Social Security: Congress has four years to fix us
Before disability benefits get cut. Retirement savings good til 2033. Tax hikes or benefit trims needed, soonest.
Social Security: Congress has four years to fix us
Joseph N. DiStefano
Social Security can keep paying old-age checks without trimming benefits or raising taxes until 2033, but Congress has just four years to prevent cuts to Social Security disability checks, writes the system's Board of Trustees in this annual report.
Democratic and Republican leaders both say the government needs to rejigger taxes and benefits to get the Baby Boomers through retirement, by raising payroll taxes, limiting eligibility, or trimming future benefits. But they have so far failed to produce compromise plans, as the gap between future benefits and liabilities keeps growing.
Comments (5)
Back in 1983 the politicians told us to swallow hard, take a big Social Security tax increase and your "Trust would be solvent for 75 years." Blessed by that pillar of truth, Alan Greenspan, and subsequently protected in Al Gore's "lock box" what happened???— Wilhelm Von Humboldt- The 75 year solvency statement is misleading and almost worthless. It is worthless because the system can have a 75 year solvency while it continues to get worse.
This statistic counts revenues but does not factor in the cost of the promises that go with collecting the revenue. For example, my son born in 1993 showed 49 years of revenue from projected payroll taxes. The figure does not include any cost of his benefits because they fall outside the 75 year window.
According to the SSA, the 75 solvency shortfall is 8.6 trillion but the real shortfall is over 20 trillion. That means that for every dollar of assets in the system the government has made 10 dollars of promises.— Joe The Economist 
Joe, you have got to kidding. The Social Security Trust fund has over $2TRILLION SURPLUS, right now! How do we run through that in 4 years. The tax loop hole for FICA needs to be closed now. It allows avoidance of payments on capital gains, partnership dividends etc and only covers a small percent of the the total income of individuals. Imagine the income tax stopping at $107,000 and letting the rest go untaxed!
Here is a small excerpt from the Columbia Journalism Review about the one sided gloom and doom narrative about Social Security that fits with the rush to AUSTERITY ECONOMICS that is tearing the Eurozone apart.
http://www.cjr.org/campaign_desk/how_the_media_has_shaped_the_s.php?page=1
"To be sure, Social Security is not in perfect financial health. But the fact is, the program can pay full benefits until 2036, and three-quarters of the benefits after that without new revenues. Many experts believe small fixes like lifting the cap on income subject to payroll taxes—$110,100 for 2012—will make Social Security solvent for decades. But that option is not on Washington’s table, nor has it been discussed much in the press. Why not? Because it doesn’t fit into the doom-and-gloom narrative that has proved politically expedient to tell?"- The source you are citing is a bit rusty. The latest Trustees Report was much less favorable than what you are suggesting.
There is no credible research that suggests lifting the cap will solve anything. CRS and CBOs report are based on the idea that taxes do not affect the economy. We can agree to disagree on the merits of that research.
Separately, you have to not only remove the cap on the taxbase, but insert a cap on contribution credit as well. Raising the cap by itself may actually reduce the life-expectancy of the Trust Fund.
In short it isn't discussed because it isn't credible. I challenge any number of people to write contrasting articles for our site. FixSSNow.Org.— Joe The Economist - Joe, Your statement is valid, but the numbers are wrong. 2033 is the insolvency of both disability and OAS. "Considered separately, the DI Trust Fund becomes exhausted in 2016 and the OASI Trust Fund becomes exhausted in 2035" Let me know if you want a source on that.
Your larger point is very valid. 2016 isn't the break year. It is 2024 when medicare goes insolvent. All three of these programs are connected because they draw on the same revenue base. If we raise payroll taxes for medicare, it is impossible to also raise them for OAS or Disability.
If we raise general taxes, it pulls resources away from deficit control.
So we aren't four years away from a problem....
— Joe The Economist
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Joseph N. DiStefano blogs about the latest news in the Philadelphia business community and elsewhere. Contact him at 215-854-5194.
Reach Joseph N. at JoeD@phillynews.com.
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