No time to waste in solving Social Security crisis
In Thursday night’s presidential debate — such that it was — the moderators asked each candidate what they would do to shore up Social Security.
President Biden responded he would make the wealthy pay their fair share. Former President Trump did not answer the question (he didn’t answer a lot of questions) but charged that President Biden was destroying Social Security, without citing specifics.
Whoever is elected in November will be a lame duck on Day One, with no more races to run. That’s the ideal situation to make difficult political decisions, and difficult political decisions need to be made urgently.
In recent days, columnist Veronique De Rugy argued in these pages that Republicans had a great deal to gain if they alone reformed Social Security. She warned that if the GOP did not institute reforms in the next decade that Democrats might resort to their “preferred” solution of raising taxes and/or increasing debt.
However, in this divided and dysfunctional moment in our country, it is a fantasy to believe that one party or the other can impose its own solution to the fast-approaching crisis of Social Security solvency. It has to be bipartisan.
De Rugy suggested that Republicans might choose from a menu of “reasonable” reforms that include raising the retirement age, adjusting (reducing) benefits to reflect longer life spans, means testing and encouraging private savings so there would be less reliance on government.
Does anyone remember what happened when Nikki Haley vaguely hinted at raising the retirement age during the primaries? She was forced to backpedal faster than an all-pro cornerback.
As economist Paul Krugman has pointed out, some Americans are indeed living longer, but those with blue-collar jobs not so much. He asked, should janitors have to work more years because lawyers are living longer?
De Rugy suggested that reforms must take place in the next decade, but the situation is most certainly more urgent than that. Every year one waits means the solution will cost more and we (most importantly our political leaders) have known this for decades but have been unwilling to touch the “third rail.”
The Social Security Trust Fund was built up as baby boomers were in their prime earnings years. As they retired, Social Security started to draw down that reserve. Current projections say it will be depleted around 2035 and at that point an automatic cut in benefits of up to 21% will be enacted. That’s the law.
No one believes politicians who want to survive one nanosecond will allow that to happen. So, how does this get done?
Currently, there is about $2.6 trillion in the fund invested in special bonds paying market rates. Because of the low interest rates a few years ago, the fund earned about 2.4% last year. One suggestion is to invest, say, 40% of the fund (a little more than $1 trillion right now) in higher-yielding investments. The federal government’s TSP does this. The longer you wait, the less there is to invest.
The Social Security Administration, in its annual report, has done much of Congress’s work for it. There is a menu of 141 options one could adopt to change current law that cover COLAs, benefits, retirement age, taxes, other sources of income, investments, and other measures. Tables show how much each would help or hurt.
One in five Americans over 50 have no retirement savings and, according to AARP, 61% of those surveyed worry that they will not have enough at retirement. Social Security, for most, is their foundation.
On Jan. 21, 2025, both parties should agree to enter a negotiation and to lay aside the partisan BS. Insuring the solvency of a program that supports 67 million Americans is one of both parties’ most urgent tasks
• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86. His new book “American Dreams: The Story of the Cyprus Fulbright Commission” is available from Amazon.com.