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When we look at the national debt and fiscal responsibility, Social Security and Medicare are near the top of areas to address based on their high percentage of the budget. Social Security makes up nearly 20 percent, Medicare close to 13 percent.
These programs are funded by a payroll deduction matched by employers. Individuals who are self-employed are responsible for the full amounts. Deductions for these programs are viewed as a "tax" by those of us who pay them. I have also looked at these deductions as a tax, but I have changed my mind.
In the past few years, we experienced a severe economic recession, greed and lack of ethical behavior by some of those who handle our investments and the fall of the stock market. We experienced similar problems in our history, any of which could lead to individuals losing their life savings planned for retirement. We need to start viewing these as "contributions" to our Social Security retirement plan, as we view our 401(k) deductions, and Medicare as we view our medical insurance deduction.
Social Security has always been the retirement income we could count on, and we need to ensure it is solid and will be there for future generations.
I have found that the facts regarding Social Security funding are not as gloomy as often portrayed. For example, in every year since 1983, Social Security revenue has exceeded expenditures. In 2009, revenue exceeded expenditures by more than $120 billion. By 2015, we are going to face the problem of expenditures exceeding revenue. Unfortunately, this is due mainly from the federal government "borrowing" from the Social Security trust fund.
By 2015, the amount borrowed from the trust fund will be approximately $3.25 trillion. Based on these facts, I conclude that the problem is with management of the trust fund, not viability of the system, which is overall managed well.
This problem does not seem that difficult to solve. The Congressional Budget Office estimates that a 2 percent increase in Social Security contribution would achieve solvency for the program over the next 75 years. Another option is to make a more significant one-time increase to the cap on taxable Social Security income, currently $106,800, as opposed to the usual modest annual increase.
The other possibility would be that the federal government pays back the amount borrowed against the trust fund, although that would seem unlikely to me at this point.
We can make Social Security and Medicare solvent for at least the next 75 years with these relatively minor changes and provide financial and health security for all who contribute to these great programs.
We can also give our younger citizens confidence that Social Security and Medicare will be there when they retire. Unfortunately, for the most part they do not have that confidence today.
Steve Deming
Clermont