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."
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.
Freep mail me to be added or dropped. See my home page for details and previous articles.
Master of the obvious.
10-15 years from now, people will look back to 2005 and see what President Bush was talking about in reference to SS and wonder how both the demonRATs and weak kneed pubbies didn't respond with a positive plan. Shame on the RATs and the pubbies have mouse nuts.
Real quick question.........If you are disabled, and on s.s., why does the government pay for your kids to go to college?
My parents told me 30 years ago not to expect SS to be there when I retired. 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.
Sorry, I don't see the problem.
All the feds have to do is raise pay roll taxes.
\sarc
..10-15 years from now, people will look back to 2005 and see what President Bush was talking about in reference to SS and wonder how both the demonRATs and weak kneed pubbies didn't respond...
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Just another massive failure of Washington to properly manage the country and work FOR THE PEOPLE -- just add it to the list of massive spending and taxation, runaway immigration and no border security, the realities of ABLE DANGER, the vile criminality and damage of the Clinton regime, 9/11, etc, etc, etc.
Happy New Year Washington!!!
I'm really happy with the superannuation system we have in Australia. I like the idea that by the time I retire, I will have enough money saved/invested not to have to rely on the government.
Plus the $800 billion + (and growing) in savings and investments does the economy good too.
But Juan Williams on Fox Sunday News just yesterday said that one of the big mistakes of 2005 was President Bush's wasting his time on SS reform. /sarcasm
Underfunding my arse!
It's the diverting of funds to other political endeavors NOT underfunding!
Keep repeating as necessary.....
They should have stuck to just "regulating" the retirement of those who pay for and depend upon their own hard earned efforts for a content filled retirement instead of taking control of it and using those funds as they deem necessary as politicians.
Bush caved way too early on this...
"But Juan Williams on Fox Sunday News just yesterday said that one of the big mistakes of 2005 was President Bush's wasting his time on SS reform. /sarcasm"
10-15 years from now people will look back and think that juan williams played shortstop for the Washington {what was the name of the baseball team that started in 2005 through 2009?}.
Williams is such a left wing nut, that if the fax at the dnc ever breaks, he won't have a thought in his empty head.
Bush didn't cave. How about holding the Weak Kneed Squishy 7 Senate RINOS and the Democrat Senators accountable for THEIR actions for a change? I know this comes as a BIG surprise to many Freepers but we are a Constitutional Republic, NOT a Presidential Dictatorship.
Exactly. They've used the SS as a slush fund for years. The chickens are coming home to roost.....and they're trying to blame it on the American people who contribute... versus the ones who utilize it most... and don't.
"I will have enough money saved/invested not to have to rely on the government."
I DO have enough money saved/invested not to have to rely on the government, but I have children and grandchildren and they deserve some return on the money that is being taken from them. However, while not required, my SS is a nice offset for my golfing habit.
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