Posted on 12/26/2005 11:38:30 AM PST by qam1
MANCHESTER — "We have overpromised."
That's how America got into the fix that will see the Social Security trust fund run out in 36 years unless something is done, according to James B. Lockhart III, deputy commissioner of the Social Security Administration.
On a recent visit to the Manchester SSA office, Lockhart sat down with the Sunday News to discuss the coming Social Security shortfall. These days, he spends a lot of his time on the road, sounding the alarm and pushing the administration's reform ideas.
He could be just the man for the job.
Earlier jobs During the first President Bush's administration, from 1989 until 1993, Lockhart was executive director of the Pension Benefit Guaranty Corp., the federal agency that insures the nation's private pension plans.
"They used to call me Chicken Little back then," he said. In those days, Lockhart was sounding the alarm about an underfunding crisis in private pension plans.
And just as in the story, it turned out Chicken Little was right.
Last May, a federal bankruptcy judge allowed United Airlines to turn over its employees' pension plans — underfunded to the tune of $9.8 billion — to the PBGC. It was the largest corporate pension default in U.S. history.
Not all convinced But many analysts believe it won't be the last.
"I think people overpromised," Lockhart said in an interview at the SSA office. "If you look at the PBGC world, what happened was that companies . . . and their unions bargained for more than the company could afford, and the unions took it because they knew there was PBGC insurance."
Back then, Lockhart put out a list of the top 50 underfunded companies to make his point.
Now he is trying to get the public to pay attention to a similar underfunding problem with the Social Security system.
"There are some people that argue maybe Social Security has promised too much, just like the defined benefit world, and we can't afford that promise. And we can't."
Numbers growing "The number of retirees is going to double in the next 30 years as the Baby Boomers retire. You've got these pressures coming very quickly, and we need to do something.
"With Social Security, we still have an opportunity, if we take action in the next few years, to create something that will be good for the next generation," Lockhart said.
But how can the administration ask the American public to make sacrifices — work longer, accept lower benefits or pay higher taxes — when Congress essentially has raided the Social Security trust fund for years to pay for other government programs?
"It is a tough sell," Lockhart acknowledged.
Problems continue
And it may not get any easier next year, with mid-term elections coming up, he said.
Lockhart said proposed solutions to the funding problem fit into three categories: Increasing taxes to pay for benefits — that could include raising or eliminating the $90,000 ceiling on Social Security earnings; reducing benefits, such as reducing payments or increasing the retirement age; and private investment, shifting some of the responsibility for saving from the government to individuals.
Lockhart said President Bush's proposal is to allow individuals to invest up to 4 percent of Social Security taxes (which amount to 12.4 percent of earnings) up to $1,000 a year, in personal investment accounts. There are also at least a dozen proposals making their way through Congress.
Tough call Lockhart said Bush's plan favors a "very simplified" system, modeled on the Federal Thrift Savings Plan offered to senators and congressmen, to include just a few choices of bond funds or stocks in which individuals could invest. That program recently added a so-called "life cycle" fund that automatically reduces the investment risks the closer folks get to retirement age.
One problem is that Americans just do not save enough for their own retirement, Lockhart said. And he said, "Maybe part of the reason is people expect too much of Social Security."
About one-third of retirees today get nearly all their income from Social Security, he said. Part of his agency's challenge is getting out the message that future retirees can no longer expect to rely solely on Social Security to live comfortably.
Cuts are needed SSA projections show benefits would have to be cut drastically — by 26 percent beginning in 2041 and by 32 percent by 2080 — unless something changes, Lockhart said. "The worst case scenario is we do nothing about Social Security, and our kids' benefits are cut 32 percent after paying in a lifetime."
Actually, that "cut" looks more like today's level of benefits. According to SSA projections, a monthly benefit today of $972 is scheduled to increase to $1,400 for someone born in 1983 and retiring in 2045. But the system will only be able to afford to pay out $1,037 in 2045, and that's where talk of a projected 26 percent "cut" comes from.
So why not just begin now, lowering expectations of the younger generations about what their future benefits will be, instead of trying to fully fund an increasing level of benefits?
Lockhart contends there will always need to be a safety net for lower-income workers who cannot afford private investments. And for higher-income people, he said, "Their benefits will be slowed down dramatically, but they will have the opportunity for personal retirement accounts."
Down the road So looking ahead 50 years, what's the best-case scenario?
"Social Security is still there as a safety net for the American people. There is that defined benefit portion of Society Security that really protects the lower income, and above that, there is an account related to Social Security that's some form of personal account that people can control, own, it's inheritable — and it's not being borrowed by the government."
In the meantime, there is an urgent need for bipartisan compromise on this all-important challenge, the deputy commissioner contends. "There really is room for people to work together."
But that will mean taking some of the politics out of it. "And that's what I hope will happen," he said. "Lower the rhetoric and hopefully get some solutions."
Because the majority of them vote D-rat.
"That's how America got into the fix that will see the Social Security trust fund run out in 36 years unless something is done, according to James B. Lockhart III, deputy commissioner of the Social Security Administration."
This is easy. Tell every federal, state and local employee that they now have to contribute into the system. When they start to fight it, bring up personal accounts.
The other option is to give everyone exactly what state and federal employees have.
Either way...
This concept is way beyond the brilliant minds we have in Washington.
After years of maxing out my payments (TAX) to social security the day will come when the politicians will say that because I have too much we're going to reduce your social security. When they do that there will be many, many folks that will declare hunting season on past and present politicians. They better pray they have a very tight gun control laws in effect before this day comes.
My feeling and intentions exactly.
I have to disagree with you there. He was right in bringing it out to be discussed. But with the AARP crowd (who have a controlling interest with the Democrats) and the weak-kneed Pubbies, it had no chance of passing.
Like I told qam1, we Gen-Xers are hosed. And President Bush can't be blamed.
I had a look at the American Social Security system a while back and I've got to admit I was shocked at the scale of the problem/debt you guys are looking at.
...but we can still afford to nationalize healthcare right?
"Tell every federal, state and local employee that they now have to contribute into the system."
Federal employees hired after 1983 do contribute to Social Security just like - in the same percentage amount as - everybody else. They are on a different retirement system than their predecessors.
Darn straight. Plan your exit strategies.
I'm trying to save $1.5M-$2M by age 45-50 then bolt for Central America.
Duh!
-- George Bernard Shaw
57,just hit 1/2 mil in 401 k
own home and car and 27 acres in CT. have med/dent from prior employeer
No spouse or dependents
Thinking of calling it quits and drawing down
on the 401 k.Planning on SS@ 62
opinions
Insane Clown Posse..haha, I just got the funniest image in my head...
By the way, I too, am shocked and deeply saddened that the Ponzi Scheme, I mean social security isn't working.
I'm at seven figures at age 34. Maybe I'll save another meal-ticket and join you. Those days ahead are going to be indescribable.
Whoa that rules.
Keep in mind there also is a 11 TRILLION dollar annual economy underlying this. The number is huge and will be a problem but it also needs to be kept in context of size of the population and economy being serviced.
Why do they keep talking about a Social security Trust fund. There is no such animal.
"I had a look at the American Social Security system a while back and I've got to admit I was shocked at the scale of the problem/debt you guys are looking at."
Dundee,
If a private corporation were running the kind of scam that our federal government is calling a social security retirement plan, the corporate officers would be doing 25 to life at levenworth federal pen in maximum security. It's a ponzi scheme and anyone with even minimal financial skills knows it. Like so many other serious subjects, the politcos don't give a ship about the common good, only about their own re-election. President Bush is too good for this Country. If he were as small minded as his opposition, he would just resign and go back to Texas. I pray to God that he doesn't, but I wouldn't blame him if he did.
The SS program if used for "personal retirement" only as it was meant to be used for instead of a government handout for the destitute while at the same time, being paralleled with a welfare program which was created to do the same, SS would be solvent today.
Instead we have multiple government organizations stacked on top of each other performing the same function only to be categorized differently as to maintain numerous bureaucracies who function is to accomplish the same thing.
Of course in the muddled mess of bureaucracy, this gives political opportunity to the access of funds.
Bottom line, funds are being funneled to Washington to give the financially opportunistic politicians a trough for the skimming of funds, available for their own personal political concerns.
And some have a disdain for the skimming of funds by Anan and the UN.....
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