponzi scheme known as Social Security. The system in its current state is simply unsustainable because of demographics: there are fewer and fewer workers supporting each retiree. The Social Security Trust Fund will start cashing in government bonds (that must be paid out of the U.S. Treasury) around 2010 and the entire Fund will be depleted around 2035. Every solution to avoid this unsavory fate involves significant sacrifice by all Americans, whether through reduced benefits for seniors or sharply higher taxes for workers.
So ignore Edith Fierst’s article in today’s WashPost titled “Easy Fixes for Social Security.” Whenever articles like this appear, the “fix” is always – always – increasing payroll taxes to cover the projected shortfall in the system:
The deficit can be remedied with a few discrete changes in the program, all of which are surprisingly easy to understand and accept.To be fair, Ms. Fierst has one proposal to slow spending:
The first is to raise the earned income on which the Social Security payroll tax is assessed and benefits are paid.
A second proposal is to keep the tax on estates worth $3.5 million and more and dedicate the proceeds to Social Security.
A third change would be to bring all newly hired public employees under mandatory coverage of Social Security, thereby reducing the long-range deficit by about 0.22 percent of payroll.
The final change would be to adopt the more accurate formula for cost-of-living increases designed by the Bureau of Labor Statistics and in use by many programs. Using that formula would reduce the long-range deficit by 0.3 percent of payroll.Got that? Zero-point-three percent or one-sixth of the projected payroll shortfall. She then dismisses the notion of raising the retirement age because it would be painful to seniors. She also dismisses private accounts for a whole series of petty reasons. For example, she notes that private investments could go down in value while ignoring the fact that a conservative investment in secure T-bills would result in a return much higher than the current projected rate of return of 1% for most young workers. And why should America burden young workers, who are usually trying to raise a family, when most of them already pay more in payroll taxes than income tax? From the Social Security Administration’s web page:
Some people believe that Social Security taxes should be raised so that all future benefits could be paid. They want to increase the current combined payroll tax rate, which is now 12.4 percent. Critics argue that payroll taxes are already very high, having been raised 20 times since the program began, and that almost 80 percent of workers already pay more in payroll taxes than they do in income taxes. And they point out that eventually Social Security taxes would have to be raised by about 50 percent to pay for all benefits owed.Let’s get a couple things straight: reducing benefits for seniors would be unpopular and political suicide for anybody in Washington. But increasing taxes on younger workers (again) is grossly unfair and threatens the prospects for the next generation. Finally, shifting a portion of the Social Security system to private accounts would be wildly expensive, although it would expand the “ownership” society and (maybe) ultimately reduce the overall burden on the SS system. All the other proposals are just nibbling at the edges. No matter what, there are no “easy fixes.”