"Fixing" Social Security

President Bush is correct in saying there is a problem with Social Security, just as did President Clinton in his 1999 State of the Union Address. And he has backed away from his earlier claims that Social Security is a crisis situation. Again, rightly so, since it currently takes in $150 billion more than it pays out each year, will continue to take in more than it pays out until about 2018, and will not expend all of the reserves represented by US Treasury notes for some 40 to 50 years.

He is right in saying that the sooner we address the problem the easier will be the remedy. He mentioned several approaches worth exploring. Two that seem like an easy sell to me are to further push back the age for full benefits and/or to raise the cap on Social Security deductions (currently $87,900). The argument that supports extending the age for full coverage is that people live longer now than they did before. Certainly, people in my generation (recently retired) live longer and are healthier than those of my parents’ and grandparents’ generations. I have every reason to believe the same will be true for my children and future grandchildren. I think most people would jump at the offer of a longer and healthier life for the tradeoff of deferred full Social Security benefits (if this were a choice for me I would be first in line).The rationale for raising the cap is this: in 1980 the wealthiest 10 percent received about one-third of adjusted gross income as reported to the IRS; in 2000 this had risen to 45 percent. Raising the Social Security cap to some larger number (maybe $150,000) would shift more of the cost of the program to those best able to pay.

What makes no sense as a solution to the Social Security problem is privatization of the receipts. The essence of this as proposed is to take one-third of the money that flows into Social Security and set it aside in private individual accounts that can be passed on to one’s heirs. Now, for an individual I can see the appeal — this becomes your money. But as a solution to Social Security this is preposterous — taking money out of a system can not make it more financially sound. I’m not against saving — 401Ks have worked well for me. But Social Security has worked well for me and millions of other people for some 70 years and can easily be adjusted to work well for another 70 years. The privatization that President Bush has proposed is actually an agenda to permanently break a very successful system.