THE ISSUE... Social Security Needs Fixing, and Soon
September 13, 2006
America stands on the brink of an epic election. And the 2006 mid -term elections are only a few short weeks away. Many of the current candidates are long on campaign rhetoric but, indeed, are short on solutions. The American public is wiser than that, and our nation demands better. Americans are looking for concrete proposals to solve current issues and useful strategies to unlock future possibilities.
Winning an election is based on solid fundamentals. We believe that candidates must possess a mental construct based upon solid principles and beliefs. Unfortunately, this is not always the case. A candidate who speaks in broad generalities and provides only pabulum of platitudes is not what elections are about. Presenting and voicing only a litany of problems and pointing to the flaws of others is not sufficient and will not do. What is required are profound ideas and a proposed strategy, a plan, a workable formula for dealing with the major issues. That is what Americans expect.
There are a number of hard hitting issues that are on the forefront in the minds of most Americans. As we see them, several of today's major national issues are: homeland security and winning the war against Islamic radicalism and terrorism, the economy and economic growth, appointments to the judiciary, immigration, health care, and safeguarding Social Security. During the next several weeks, your columnists will address a number of these issues.
Today's column addresses the urgent need for Social Security reform. The System needs to be fixed, and soon. Either the current Congress, many of them are running for reelection, or the next...most of who are running for election... must deal with this pressing matter.
The system has been in service, uninterrupted for 70 years. For today's generation of senior citizens, the system is strong and fiscally sound. But the younger generation of citizens is seriously concerned and rightly so. With the aging population, and a steadily falling ratio of workers to retirees, the system is on a course to eventual bankruptcy.
In 1950, there were 16 workers to support one beneficiary of the system. Today, there are only 3.3 workers supporting each beneficiary. In 2008 baby boomers will begin to retire. Further, over the next few decades, people will be living longer and the numbers of benefit recipients are scheduled to increase steadily. By the time today's youngest workers turn 65, there will be only 2 workers supporting each beneficiary. And 13 years from now, in 2018, the government will begin to pay out more in Social Security benefits than it collects in payroll taxes. Thus, by the year 2027, the government will need to come up with an extra $200 billion a year to keep the system afloat. The President has suggested two changes that would begin to address the problem: first, to update the Social Security benefits schedule and, secondly, allow workers, IF THEY CHOOSE, to invest in Personal Retirements accounts.
The next Congress, if not this one, must indeed deal with this serous issue. Any reform which does not include private accounts will be obsolete within a decade. To create a system with long term solvency, personal accounts must be embraced. Poor Americans live shorter lives then wealthier ones, and under Personal Accounts, that wealth could be passed on to the younger generation to break the yoke of poverty.
The Bush Administration has proposed a means whereby workers could, if they so choose, divert about a third of their share of Social Security taxes into personal retirement accounts. Individuals would be able to keep everything they set aside in their personal accounts, plus the increased rate of return they will realize on their investment. It is the individual's own account or that of the individual's estate. Thus, if this were approved, younger workers would be able to divert part of their Social Security payroll tax contributions into personal investment accounts which would allow the investment to grow more than if it had remained in the traditional system. We embrace this proposal and encourage the Congress to act accordingly.
In addition to the above, your Columnists suggest an additional innovative reform. If we as a people are genuinely interested in assisting the lower income and poor, we should seek to abolish or reduce the regressive Social Security tax on those individuals. A wise friend reminded us of this injustice and its related disincentives to hire poor and low income peoples. We suggest allowing the first 10,000 income dollars, as a starting point, to be tax free for both the employer and employee. This would greatly increase equity and most importantly provide a strong incentive to hire low wage people. This incentive would dramatically increase low end wages and decrease un-employment among the most economically fragile. These costs could easily be funded by raising the top contribution levels, reducing high earners pay-outs, or rising the retirement age. Think about it, this is an idea which merits serious consideration.
In conclusion, we recognize that the Social Security needs immediate fixing. Michael D. Tanner of the Cato Institute stated it so well when he said "Social Security reform plan should restore the program to solvency, not just short-term actuarial solvency, but permanent, sustainable solvency. Still solvency is not enough. Instead, Social Security reform should strive to build the best possible retirement system for our children and our grandchildren. Yet when it comes to retirement, Congress forces all Americans into a one-size-fits-all, cookie-cutter retirement program." Tanner and the Cato Institute know what they are talking about.
We believe that the Social Security's current situation should not be seen as either a crisis or a problem, but as an opportunity to build a new and better program, based on the fundamental American values of ownership, inheritability, and choice. And "choice" is the essence of America. That is how we see it FROM OUR PERSPECTIVE.