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I listened to an interview with a former Social Security deputy commissioner, and one point stuck with me: Social Security isn’t going to vanish, but Congress still needs to deal with its funding problem.
I’m getting close to retirement, so I’d like to know what to plan for. I can run the numbers with a smaller benefit. What I can’t do is guess which changes Congress might make—or whether they’ll wait until the trust fund is nearly depleted before making them.
I know neither party wants to be the one proposing higher taxes or changes to benefits. But the longer they wait, the harder the fix becomes. I’d rather hear the options now and have time to adjust than get a last-minute deal after years of reassuring headlines and political finger-pointing.
What would a fair compromise look like for current retirees, people nearing retirement, and younger workers? Do you think Congress will act before it has to? Does anyone think Congress will act early? Or is this destined to be another deadline-driven deal?
Jeff
Here is the interview if you want to watch. Social Security Will Change—Here’s Who Gets Hit First | Jason Fichtner
Congress isn’t going to act before 2029 (for obvious reasons). To avoid reductions in current benefit payments in 2032 will require a very significant quick injection of added revenue. How who knows. One short term fix may be to transfer funds from the disability portion of the trust to the retirement side which has been done before.
But the real solution must be increased ongoing revenue in excess of immediate payments to replenish the trust reserve again and pay full accrued benefits.
To be fair the money needs to come from current retirees, workers and employers. To me that means modifying future COLAs, increasing the payroll tax on both worker and employer with perhaps an extra 1/2 to 1% on employers. We could also raise the taxable wage cap, but only if there are some additional benefits accrued on the higher earnings taxed. Raising the FICA tax is a form of forced savings in my view.
After all the fixes are done, additional changes should be based on the annual actuarial determination of what is needed to keep the program sustainable. No more Congressional involvement, the program runs on automatic based on changes in demographics and/or future changes in benefits. Never go through this again. What it all costs is real, current and visible.
Private pensions are required to maintain adequate levels of funding, why not Social Security?
Social Security may be the only issue that gets older voters to stop automatically voting for incumbents. We don’t usually do politics here, but Social Security is a political problem that needs solving. Someone’s ox is going to get gored, and I hope that our usually feckless politicians spread the pain around, so we all share in the results. Poor people or those who are on the edge usually get screwed. I hope that doesn’t happen with Social Security reform.
The shame is that there is no reason anyone should be gored, gradual modest changes over a decade would have and should have avoided any crisis. Americans don’t want to face the truth and politician fear voters if they tell the truth.
Even now many Americans think the problem is because Congress borrowed trust funds “and didn’t pay it back” or many people are illegally collecting benefits. It’s tough to cope with such ignorance.
If you want detailed discussion about SS and the facts from the Trustees and more, you might want to view the Social Security section of my blog Quinnscommentary.net.
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