Back in 1993, George W. Bush tried to scare the pants off of us by telling us our Social Security Trust Fund, in his own inimitable rhetoric, was “going flat busted.”
Privatize some of the new Social Security contributions. But just think, what if even one-third of an individual’s Social Security money had been in the securities market in 2008?
George W.’s statement that Social Security was fast headed toward insolvency was not merely disingenuous, it was an outright lie — and he knew it. While the system might be in need of another overhaul or tune up, similar to the one it got in 1983 that was necessitated by the effects of the prolonged inflation of the 1970s, but the fund is definitely not going broke.
Separate studies in 1993 by the Congressional Budget Office and the Social Security Trust Fund indicated that, under its setup then, Social Security would remain solvent until at least 2040. After repeated borrowings from the fund, that date has been moved up to about 2036, still nothing to panic about. By law, the Social Security Fund trustees are required to maintain a 75-year forecast to predict any unanticipated shortfalls. George W. was simply being George W.
There are several things we can do to enhance Social Security’s long-term viability after the baby boomers begin to seriously tap into it. We can gradually raise the retirement age as our general health and life expectancy increase. When Social Security was first initiated many contributors never lived to collect it and most drew on it for only a few years. But it is not unusual today for someone to draw benefits for 15-20 years. At 81, I have been collecting Social Security checks for almost 18 years now.
The cap of $106,800, the income amount beyond which no one pays payroll tax today, can be removed without working a financial hardship on anyone. And we can gradually raise the payroll deduction amount for workers and employers alike by 1.1 percent. Means testing of recipients has been suggested, but that is to be avoided at almost any cost; it is unpopular and unfair. All of these changes can be phased in over time as needed, not introduced all at once. And some of them will probably not be necessary.
Social Security was first established in 1935 by the Roosevelt Administration when an estimated 50 percent of older Americans were living below the poverty level. It has since been expanded to cover other social needs such as disability and medical care.
Privatization? We already have it today in the old IRA accounts and 401Ks to the tune of almost $1.9 trillion, roughly three times the current amount in the Social Security trust fund. The difference is that the government forces us to put Social Security money away; private accounts are strictly voluntary. And some people don’t like the government being in the retirement business, as it is, I might mention, in every other nation in the developed world.
Today, Germany has a comprehensive, actuarially-sound social security system that was first introduced by Chancellor Otto Von Bismarck in the late 19th century more than 120 years ago. Surely the wealthiest, most powerful and one of the best-educated nations on earth can muster the political resolve and unselfish spirit to preserve our own Social Security fund.
George B. Reed, Jr. is retired from AT&T and a former history teacher in the Hamilton County school system. He lives in Fort Oglethorpe and can be reached at firstname.lastname@example.org or 706-858-3501.