Sometime in 2018 the Social Security Administration is to begin printing this on each benefit statement: “By 2034, the pay roll taxes collected will be enough to pay only 77% of scheduled benefits.” I don’t know if this is a political thing or not. But the situation is real.
Some good people are adamant that Social Security does not contribute to the deficit. Perhaps from some accounting viewpoint it doesn’t. But as a practical matter it does. The Social Security Trust Fund holds $2.8 trillion in U.S. treasury bonds. Every time the Social Security Trust Fund redeems one of its treasuries to pay benefits, the Treasury goes to the bond market to borrow that money. Benefits need to be adjusted and the tax base broadened.
Ronald Reagan’s 1983 reforms were based on Social Security taxing 90% of our country’s income. We presently tax only 85%. To return to taxing 90% of incomes, Social Security income caps need to be raised to about $190,000. To Republicans who object, this was Reagan’s plan.
The benefits to the top tier of wage earners would grow more slowly. The benefits to the lowest wage earners would grow faster. This would achieve a highest to lowest ratio of 2.1/1 by 2050. Ratio is currently 3/1. The standard retirement age would be raised (again) to 69 by 2075.
People have told me, “That is my money. I have paid into it all my life. Nobody is going to take away what I have coming.” That is the same sentiment and expectation I have had all my working life. But make no mistake about it, Social Security is a pay-as-you-go system. We can’t change now how it was set up. It needs to be made solvent and sustainable over the long term.
Congress knows someone will have to do something, eventually. But their attitude is, “Just not them. Not just now.” I say nonsense. I say now.