The failure of Social Security and with it the ultimate demise of the American Dream has been widely predicted, dating back many years. Unfortunately, the oft-quoted adage “Let sleeping dogs lie” continues to be the slogan of politicians and the public alike.
After all, what we don’t know can’t hurt us, right? Wrong.
Social Security may not be dead just yet, but it’s certainly moribund. It’s just that not everyone realizes it, especially the public in general, who have been lied to and misled by our political leaders for generations.
Demographics guarantee that America’s Social Security system will eventually fail — probably sooner than thought — unless, of course, some changes are made. And soon.
At this point, I suppose I should make the proper pro forma disclosure: I have been collecting Social Security for about 17 years. The check is automatically deposited into our bank account on the third day of the month, and I readily admit that we appreciate the additional income.
In 1998, Sen. Daniel Patrick Moynihan, D-N.Y., who was widely recognized as perhaps the Senate’s leading intellectual at the time, proposed a plan for the long-term survival of Social Security. His recommendations included, among other changes, increasing the wages subject to the Social Security tax (FICA), extending Social Security coverage to all newly hired state and local employees, taxing the benefits paid to recipients, adjusting the cost-of-living percentage, reducing the amount of the FICA tax and beginning to transfer a portion of the payroll tax into personal savings accounts.
Notwithstanding Moynihan’s credentials as one of the most liberal politicians in Congress at the time, his ideas were widely criticized by many legislators, especially his suggestions for privatizing the system.
The problem is that, politically speaking, Social Security has always been the “third rail” of politics, and those who attempt to change it do so at the risk of ending their own political careers. Furthermore, over the years, Social Security has been expanded into areas that have nothing to do with retirement.
In 1939, five years after Social Security was established, payments to families of workers who died and for the dependents of retirees, such as stay-at-home-spouses, were added to the program.
Disability benefits for workers were added in 1956, and in 1965 Medicare was established.
In 1974, welfare payments in the form of Supplemental Security Income (SSI) were established for low-income seniors and people with disabilities.
The program is now paying out more in benefits than it collects in taxes, and the shortfall is expected to become permanent in 2017.
About 23 percent of the program’s shortfall could be eliminated by changing the retirement age from 67 to 68, and almost a third of it would disappear if the retirement age were increased to 70.
The so-called Social Security “trust funds” have been raided by the federal government, to the tune of $2.5 trillion. In short, there are no trust funds, and the government soon will have to borrow money in the public debt markets to cover its obligation to retirees.
Foreign workers who live in the United States have to work and pay taxes into the system for at least 10 years to qualify for Social Security benefits, just as U.S. citizens do.
In 1950, there were 16 workers for every Social Security beneficiary. By 2015, there will be only three, and about 15 years later, in 2030, the ratio will be only 2.2 to 1. It doesn’t take a mathematician or a Ph.D. to see that the contributions of just 2.2 workers will not be sufficient to support one retiree.
So, what’s the solution? Reduce costs, which can be accomplished either by changing the age for eligibility or reducing benefits, or some combination of both.
There is no other solution, and chances are those politicians who are courageous and patriotic enough to take the necessary actions will quickly be turned out of office, but they will have done the right thing.
Typically, whenever Congress is forced to deal with unpopular issues, they try to give themselves cover by appointing a commission to do their dirty work for them, which generally makes recommendations that the politicians are not courageous enough to make on their own.
— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who as lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog, Opinionfest.com.