Social Security is running out of money! It will go broke, and very soon! We must fix the problem! We'll have to privatize the funds! The people know better than government how to invest their money! We'll still have to reduce benefits, but this will help in the long run!The trouble is, it's just not true. Well, the giong broke thing is true, if you consider 2052 to be "very soon." But the rest doesn't play.
See, Right now Social Security runs a surplus. That means, in 2005, more money comes in than goes out. This will be the gradually diminishing case until 2018 or so, when the Baby Boomers begin to retire and collect, and then the program will run deficits until 2052, and will offset the costs using the substantial ($1.7 trillion) surplus built up between 1935 and 2018. The surplus will run out in 2052 (or thereabouts). The money brought in then will only be able to cover about 75% of the level of current benefits. And this is all based on maintaining current benefit and Social Security withholding levels (that's 7.5% of your income up to a $90,000 cap). If benefits were reduced even the slightest bit, or the cap raised by an amount consistent with inflation levels, this would put the program into solvency into the 22nd Century.
As we are seeing an America more prosperous and healthy than at any time in history, it could just be that retired persons will rely less on Social Security income than in the past, and also that they will be living longer, and working longer, and that "retirement age" has already or will eventually reach 68 or 70 years. Remember, Social Security was initially created to alleviate a crisis of poverty among the elderly of America, and has succeeded immensely in that charge. That's why the system is faced with budget issues in the first place. But Social Security is still enormously essential to ensure that the U. S. does not revert to the poverty of the past.
Now, it doesnt take much calculation to figure out that very small changes now will make great advancements in Social Security solvency in 2052 and beyond. See, as currently run, even when the money runs out, Social Security revenues are still able to cover 75% of the costs in 2053, 2060, 2090, and beyond. So changes now only need account for that other 25% that is still well off in the distance. We're talking about benefit reductions or withholding increases of about 2% over current levels. Less than it costs to feed Sally Struthers.
But the folks at the White House, and their right-wing news cronies would have you believe that the sky is falling. They say the government should not be allowed to invest the people's money. But Social Security is not an investment strategy, that's what a 401(k) or a Roth IRA are for. Social Security is a societal safety net, that ensures that old people don't have to scrounge through garbage cans for clothes and food. If it costs me 7.5% of my income (matched by my employer), most of which I get back when I'm old and hungry, I'm okay with that. Besides, it's two relatives I don't have to care for (and soon four more, as my parents and in-laws are all near 60). And all my older relatives have retirement investments in addition to Social Security, because they knew forty years ago that they would need more to live beyond a basic existence in the golden years. And I invest for retirement too, because I know I want more out of retirement, and the chance to leave something for my kids, if I'm gone. And not in lieu of Social Security, but in addition to it. So I've got my alloted piece of the social pie, and my extra slice I planned for before I came to the picnic.
And how unreliable is Social Security as an investment (which, remember, it's actually not)? The surplus $1.7 trillion (that's $1700 billion) is held in the form of specially issued Treasury Bonds. They make a modest return, but are backed by the United States government, so they are as good as gold. But the White House crowd wants people to believe that these are just IOU's that have no real value. Here's the disconnect: if these "IOU's" are as potentially worthless as the administration claims, then Americans should have no faith in the U. S. economy, because the U. S. would have to default on $1.7 trillion in bonds for this to be true. And if that happens, the last place I would want my money is in the stock market.
Which is where they propose the privatized Social Security money goes.
I know, in the title of this post I likened the Bush Social Security plan to a shell game, but I was incorrect. It's really Three-Card Monte.
