What is the Future for Social Security?
Annually, reports are released warning that the fiscal health of Social Security and Medicare are in danger.
The reasons why are simple. Both Social Security and Medicare programs are funded by payroll taxes. They are meant to be self-supporting, meaning that revenue generated is supposed to be sufficient to meet current payments to retired workers and others qualified to receive benefits. For many years, the programs operated as intended.
This is no longer true. Both Social Security and Medicare are running out of money.
Why? Because there are now too few workers paying taxes to support too many beneficiaries.
In 1945, there were forty-two workers paying into the program for every person drawing benefits. In 2018, the ratio is under three. As a result, for the past half-dozen years or so, money going out has exceeded money coming in. And the gap is only growing larger. Estimates are that money set aside (not really – it’s only an accounting entry) will run out in about ten years for Medicare and fifteen for Social Security. By law Social Security benefits will be cut drastically.
Do you hear politicians talking about those facts? Very few.
Far more typical are the comments like those uttered by President Trump during the 2016 campaign pledging not to touch such entitlement programs.
And how about Maryland Congressman Elijah Cummings, typical of Democratic politicians, who pledges on his webpage that the programs cannot be changed since they involve “solemn generational promises”? Promises that can’t be kept, however, are deceitful.
Kicking the can down the road, as the President and Congress are doing, is simply irresponsible.
There are solutions. They involve choices that are not pleasant or necessarily popular. But soon, making them will be unavoidable. The end of the road is looming whether the Elijah Cummings of Congress look that way or not.
What can be done?
Benefits may need to be reduced, but the objective should be to maintain those of current beneficiaries. Those not yet eligible can be given time to adjust their retirement expectations. The age of qualification can be extended. More controversially, consider the privatization of Social Security (modeled as a corporate 401K with investment flexibility) or limiting access based upon an income ceiling. (Social Security deductions for some would, then, simply be additional taxes not producing an entitlement to benefits.)
Certainly there are other ideas which merit consideration, as well.
Simply put, further government inaction on the entitlement crisis can no longer be tolerated.