The time is ripe

SocialTwist Tell-a-Friend

We’re told the need to address our federal budget deficit (over $14 trillion and growing by $4 billion a day) is about to push us over a “fiscal cliff” that would send us back into recession or worse.

Among the many steps Congress is being urged to take to cope with this crisis is the modification of Social Security.

Does one have anything to do with the other?

Certainly not, say those who point to the fact that Social Security is a self-financing program where current workers pay withholding taxes to support current retirees.

These people also note, correctly, that those taxes have generated $2.7 trillion in surplus payments over the past few decades — money that is held in trust in the form of Treasury bills, the world’s most secure government debt.

Aha! say the others. So you admit that the so-called “trust funds” for Social Security are simply more debt! This is also true.

Every year that surplus Social Security taxes were paid in by workers, the extra funds were deposited into the General Fund (where they were promptly spent) and converted to intra-government debt, that is, debt owed by one part of the government to the other.

The surplus was thus spent and transformed from “savings” into a financial obligation. Social Security’s $2.7 trillion trust fund is actually a component of the $14 trillion national debt we are faced with today!

In addition, the payroll tax reduction holiday all workers have benefited from for the past two years, part of President Obama’s stimulus package, has speeded up the need to tap the trust fund debt to make Social Security’s ends meet.

So, while the Social Security program is not technically “at fault” for the deficit (and probably should never have generated such huge surpluses without a system to hold onto them in some way), it is wrong to say that Social Security does not contribute to the deficit.

Furthermore, even if the trust funds did consist of cash with which to pay current benefits, they would still not last us through the boomer retirement years. Without some adjustments, Social Security will only be able to pay about 75 percent of promised benefits starting in 2033.

The last time Social Security was overhauled was in 1983, when the system’s trustees informed Congress that push had come to shove, and the system was about to be unable to pay current benefits.

Why did it take such a crisis to get Congress to act? There’s a reason Social Security is referred to as the third rail of politics: no politician wants to touch it. It’s a hugely popular program that has helped wipe out formerly high poverty rates among our nation’s seniors.

And that’s another reason Social Security is being addressed in the context of the fiscal cliff. It has taken this somewhat manufactured crisis to force Congress to even consider doing what it has delayed for too long, namely, getting our national house in order.

We need to live within our means as a country. Continuing to borrow more than a trillion dollars a year from foreign governments and individuals worldwide, even at ridiculously low interest rates, is not a viable long-term strategy. Eventually, the debt will need to be repaid, and the longer and faster it grows, the more pain we pass on to future generations.

It appears the American people are finally willing, even eager on some level, to tackle our huge financial problems.

It remains to be seen just how willing we are to take our medicine and how long we will tolerate the politicians who feed it to us. But for the moment, there is a brief glimmer of opportunity. So now is absolutely the best time to address all our financial problems at once.

There are a number of adjustments that can be made to Social Security to cope with the fact that the number of workers paying taxes is declining relative to the growing number of baby boom retirees (who will turn 65 at the rate of 1,000 per day for the next 18 years).

Among the most obvious solutions: raising the age at which future retirees become eligible for benefits, raising the rate of the withholding tax, raising the level of income on which the tax is paid, adjusting the cost-of-living formula, and others.

Making gradual and relatively small adjustments to all of these things would spread the pain among workers, employers and retirees over time.

Most importantly, the Social Security trustees tell us it is possible to set the system on a sustainable course while completely protecting current retirees (and workers within a decade or so of retirement) from any of these changes.

But in order to avoid hurting current retirees, Congress must act now. Kicking this can down the road for another year or ten will ensure that we will be unable to protect those already retired.

Most Beacon readers — today’s Social Security beneficiaries and those close to retiring — thus have no reason to object to responsible adjustments to the system. The changes will not cost most of us a dime, and if you are about to say you’re fighting changes to Social Security “for my children and grandchildren,” then you’ve missed a key point.

It’s failing to adjust Social Security today that will impose unnecessary burdens on our children and grandchildren. If we leave things as they are, our progeny will have that much larger a problem to cope with, and they will be unable to avoid bearing much of the suffering themselves.

Now — while our national mood is briefly accepting of steps to help us secure the future —  is precisely the time to support changes to Social Security.