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Social Security Crisis No More

Social Security is America’s promise that those who work hard and play by the rules will retire with dignity. While in need of strengthening, the “three-legged stool” for retirement, made up of Social Security, private pensions and retirement savings, is the strongest retirement system in the world. And the centerpiece, the foundation on which the retirement system is based is Social Security.

Social Security was originally designed to supplement, and was structured to resemble, private-sector pensions. In the 1930s, all private pensions were defined-benefit plans. The retirement benefit was based on a worker’s former wage and years of service. In most plans, after 35 years of service the monthly benefit, received for life, would be at least half of the income received in the final working year.

From its commencement, social security has been a system of social spending by present-day workers to take care of present-day retirees and the disabled. As people had fewer and fewer kids or no kids at all, it was no longer viable to pretend that retirees could depend on their own children for retirement income. And despite all the talk of crisis, it is perfectly reasonable to expect future workers to fully take care of future retirees.

The Social Security financing shortfall is relatively modest and certainly manageable without drastic changes. The white-hot rhetoric coming from the White House on Social Security does damage to Social Security and to the American people. According to the Social Security Trustees, workers in the future are going to be far richer than today's workers, and retirees will be receiving far higher benefits.

Social Security always has been a pay-as-you-go system. Current benefits are paid out of current tax revenues. Opponents of Social Security claim the system will then be "bankrupt." But if the trust fund goes to zero, Social Security will not shut down and stop paying benefits. It will simply slip back to the pure pay-as-you-go system that it was before 1984 and continue to pay current benefits using current tax revenues. Even if the trustees’ worst-case assumptions come true, the payroll tax paid by workers would need to increase by only about 2%, and only in 2030, not today.

Remember even if benefits in the future are slashed by twenty percent, those retirees will still be receiving more benefits than today’s retirees. Or even if an average worker in the future had to pay an additional ten percent of their income to cover retiree benefits, they will still be.
Thus, simply put, there is no social security crisis.

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