Former West Palm Beach Mayor Lois Frankel emailed last week to wish Social Security a happy 76th birthday. I couldn’t fathom how I got on her email list, or why she sent it to me instead of the Social Security Administration. Then I read further and gleaned that she was merely venting against Allen West, whom she hopes to unseat as U.S. House District 22’s representative. In her words, “it’s time we reject the radical plans to destroy Social Security by tea party conservatives like Congressman Allen West.”
Perhaps Lois didn’t get the memo: Social Security is already being destroyed. If we don’t take steps to correct its downward spiral, its benefits won’t be available to our next generation. Further, the more time we waste discussing the issue, the more radical those corrective steps will have to be.
On March 24 of last year, The New York Times reported that Social Security will pay out more in benefits than it receives in revenue. The Congressional Budget Office didn’t expect us to reach that point until 2016. However, the date we actually reach the threshold is less important than the fact that everyone knew it was coming. Nonetheless, people like Lois continue harping, “Don’t touch Social Security.”
According to government figures, if everything remains the same, by 2035, 2.1 workers will be supporting each Social Security recipient. Scarier yet, the government got the “negative cash flow year” wrong. Who can say government pencil-pushers didn’t do the same this time?
On Page 7 of the federal report, “The Future of Social Security,” the Social Security Administration emphasized that the Social Security program is unsustainable in the long run and that “Social Security is a pay-as-you-go retirement system — the Social Security taxes paid by today’s workers and their employers are used to pay the benefits for today’s retirees and other beneficiaries.” This is in stark contrast to the commonly-held belief that what we pay into the system is “socked away” for our own future use.
Even President Obama’s Federal Reserve chairman, Ben Bernanke, recognized the unsustainability of Social Security in its present form. Speaking before the Washington Economic Club in 2006, Bernanke pointed out that the aging of America will necessitate higher taxes and decreased benefits. He concluded, “A failure on our part to prepare for demographic change will have substantial adverse effects on the economic welfare of our children and grandchildren and on the long-run productive potential of the U.S. economy.”
What about privatization? On October 8, 2003, the CATO Institute published its findings on the subject in a report titled, The Better Deal: Estimating Rates of Return under a System of Individual Accounts.” It concluded, “Clearly, investment in private capital assets provides a higher rate of return than can be earned through the current PAYGO Social Security system.” Recognizing this, George W. Bush wanted to make Social Security privatization the hallmark of his administration.
Columnist George Will ignored the crisis aspect, but emphasized the personal freedom that privatization offered. In a Washington Post, column, he opined that privatization would create true personal wealth for each worker — wealth that can be both managed and passed from one generation to the next.
Observing the government do nothing on this issue is like watching a runaway train race toward a pedestrian standing in the middle of the tracks. He can jump one way or the other, but if he doesn’t do something, he’s going to get nailed. Ten years from now, will Lois Frankel be singing “Happy Birthday” to Social Security, or will she be whispering, “Rest in peace”?
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