Proof That Social Security Is NOT In Trouble
May 04
It seems a day doesn’t pass when one government official or another isn’t quoted in a major news outlet warning of the need to “fix” Social Security and Medicare. In fact, predictions of Social Security’s impending insolvency have become so common that most people seem to take for granted that the Social Security Trust Fund will be depleted well before they retire, and that they certainly shouldn’t count on receiving a Social Security check when they retire. However, predictions of Social Security’s demise are not only exaggerated, they are, in fact, based on outright misinformation and lies.
The truth is that, according to the nonpartisan Congressional Budget Office, Social Security is fully funded until 2052, at which point, assuming no increase in productivity growth rates or dramatic demographic shifts, benefits would need to be reduced by a whopping… 20%. In the alternative, payroll taxes could be increased from their current 15.3% to 20%, or, more likely, a combination of both tactics could be employed. In any case, projected increases in standard of living suggest that the net effect on future generations of either lowering of benefits or increasing payroll taxes will be negligible at best. But if this is the case, why on Earth are so many politicians, journalists, pundits, and Wall Street types calling for urgent action to “fix” what simply isn’t broken? With all the issues that they SHOULD be addressing, why do both parties keep obsessing over making changes to Social Security?
There seem to be two main reasons for this wave of Social Security fixation. The first is that politicians and other civic leaders are subject to the very same misinformation as the general public. Many seem to actually believe that the trust fund is in imminent danger, or, worse yet, that the trust fund itself is nonexistent. But as the head of the C.B.O. has asserted,
“There is a trust fund. Statements that there is no such thing as a trust fund are overstated. It has in it U.S. Treasury securities. They are backed by the full faith and credit of the U.S. government, and they will not in fact be defaulted on.”
In other words, all funds received in Social Security taxes in excess of payment to retirees are invested in treasuries, much like the retirement funds of our most affluent citizens. There is, arguably, no safer place for funds to be invested. And what is the alternative? To stuff cash into a giant vault? Or to roll the dice and invest it in the private economy?
There is a second reason why so many leaders are calling for “reform” of Social Security is far more insidious. Many Wall Street moguls have long been lobbying for either investment of the trust fund into stocks or elimination of payments to retirees altogether. Those with this agenda are fond of lumping Social Security in with Medicare, labeling both as endangered and counting on the press to miss the distinction between the two plans. So far, their plan seems to be working - very few in the media have taken note that, while Medicare is in deed in dire trouble, with costs expected to TRIPLE in the next few decades, Social Security is well funded and robust.
Most people calling for a Social Security fix cite demographic changes and the drain on the system from retiring baby boomers, but the problem with Medicare and Medicaid has nothing to do with demographic shifts. No, the problem with these programs is the rapid nationwide escalation in health care costs. As Douglas Holtz-Eakin, former head of the C.B.O. under the Bush Administration put it, “The central domestic policy challenge of our time is rising health care costs.”
Politicians should be focusing like a laser beam on overhauling the medical system, not wasting time fixing a Social Security system that isn’t close to being broken. Of course doing so would involve taking on massively powerful interest groups, ranging from Big Pharma to the AMA. The question is, do they have the guts to do so?