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June 19, 2013
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 The Reason for the Rush to Change Social SecurityPosted on Feb 18, 2011By Ruth Marcus Procrastination is rarely a cost-free strategy. That is true when it comes to fixing Social Security—as much as the Obama administration and, even more forcefully, its allies on the left may wish to believe otherwise. Their “what’s the big rush?” message goes like this: The retirement program isn’t really contributing to deficits in the short run. Indeed, its finances are healthy enough so that it can continue paying all promised benefits for more than two decades, until 2037. Even then, if absolutely nothing is done, Social Security would be able to pay about 75 percent of promised benefits. So where’s the fire? Here it is. Last year, for the first time in its history, Social Security paid out more in benefits than it received in payroll taxes. The recession caused this shortfall: Seniors who lost their jobs chose to start collecting benefits earlier, while payroll tax collections fell because of high unemployment and lower wages. As a general matter, it’s true—although less than previously—that Social Security is not a cause of short-term deficits. In fact, until last year, the surplus in the Social Security trust fund masked the true size of the current deficit. But the 2010 experience is a hint of things to come—soon. By 2015, Social Security will be increasing the deficit every year, not obscuring it. Still, that’s not the real problem, or the strongest argument against thumb-twiddling. The reason is that making changes now will make it easier to protect the very people that the “Social Security’s not a problem” brigade say they care about. The Social Security trustees make this point every year in their annual report about the system’s finances: “If action is taken sooner rather than later, more options will be available and more time will be available to phase in changes so that those affected have adequate time to prepare.” The challenge isn’t huge, but it is significant. As a useful paper by Charles Blahous and Robert Greenstein for the Pew Fiscal Analysis Initiative explains, when the trust funds run out, the gap between Social Security revenues and benefit payments will be 1.3 percent of the gross domestic product—about one-fifth of the projected deficit then. Yes, Medicare and Medicaid present a bigger challenge, but the Social Security shortfall represents a significant slice of the deficit. Unlike the health programs, whose solvency ultimately depends on the uncertain enterprise of slowing cost growth, the potential fixes to Social Security are both obvious and reliable. If you raise payroll taxes, you know more revenue will come in. If you reduce benefits, you know costs will go down. Advertisement The cost of delay is measurable. In fact, the Congressional Budget Office measured it. “With every year that goes by,” it found, “larger changes would be needed to create a balance over the next 75 years between scheduled revenues and scheduled benefits.” Take the example of raising the payroll tax rate by 2 percentage points. If the increase were to start in 2012 and be phased in gradually over 20 years, the trust funds would not be exhausted until 2083. But dawdling for a decade would make it significantly harder to achieve the same result: The tax rate would have to go up by 2.6 percentage points rather than 2 points. The same is true of benefit cuts. Imagine that benefits were cut 15 percent for new retirees beginning in 2017. That would keep the trust fund solvent until 2076. To achieve the same result but start a decade later, benefits would have to be slashed by one-third more—20 percent instead of 15 percent. Dealing with Social Security now would require less in the way of punishing tax increases or benefit cuts. It would give future retirees more time to plan and save. It would reduce the burden placed on younger workers to shoulder the cost of sustaining the program. The procrastination caucus ought to embrace these outcomes, not forestall them. Ruth Marcus’ e-mail address is marcusr(at symbol)washpost.com. © 2011, Washington Post Writers Group  Previous item: Why Do They Hate Social Security? Next item: The Submerged State New and Improved CommentsIf you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy. |
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By blahblah, March 5, 2011 at 5:10 pm Link to this comment
(Unregistered commenter)
mrs. know-it-all strikes again…
Report thisBy TrishaJ, February 20, 2011 at 7:32 pm Link to this comment
Why is the idea of raising the percentage of the Soc.Sec. tax repeatedly suggested rather than the solution of removing the cap on the amount of salary on which the tax is paid?
Since people who earn smaller salaries are paying this tax on everything they earn, why shouldn’t those who earn more pay this tax on everything they earn?
This change would solve the problem without increasing the tax rate, without reducing benefits, and without raising the retirement age.
And why do people continue to talk about Social Security as though it is some lavish gift from the government? It is an insurance program that people pay into for years. If the government had kept these funds in reserve, earning interest, all these years instead of “borrowing” for other purposes, would this problem exist?
In all the non-profit organizations I have worked for, funds collected for a designated purpose could not be used for anything else. It is illegal to do so. Why is this not true when the tax taken from our salaries is explicitly taken as “Social Security tax?”
Richard Lugar, on Candy Crowley’s State of the Union this morning, had the nerve to say that we don’t have the money to pay Social Security right now. That we have to borrow it from the Treasury. That obfuscation attempts to paint current Social Security payments as deficit items. It is a prime example of the lengths to which Republicans will go in order to kill or privatize this successful program.
Report thisBy George, February 20, 2011 at 4:03 am Link to this comment
(Unregistered commenter)
Always remember when you read an opinion by this so called liberal columnist Ruth Marcus that she once wrote a column arguing that the Bushies who were involved in torture should not be held accountable for their crimes.
Real liberals. Real progressives. Moral people of any flavor do not support torturers.
Report thisBy Leefeller, February 19, 2011 at 5:04 pm Link to this comment
Another point of view compared to the Author. Yes SSI recently is paying out more than what is coming in, but this was expected and anticipated for and not a problem, it seems the US government has borrowed from SSI, so just pay back on their IOU, though it seems they are attempting to wiggle out of paying their bill? Read the following link it explains it better than I. I hate all this political pondering crap!
http://robertreich.org/post/3331762717
Report thisBy Leefeller, February 19, 2011 at 2:45 pm Link to this comment
How does this work, I paid into social security and have paid into social security since I was a teenager, so if I decided to collect from it when I become 75 by the time they quit screwing with it, I will need to lower my payback expectations because of what?
Seems to me there are a number of people who do not live long enough to collect SSI and especially now since most Americans do not have any Medical Insurance. People will be dropping dead in the streets like flies, so actually there should be more SSI for me to collect from, when the time comes, how about a raise? Just another numbers game to chip away once again.
Ruth Marcus, ....I had thought you retired to live on your SSI?
Report thisBy purplewolf, February 19, 2011 at 12:36 am Link to this comment
Short of money(not really)and refuse to cut the military,then tax the churches,as so many of them have been involving themselves into the political scene since G.W. and they are therefore no longer just a church,but a part of the political campaign process and should have lost teir tax exempt status 10 years ago.
Report thisBy smitty8, February 18, 2011 at 9:45 pm Link to this comment
I do not understand why posts such as this keep honking
on a theoretical Social Security/Medicare problem when
solutions are so obvious. For example, why not simply
eliminate the $106,800 cap on taxable earned income? Why
should someone making ten million not pay taxes on the
top $9,893,200? And why should ALL UNEARNED INCOME
(income from profits, rents, interest, etc.) be TOTALLY
EXEMPT?
Simply eliminating these two LOOPHOLES would solve the
‘problem’ while providing sufficient additional income
to not only eliminate the most unlikely shorfall but to
fully fund a single-payer national health care system
fully covering all Americans. Not only would this free
all of us from health care concern, but would eliminate
health care insurance handicaps for current and retired
employees handicapping many or most US businesses as
well as state and local governing bodies facing
crippling financial crises.
Solutions to most problems are pretty easy to come up
Report thiswith. What is difficult is to find representatives not
so incompetent and/or corrupt and constituencies so
stump-broke as to show no interest in looking at them.
By Jim R, February 18, 2011 at 9:41 pm Link to this comment
(Unregistered commenter)
The only reason wealthy beltway insiders have been clamoring for S.S. “adjustments” is that, aside from their class or ideological reasoning, they know it contains one of the last pools of wealth they and their ilk have been unable to pilfer for themselves.
Here’s a clue MSM “journalists” - since defined benefit retirement plans are gone and 401Ks are a rigged joke, with 90% of all outstanding stocks owned by the wealthiest 10%, and middle class employment will never return to previous levels - RAISE S.S. payments and LOWER the retirement age.
Put down Atlas Shrugged for awhile, Ms. Marcus, and try the teh Google on John Maynard Keynes.
I can think of no better long term stimulus than retired folks with disposable income, and retiring by 62 opens up job opportunities for the young.
I know, I know, but what would John Galt think of that and what about my annual stock dividends? We all have to sacrifice, right?
Report thisBy morongobill, February 18, 2011 at 7:33 pm Link to this comment
Anything to avoid raising taxes on “the dear leader’s”
long time best friends, the rich.
Everytime I read one of this writer’s posts, I am thinking better put on the high waders, the crap is getting deep in here.
Report thisBy gerard, February 18, 2011 at 5:52 pm Link to this comment
What! And not a word about cutting out wars and reducing the Pentagon’s ever-increasing trilliono-dollar Arms Bazaar?
Report thisBy LillithMc, February 18, 2011 at 5:35 pm Link to this comment
It is hard to imagine how making a change in social security now after 30 years of GOP trying to destroy it would help anything when it is projected to last through the baby boom generation. I don’t know Ruth Marcus, but I do not trust her.
Report thisBy JeffT, February 18, 2011 at 4:38 pm Link to this comment
(Unregistered commenter)
You are absolutely correct. I have been saying this for years but I guess it’s just too radical an idea!
Report thisBy James Bowen, February 18, 2011 at 3:58 pm Link to this comment
(Unregistered commenter)
sharonsj said “Members of Congress only have to serve for 5 years before being entitled to a FULL pension at age 62.”
I doubt seriously that you can document that. Members of congress are enrolled in FERS the same as all federal employees hired after 1983. Social Security is the cornerstone of FERS, in other words members of congress contribute to Social Security and are subject to its rules just like everyone else. Granted that most are wealthy and won’t have to depend on it as their primary income when they retire like most of us.
Report thisBy James Bowen, February 18, 2011 at 3:58 pm Link to this comment
(Unregistered commenter)
sharonsj said “Members of Congress only have to serve for 5 years before being entitled to a FULL pension at age 62.”
I doubt seriously that you can document that. Members of congress are enrolled in FERS the same as all federal employees haired after 1983. Social Security is the cornerstone of FERS, in other words members of congress contribute to Social Security and are subject to its rules just like everyone else. Granted that most are wealthy and won’t have to depend on it as their primary income when they retire like most of us.
Report thisBy prisnersdilema, February 18, 2011 at 2:28 pm Link to this comment
No ones buying the lies this time. If you really want a revolution in this country then go
ahead F with social security.
I guarantee bodies will be piled 10 feet high from Wall Street to Washington.
Report thisBy sharonsj, February 18, 2011 at 11:28 am Link to this comment
(Unregistered commenter)
Members of Congress only have to serve for 5 years before being entitled to a FULL pension at age 62. The rest of us get Social Security after working 45 years, and if you collect at age 62 you are forced to give up 25% of what you are owed.
I say make the clowns in Congress give up their sweet deals before they take away the little we’ve got.
Report thisBy Salome, February 18, 2011 at 10:02 am Link to this comment
(Unregistered commenter)
I agree with “culheath”—-same crap as always.
Instead of raising 2 percentage points just take the cap off Social Security: Everybody pays into Social Security a percentage of their TOTAL income—-no cap.
Report thisBy culheath, February 18, 2011 at 5:47 am Link to this comment
Same crap as always… as a trustee of the Social Security trust fund, Robert Reich gives us the real picture bout the present situation of SS and how to quickly and simply fix it permanently:
Budget Baloney: Why Social Security Isn’t a Problem for 26 Years, and the Best Way to Fix It Permanently
http://robertreich.org/post/3331762717
excerpt:
Remember, the Social Security payroll tax applies only to earnings up to a certain ceiling. (That ceiling is now $106,800.) The ceiling rises every year according to a formula roughly matching inflation.
Back in 1983, the ceiling was set so the Social Security payroll tax would hit 90 percent of all wages covered by Social Security. That 90 percent figure was built into the Greenspan Commission’s fixes. The Commission assumed that, as the ceiling rose with inflation, the Social Security payroll tax would continue to hit 90 percent of total income.
Today, though, the Social Security payroll tax hits only about 84 percent of total income.
It went from 90 percent to 84 percent because a larger and larger portion of total income has gone to the top. In 1983, the richest 1 percent of Americans got 11.6 percent of total income. Today the top 1 percent takes in more than 20 percent.
If we want to go back to 90 percent, the ceiling on income subject to the Social Security tax would need to be raised to $180,000.
Presto. Social Security’s long-term (beyond 26 years from now) problem would be solved.
Report this