That's what my Pop always said.
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."
I'll be there one day, hopefully before Congress can vote to confiscate it all.
There is no money in the SS Trust Fund, just non-marketable T-Bills, which are really IOUs. SS is a pay as you go system. Beginning in 2008, the SS "surplus" will start declining and in 2017, we will start paying out more than we are taking in. In order to meet those obligations, we will need to borrow more money and/or cut spending or programs.
I am a little concerned that the Deputy Commissioner of SSA is still maintaining the charade of a SS Trust Fund.
I don't know how old you are however if you have spent more than a decade working or running a business, you would get (or have been) teary eyed looking at the ratio of input of SS funds compared to the available funds at retirement on a personal basis.
Just a little ditty to contemplate the next time a politician requests you to be complacent when paying your "fair share".
"All the feds have to do is raise pay roll taxes."
not a half-bad idea.....so long as you mean to tax the jobs that have been exported with a hefty import tax on services rendered overseas and imports of foreign merchamdise.
That's what my Pop always said.
Lest we forget the increase in retirement age that has been bestowed upon us via SS also.
48 million Americans receive Social Security benefits, including 33 million retirees, 7 million survivors, and 8 million disabled workers.
By 2030, there will be 70 million Americans of retirement age--twice as many as today.
Social Security faces an unfunded liability of more than $12.8 trillion.
Keep working. You'll be bored to death. I'm 72 and still working full time. Don't plan on stopping until I can't go any more.
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
That's correct. The full retirement age today is 65 years and four months. It rises by two months every year, gradually increasing to age 67 for people born after 1959. You can still retire at age 62 with reduced benefits.
The infamous P.L. 98-21, (H.R. 1900) Social Security Amendments of 1983-Signed on April 20, 1983 reduced benefits and increased the retirement age and SS taxes. I suspect that we will see a similar compromise by both parties as the day gets near again when SS can no longer bring in sufficient revenue to pay benefits. The Dems will not pursue personal accounts because they want SS dependence and the issue for political reasons. Medicare is in worse shape.
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
"Dingy Harry and his Insane Clown Posse" bump
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
Well you just found out what the X stands for hmmm?
What ever happened to states rights and a "closer to home" resolution to domestic issues?
For Washington to be disputing the weighing of foreign and defense spending with domestic spending appears to be a contradiction to the idea of "states rights" and promoting the removing of local jurisdictions and taking the say of the voters to a higher level of irrelevance.
What's next, the bowing to the UN for direction?
Started an IRA at the age of 16 and still going strong. A shame that more people do not understand that the future is up to them.
I too started saving early (22, right after college). But I do worry that, at some point, those of us who planned ahead will be taxed or penalized (through benefit reductions) because we are "better able" to support ourselves.
I also think its going to worse than the author is saying. After all--THERE IS NO TRUST FUND. It's only a set of IOUs that are going to have to be paid back through more deficit spending. Plus Medicare will soon be running a deficit and the prescription drug promise will just be more dirt on the grave. Lastly, there will be all those companies trying to dump their pensions on the PBGC. Before long, we will have 100% of the Federal budget going to old people. It's gonna get scary.
Yeah--you don't have enough.
whats enough?????
re: your tagline---the people?
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