Posted on 03/27/2008 1:01:40 PM PDT by BenLurkin
For a brief moment this week, the housing crisis took a back seat to another once hot-button economic issue: the financial health of Social Security.
The Social Security trustees issued their annual report Tuesday, and it showed how soon the system will run into trouble.
The problem is well-known: Funded by taxes on workers' wages, the Social Security system currently takes in more funds than it has promised to pay out to retirees. And the federal government has been borrowing those surplus funds over the years. But that surplus is shrinking, and eventually the system won't be able to pay out all of the promised benefits.
The trustees estimate that by 2017, the funds going in to Social Security will be less than the benefits promised.
The government will cover the difference by paying back the surplus it borrowed plus interest, which could be a problem, given other big-ticket items that lawmakers want to fund in the next few years. Namely, reforming the Alternative Minimum Tax and extending some or all of President Bush's tax cuts.
By 2041, the trustees have estimated that the trust fund - that is, the money the government owes the system - will be tapped out and in-coming funds would cover only 78% of promised benefits.
"Whereas Social Security has been helping to prop up the budget, it will become a diminishing resource," said Robert Bixby, executive director of the Concord Coalition, a deficit watchdog group.
And the effects of that decline will be felt during the next president's term.
Where the Candidates Stand
Shoring up Social Security generally involves raising taxes or reducing benefits.
Democrats typically have opposed benefit reductions while Republicans have opposed tax increases.
Republican presidential candidate John McCain and his Democratic rivals Hillary Clinton and Barack Obama have all said that they would seek bipartisan solutions.
But the few proposals they have floated so far are either too vague or don't fully address the long-term funding concerns, Bixby said.
Clinton, for instance, has pledged to stop the practice of the federal government borrowing the surplus paid into Social Security.
That's a noble idea, said Bixby, but difficult to achieve because the government relies on the money. In addition, it doesn't address the longer-term shortfalls.
Clinton also has indicated that she would not favor eliminating the cap on the amount of income subject to the Social Security tax. Currently, the first $102,000 of wages are subject to the 12.4% payroll tax. Typically, half the tax is paid by workers, and the other half is paid by employers.
Obama, meanwhile, has said he wouldn't favor increasing the retirement age or cutting benefits, but he would consider increasing the amount of wages subject to the payroll tax. He would favor doing so by subjecting all wage income to the payroll tax with the exception of income that falls within what's called a "donut." A donut protects a certain portion of income (e.g., between $100,000 and $200,000) from the payroll tax and could be phased in over decades.
That solution alone will raise some revenue but won't go far enough to fully establish long-term solvency, Bixby said.
Plus, it's not clear yet whether Obama, in exchange for raising the payroll tax burden on very high-income taxpayers, would also support increasing the benefits paid out to them when they retire. If so, that would negate to some extent the additional funding raised by his donut proposal.
So, too, would his plan to create a credit worth up to $500 per working person ($1,000 per family) to offset the Social Security tax on the first $8,100 of earnings. The credit would start to phase out for people with incomes between $150,000 and $200,000.
McCain has said his preference is to shore up funding by reducing growth in benefits without raising taxes. But just how that's done isn't clear.
Unlike his Democratic rivals, McCain has expressed support for individual investment accounts as a way to augment Social Security benefits. But his campaign has indicated he no longer favors diverting payroll taxes from Social Security to fund those accounts - a centerpiece of President Bush's Social Security reform proposal.
That's an idea Democrats might find more amenable, but "the question is, how will you fund them? You have to find a new source of revenue," Bixby said.
One option is to create a tax incentive for people to save in those accounts and another is to mandate that a small percentage of payroll tax (on top of the amount paid into Social Security) be deposited in the add-on accounts.
Either way, that's a potential cost to government coffers, too.
Pay everyone back their money and then close it down.
I couldn’t agree more. I’m turning 32 next month and it really galls me to know that it won’t be around when I retire, and I won’t get the money back that I’ve spent into it. Don’t be fooled into thinking that your employer really matches your contribution, either. Their burden is distributed onto your pay and benefits so that they don’t really have to suck it up as a loss.
The money has been spent. Future politicians of both parties will just opt to deficit spend and borrow from China or some other country, just like we are now. The Boomers are in control, and their sense of entitlement trumps all other political and philosophical beliefs.
i’ve paid for twenty years. all i want is OUT!
screw the old people, they made this mess let them eat it.
But it’s not there. They’d have to float a third set of bonds to the Chinese to pay us. By the way, does anyone know how to say Euthanasia in Spanish?
Your SS contributions don’t belong to you. The Supreme Court ruled in Flemming v. Nestor that there is no legal right to Social Security benefits. Source: Flemming V. Nestor, 363 U.S. 603,
I'm currently 32, and wish I could escape these God-awful socialist programs. I'd be more than willing to forfeit what I've paid into socialist security thus far, if they would just not take any more from me.
Of course it’s been spent.
I don’t care if they have to sell Yellowstone Park to the Sultamnate of Oman. I want my money back.
Man, I was hoping congress could debate steroids in baseball again...or maybe add five more miles on the border fence to keep illegals out....or find one more charge to dump on Scooter Libby...or spend an entire month dealing with Sesame Street Muppets.
You bet. If they can pay billions in bribe money in the form of foreign aid to almost every country on earth, they can pay us all back back, with interest, then shut it down.
Otherwise, I see lots of anger, torches and pitchforks.
Social Security has been a LOOMING PROBLEM for YEARS and YEARS and YEARS!!!!
“I’m currently 32, and wish I could escape these God-awful socialist programs. I’d be more than willing to forfeit what I’ve paid into socialist security thus far, if they would just not take any more from me.”
You guys crack me up. You get about double in age and you’ll be thanking your local democrat and rhino for these socialist programs.
I could go for that, too. The money that I would no longer be paying into SS could go into my 401(k), where it would make far more money.
I just think of it as a fancy name for more federal income tax. I’m not planning to ever see any or it and it certainly isn’t calculated into my retirement planning.
Ponzi scheme bump.
The politicians who ran this racket deserve to spend the rest of their days in subsidized housing known as federal prison.
Gee, I thought everyone loved us? We, merry band of typical
white baby-boomers.
Means testing means that we won’t ever see a dime of our money.
Only way to do away with this f***ed up system is to phase it out.
Here’s my plan:
Effective January 1, 2009, form age brackets and % pay as follows:
If you are 55 or older on 1 - 1 - 09, you get 100% as promised.
If you are 50 - 55 on 1 - 1 - 09, you get 80% as promised.
If you are 45 - 50 on 1 - 1 - 09, you get 60% as promised.
If you are 40 - 45 on 1 - 1 - 09, you get 40% as promised.
If you are 35 - 40 on 1 - 1 - 09, you get 20% as promised.
If you are 30 - 35 on 1 - 1 - 09, you get 10% as promised.
If you are 25 - 30 on 1 - 1 - 09, you get 5% as promised.
Under 25, zero.
BUT, what this would do is create a finite # of future recipients, and that pool would be shrinking every year.
Continue to tax people and companies as is now, but as fewer people get paid, shift the money into private accounts that we can own.
The $$ would have to go into approved accounts just like IRA’s are regulated now. And there are some minor other disputes here, like disability, but SSI is mostly a fraud anyway...and ..
Anyway, 20-30 yr olds will reach retirement age with a HUGE account that they could then draw from as they wish since it would be their $$. Also, this money could be passed on making future generations even less dependent on the govt.
Whaddya think???
The socialists want you to overthrow the constitutional form of government. So angry mobs with pitchforks and torches angry over a lifetime ripoff will “get the job done” that the socialists couldn’t accomplish 40 years ago.
Tell ya what, lets make 2 lists, you can be on the one that says you're happy to forfeit everything the corrupt government has taken from you, and I'll be on the list that wants the tens of thousands of dollars they've confiscated from me, paid back.
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