I saw yet another graphic on Facebook being shared that claims that Social Security has no problems at all, and that we don’t need reforms. Unfortunately, much as I am a fan of the system and its successes, this just isn’t the case.
Until now, we’ve been running a surplus in Social Security taxes, due to the balance of young vs. retired workers. Now, we’re right at the edge of the revenue equalling the payouts. So sure, RIGHT NOW (as in this year), Social Security basically pays for itself.
The problem is, all of those years of surplus didn’t go into some “lock box.” Instead, they were spent in the general budget on wars, tax cuts, and, yes, other entitlement programs, and were accounted for by the federal government writing IOUs to itself, which are held by the OASI. This debt makes up almost a third of our $17 trillion national debt.
So now we’ve got a problem. Going forward, we will NOT be collecting enough in Social Security taxes to cover the checks being sent out. It’s simple math based on the number of workers vs. retirees, a reflection of demographics, not a political issue.
That means we will need to do one of three things: raise revenues, cut benefits, or trade OASI debt for more treasury bill debt.
To raise revenue, we could start taxing income over $113k, which is currently exempt from Social Security taxes. We could also cut the business deduction for retirement plans. Both would help, but wouldn’t fully cover the deficits in the income vs. payout coming over the next two decades. Another thing that would help would be to reform the immigration system and bring in young workers to help tip the balance of our aging demographics.
I’m a pragmatic moderate, so I’m open to ideas on how to solve this. But it’s disingenuous to use accounting tricks to state that Social Security is “fully funded” until 2033 or whenever. It’s just not. The money we were *supposed* to have sitting around for that has been squandered, so unless we do something, we are looking at several decades coming where each year, we’re paying out more in checks than we have coming in.
(Granted, if the government had been simply pulling money out of the economy to have it “sitting around,” it might actually have made things worse by creating inflation. So I’m not necessarily against spending the surpluses, though I think we should’ve spent them in investments that broaden revenues in the future, such as education and infrastructure, not wars and tax cuts.)
Numerous non-partisan studies have been done by the SSA, CBO, and CRS to shed light on these issues and compare the numbers on various proposed solutions. If you’re interested in actual public policy, don’t listen to the politicians on either side of the aisle, because both of them use jingoistic, misleading talking points to wage war against each other rather than to solve the problem.