Every year we see reports of the impending doom of social security. It’s going to run out of money. But then we get counterpoints that explain maybe things aren’t so bad like this one:Here’s what you need to know: social security will be depleted in 2033, according to the report, which was released Monday. The Medicare report showed that the program’s funds are now expected to deplete in 2030. Bad news? Not really. The estimate on social security’s funding is unchanged from last year. Medicare added a mere four years to its lifespan. Neither is going to die a sudden death. After the social security fund runs out in 2033, the annual revenue from taxes will still be enough to cover 75% of pension costs. By 2050, the revenue from payroll taxes will be able to cover 75% of Medicare’s costs. What people seem to forget: these are estimates, not bills coming due. “We caution the media not to overreact,” said Kathy Ruffing, a senior fellow at the CBPP, on a press call Monday afternoon. She said social security funding is a long-term challenge, not an immediate crisis.
The article goes on to explain that Baby Boomers aren’t even to blame for this. The government saw this coming and put in measure to absorb the financial strain caused by retiring boomers. However they made some reasonable assumptions about growth in income that did not pan out. The problems with social security are merely another symptom of the stagnant wages our economy has been dealing with for a generation. Thankfully the fixes to social security are straightforward, except that they’ll practically destroy anyone’s political career.
Not everyone buys this version of the story. One of them is a former economist of the Social Security Administration. He has testified to Congress:Social Security faces real and increasingly urgent financial challenges. Reform isn’t only the wise thing to do, it is critical to ensure that Social Security remains solvent and fiscally sustainable and can continue to provide retirement security for generations to come. Social Security reform must not only address the program’s fiscal solvency issues but also remove the disincentives to working later in life. This means reforms must focus on reining in the growth of program costs, encouraging personal saving and investment, and rewarding those in middle and early retirement age who make the decision to extend their working careers. Finally, Social Security reform must begin immediately…We can reform this critical program, and we can do it in a way that will improve the financial security of all future Americans in retirement.
His points are straightforward. Social security is a bit of a mess. Sure there is some time to fix it but no one has the will to do so. And fixes aren’t just about maintaining benefits. Fixes must also include changes in how benefits are awarded and monitored.
This is a complicated argument that I can’t begin to have a full grasp on. But regardless of whether you think it’s a crisis or not, the program needs reforms. The sooner we do that, the better.