Reforming Social Security is a gigantic problem for which a fix really can't wait, as President Barack Obama correctly noted in a State of the Union address filled with lofty rhetoric and with but a few tepid proposals for fiscal reforms we need.
It will be very costly and must be done on a bipartisan basis. With the Hall County area increasingly becoming a magnet for current retirees, and many Hall citizens already or approaching retirement, we need action now.
We pay into Social Security during our working years, the funds invested in a special bond account which supposedly draws interest until cashed to pay retirement benefits. What are bonds? They're government debt taxpayers must repay. They are cashed as benefits come due. The trust fund is growing, but its growth rate is slowing dramatically. We taxpayers are paying ourselves.
Baby boomers are beginning to retire. Social Security tax collections within the next six to seven years won't be enough to pay benefits. That's when the surplus must be tapped to make up the difference. How is it tapped? The government, through higher income taxes or borrowing even more, pays its accumulated debt to the trust fund. Don't forget, the trust fund itself is debt.
Isn't paying benefits the purpose of the fund? Yes. But with benefits increased through the years without corresponding contributions and earnings needed to keep the fund solvent indefinitely, it now races steadily toward a bankruptcy now approaching at a steadily accelerating rate.
How long do we have, assuming nothing is done?
Actuaries say by no later than 2018, the fund will be taking in less than needed to pay benefits. We must start depleting the fund. By somewhere between 2042 and 2052, the fund will be empty. That's when those just now entering the full-time work force will be retiring. Taxes then being collected will be enough to pay less than 70 percent of the amount current benefit formulas require. Worse, that percentage will steadily decline.
Even that is not the worst. As the trust fund begins to be tapped at an accelerating rate by 2018, our income and/or FICA taxes must increase sufficiently to pay that huge accumulated debt or we must cut back mightily on other programs such as defense, judicial system, health, education, infrastructure, etc.
We must do something, and the longer we wait, the more expensive it will be. It's human nature to assess blame for problems. Why did our leaders let us get to this point? Didn't they know there was a problem?
The first serious warnings and reform proposals came in 1964 from GOP presidential nominee Barry Goldwater. You know how we responded to him. Next, Democrat president Jimmy Carter pushed a measure through a reluctant Congress that didn't take effect until he left office, sparing Congress political pain in the approaching election. It delayed the root problem.
The problem had regained momentum and GOP President Ronald Reagan pushed through another temporary fix. After the Democratic Congress refused to submit a plan, at its request President George W. Bush proposed a truly permanent fix and said all cards from both sides should be on the negotiating table. Congress refused to consider anything unless the vital key to permanency was taken completely off the table. Now in an even worse pickle, we're back to the root problem.
There's no painless way out. What are alternative solutions, the fairest way to share pain in this era of the "don't tax me, tax that fellow behind the tree" philosophy? The many ways all require bipartisan cooperation, compromise and fiscal pain.
Next time, we'll explore some of the suggestions and what their real-world practical financial effects would be.
Ted Oglesby is retired associate and opinion editor of The Times whose column appears biweekly on Tuesdays and on gainesvilletimes.com. You can reach him at P.O. Box 663, Gainesville, GA 30503.