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Social Security Crisis

Social Security is the largest and most successful anti poverty program keeping about half of the nation’s senior citizens from falling below the official poverty line. Social Security also provides an inflation proof guaranteed annuity from the time of retirement for the rest of the beneficiary’s life.

The notion that Social Security is in crisis is phony. If the government did nothing to affect the Social Security trust fund in the next four decades, the system will still be able to pay full benefits for every expected retiree until 2042.

According to this year Social Security trustees report, Social Security can pay full benefits as promised until 2042. In addition, the projected revenue shortfall is not nearly as bothersome as privatization proponents’ claim. Private accounts would divert one third or one half of Social Security’s payroll tax income normally used to pay retirees and put in into private accounts. This, however, would not stop the money now flowing into the trust and some interest would need to be withdrawn the first year this starts and more would be needed each year. If withdrawing interest is a crisis, then private accounts will start the crisis immediately instead of in 2018. But no privatizer has said this. That is because withdrawing interest is not a crisis.

There is a need for changes to address the ultimate shortfall of Social Security but not as drastic as those promoted by supporters of privatization. So the answer to the crisis that would make Social Security solvent after 2042 would be to increase worker’s wages and to lift the cap on the Social Security taxes for the rich.  
A major lesson of this is that Social Security can be put on a solid financial footing without dramatic change. In contrast, President Bush is using the vision of an impending crisis to justify allowing workers to divert up to 4% of their payroll taxes into private, individually controlled retirement accounts. This would reduce payroll tax revenues available to cover promised Social Security benefits by as much $2 trillion to $4 trillion, transforming an imaginary crisis into a real one.

For nearly 70 years, Social Security has provided all working Americans with a basic level of income protected against inflation, financial market fluctuations, not to mention the risks of disability, losing a family wage-earner, or outliving one's assets. With a few modest changes, it can continue to deliver this remarkable security. There is no crisis.

Reform of Social Security with private accounts is an issue that shows compassionate conservatism at its best. Social Security is not going to crumble away before our children retire. It is not impossible to keep Social Security solvent for the rest of the century. If only legislators were willing to get together like adults and simply address the problem, it could be solved quickly and easily.  

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