Every day in the United States, 10,000 baby boomers reach retirement age. That, in a nutshell, is the demographic challenge facing Social Security.
Critics want to blame the system itself. They point out how it will run through its surplus funds by 2033 – and how, after that, it will only have enough to provide 75 percent of promised benefits. They depict Social Security as one more failed government program or, as Texas Gov. Rick Perry once put it, a Ponzi scheme.
But compared with Washington’s budget processes, Social Security is a model of fiscal rectitude. While Congress has failed to rein in spending and engaged in expensive off-budget wars at the same time that it was cutting taxes for the rich, Social Security has operated under a 30-year bipartisan agreement that not only fully funded existing benefits but also built up a $2.6 trillion surplus in anticipation of today’s retiree bulge.
How has Washington rewarded that fiscal prudence? Congress and various administrations have raided these surplus monies in order to make their overspending appear less egregious in the budget books.
So next time someone suggests radically downsizing Social Security or scrapping it altogether, ask yourself who should take the bigger financial hit: baby boomers and younger workers who paid into the system to build up the surplus – or the top 1 percent of Americans who benefited the most from all those tax cuts..?
It’s true that Social Security’s 30-year-old compromise was not a permanent solution. Social Security has historically been a pay-as-you-go system: the FICA amounts paid by workers and their employers exceeded the payments from Social Security for benefits for current retirees. That changed in 2010 when the Social Security Administration had to begin using the interest accumulated on the excess amounts paid into the system over the past 30 years to make up the difference between receipts and benefits.
SSA estimates that this interest along with Social Security taxes collected annually will be sufficient to fund benefits through 2020. After 2020, SSA must begin drawing on the $2.6 trillion in the trust fund by liquidating enough US Treasury bonds to make up the difference. The shortfall in monies for future retirees’ benefits, referred to as an “entitlement problem,” must come from somewhere.
The CSM wanders off into three choices. RTFA. Truly, the most just would be taking something back from the 1% who have been riding the gravy train all these years. Between Republican intransigence and spineless Democrats I don’t think that’s likely, yet. Though it’s worth the good fight.
Simply removing the cap, continuing to collect the FICA tax from folks’ earnings after they exceed $106K in gross income will get us into the 22nd Century. Surely there will be a few people with brains and courage in Congress by then.