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."
slinks away...."U-R".
"Lockhart was executive director of the Pension Benefit Guaranty Corp".....Shoulda/coulda been captain of the TITANIC --same diff.....Bad Choices have consequences PBGC was as doomed as the ship---just a bone thrown to the public to quiet concerns back then...bankrupt now..except for taxpayers who will/are expected to bail them out..recall FSLIC?
why does the government pay for your kids to go to college?
Just remember you cannot squeeze water from a rock.
I'm thinking it's probably along the same lines as why the gubmint is allowing illegals to receive disabilty payments ... though they are here illegally and have never paid Dime One into the SS system in the first place.
If he's so good for this country, after reading this info why in the hell does he insist on making illegals eligible for SS.......even though many of them will not even pay into the system for a period anywhere near what an American has been forced to do?
We've also aborted 40+Million potential taxpayers... not to mention that women....since the 1950's have decided to have more career and less children....thanks to the Wimmen's lib movement.
BTW... wasn't the SS system supposed to be "temporary"?
Consider this: Social Security pays more than $450 billion in benefits each year. If nothing is done, by 2060, the combination of Social Security and Medicare will account for more than 71 percent of the federal budget.
If you think you'll have enough to live the way you want for the rest of your life, why not? I don't think that's enough of a pot to generate the necessary life income for most people, nor do I think it will be easy to hide that lump of cash when the Gummint comes knocking on your door in a few years to tax the money in 401K accounts BEFORE it's withdrawn.
(They will, you know. They'll have to do SOMETHING. And 401Ks being mostly repositories of Gen X and Y money, I'm betting on that being one of the first taxer targers.)
But assuming you have enough to live on, go for it! I will definitely be retiring gummint-wise at the earliest possible age, if I have that opportunity, just so I get SOMETHING back. Men get more screwed than women by SS actuarial tables, blacks more than whites, so why not get some back while you can?
Suggest you retire somewhere that pot of cash will last longer, where the cost of living is lower, but the hospitals are still decent if you have dough. Maybe the Philippines or Guatemala. Keep your money outside the U.S. and outside of your host country, too, and you'll be golden in your golden years.
"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 would worry about getting that savings taxed, too. You might consider putting it somewhere safe, outside the country.
Just a suggestion. I'm not gambling on my money getting stolen by the government when it tries to fix things. Government 'fixes' always end up meaning someone who earned their money gets it taken and awarded to someone who didn't.
Kinda sad dont,cha know.....
The more afluent a country, the lower the birthrate regardless of how it comes about.
BTW... wasn't the SS system supposed to be "temporary"?
Not that I am aware of. It was supposed to be a safety net, not the main source of retirement income.
Bush Urges Business to Protect Pensions
http://www.freerepublic.com/focus/f-news/1534428/posts
Gubmint Schemes Excluded
40 YEARS AGO, I went to work for the Social Security Adminitration and was told the same thing (the imbalances have obviously only gotten worse since)! No one wants to solve the problem because they will be "tagged" with the blame for their having been the final "messenger" bearing bad news!
I could have sworn I read somewhere that this was a temporary program to help overcome the Depression. Oh well. I've read so much lately... my poor brain is on overload. *chuckle*
36 years? I'll be 88! I'll probably need the money for viagra and hair plugs by then! Oh, wait, I'll probably be dead. (just like all the RATS in congress who killed SS reform) Never mind.
Just let people do what they want with their money. It's their money, so government doesn't need to tell them what they can and can't do with it.
That's of course how it was billed. But FDR had definitely made it clear privately that he set it up so that it could not be dismantled later on. So in other words, he used a crisis to ram through permanent programs that people would most likely not have voted for under more normal conditions.
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