After the crash of the financial markets, “privatization” is a dead letter. IT WON'T HAPPEN IN YOUR LIFETIME!
But, even if we were to go that privatization route, there is no way that we could quit paying benefits to those who are already drawing benefits.
Reduction in those benefits is also a non-starter.
TAXATION of those benefits is, politically, the path of least resistance.
There aren't enough benefits that can be taxed to fund the program. Most Americans have little or no savings. SS represents there major source of income.
For the lowest quartile of elders in the U.S., those with incomes of less than $9,390 in 2004, Social Security provided 86% of their total income on average. The second quartile, people with incomes from $9,390 to $15,199, depended on Social Security for 82% of their income. In the next highest quartile, those with incomes between $15,199 and $26,777, Social Security furnishes 58% of the income.
Only for the most affluent quarter of the post-65 population, people whose income exceeds $26,777 a year, does Social Security diminish as the mainstay of economic stability. For this group, earnings provide 35% of income, with Social Security contributing 21% and the rest coming from pensions and savings.
Among Americans 65 and older, total average income in 2004 was $23,878. But that figure is distorted by the wealth accumulated in the top quartile. The median income in 2004 was $15,199.
Your Obama like solution of taxing the rich and corporations doesn't work, because there are not enough "rich" people to support the system. And the million or more SS retirees entering this system annually are in much the same economic situation as those before them.
A greater percentage of future retirees is likely to have high incomes and substantial wealth than among current retirees, due to higher incomes and asset accumulation during their working years and continuing employment after age 65.
However, an analysis of projected retirement wealth among those aged 47-64 indicates that most retirees over the next 30 years will not be substantially better off than their parents.
No one is suggesting that. There would be transition costs, but it would be like paying your mortgage off early. The USG has about a $13 trillion unfunded SS liability. If the USG got out of the pension business, it would no longer incur future liabilities. There are a number of ways to fund the transition costs.
There are many solutions out there. Here is one from CATO, but many of the think tanks have come up with solutions. The 6.2 Percent Solution: A Plan for Reforming Social Security
In many ways, SS is easier to solve than Medicare/Medicaid. David Walker called resolving SS a part of the "low hanging fruit" that government could solve more easily than the other entitlement programs.