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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: "homestead AT lists.ibiblio.org" <homestead AT lists.ibiblio.org>
  • Subject: [Homestead] Easy fix for Social Security
  • Date: Fri, 25 Mar 2005 07:43:30 -0700

Easy fix for Social Security

David Lazarus

Friday, March 25, 2005

The overseers of Social Security issued their annual report about the system's financial prospects the other day, and Republicans and Democrats wasted no time in trying to score political points.

The report says Social Security's current surplus will be depleted by 2041, a year earlier than previously estimated but essentially the same problem we had before -- lots of benefits being handed out to Baby Boomers and not enough cash to pay the bill.

Treasury Secretary John Snow reiterated the White House line that Social Security is in crisis. "Reform of this system, for the sake of our children, grandchildren and the financial future of our country, is a very real and pressing matter," he declared.

House Minority Leader Nancy Pelosi reiterated the Democrats' line that while Social Security faces "a challenge down the road," Republicans are creating a false sense of urgency "to justify a privatization plan that is unaffordable, unnecessary and unwise."

As usual, neither side is proposing any real solutions.

So I turned to someone in a unique position to comment on Social Security's funding woes: Steve Goss, the Social Security Administration's chief actuary, the system's number-cruncher-in-chief.

He told me this week's report doesn't contain much that's new. "On balance, there was very little change," Goss said. "The deficit is still very much the same."

But that's not to say we aren't facing a big, big problem. Social Security's funding shortfall over the next 75 years will run about $4 trillion. The deficit for its sister program, Medicare, will balloon over the same period to a staggering $28 trillion.

Goss acknowledged that it would be prudent from a budgetary standpoint to tackle both problems simultaneously. But politically speaking, that's probably not realistic.

"It would appear reasonable that looking at things on a combined basis would make sense," Goss said. "We would settle for dealing with them one at a time."

So what's to be done?

President Bush has been traversing the country trying to drum up support for his plan to partially privatize Social Security, allowing people to steer a portion of their payroll taxes into private accounts.

Whatever the merits of such a proposal, it does nothing to address Social Security's cash crunch. If anything, private accounts would only make things worse by siphoning off money from the pension pool.

Bush acknowledged this week that his plan is "not the way to fix the system" but is instead "a way to make the system better for the individual worker."

"It's going to require other matters to fix the system," Bush said during a stop in Arizona.

And though Bush won't say it, and though his Republican colleagues won't say it, and though the Democrats won't say it, there are in fact only three ways Social Security can be salvaged.

Raise taxes. Cut benefits. Or both.

I asked Goss what he thought about an appropriate remedy, but, like just about everyone else in Washington, he didn't want to be the first to bite the bullet. Besides, he was quick to emphasize that he and his team are analysts, not policy-makers.

"We do not espouse that there is a better or worse solution to the problems that we face here," Goss said. "That's the job of elected officials."

Well, what if we tried something as simple as doing away with the current cap on taxable earnings? As it stands, workers pay a 6.2 percent tax on everything they make up to $90,000 (their employers pay an equal amount).

The upshot is that someone making $50,000 a year pays the full 6.2 percent into the Social Security system, while someone making $5 million a year pays only about 0.1 percent.

Goss may not espouse a particular solution, but he has run the numbers down his slide rule. And getting rid of the $90,000 cap would have a dramatic effect on Social Security's 75-year, $4 trillion deficit.

"It would eliminate the deficit entirely," Goss said.

Better still, it would even leave the program with a surplus, at least until 2090 or so.

--The rest of the story is at:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/03/25/BUGGRBUARF1.DTL





  • [Homestead] Easy fix for Social Security, Gene GeRue, 03/25/2005

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