February 21, 2005

Social Security > Charles Krauthammer on Social Security Reform

Think 2018, not 2042:

2042. I do not know if President Bush's Social Security reform will pass, but if it does not, its demise will be traced to that point in the president's State of the Union address when he warned that the system would go bankrupt in 2042. It was a disastrous moment.

First, it is hard to rally people to a crisis that you have located 37 years out. People 45 and older figure they will be dead anyway. And younger people have such a short time horizon that 37 years in the future is utterly meaningless. It does not matter if you have young children. A parent with young children can barely imagine them as teenagers, let alone as pre-menopausal fortysomethings. [...]

The really important date is 2018. That is when this pay-as-you-go system starts paying out more (in Social Security benefits) than goes in (in payroll taxes). Right now, workers pay in more than old folks take out. But because the population is aging, in 13 years the system begins to go into the red. To cover retiree benefits, the government will have to exhaust all of its FICA tax revenue and come up with the rest -- by borrowing on the world market, raising taxes or cutting other government programs.

Posted by lesjones



Comments

The Usual Suspects show up to rail against Bush and his Soc Sec plans in 5....4....3....

And I don't mean Verbal and Kobabayashi. :)

Posted by: Thibodeaux at February 21, 2005

Doesn't sound like Krauthammer has his facts arranged quite right. It's true that the projected point at which SS payouts are greater than FICA taxes coming in is 2018,although I've seen that point quoted as early as 2012. I think the discrepancy depends on various forecasts for immigration and the overall economy.

That said, SS won't be borrowing money. It will be calling back in the money it has already loaned out. The 'Trust Fund' does exist-but it's entirely invested in Treasury Bonds. The government loaned the money to itself. 2042 is the estimate of when that money will run out.

My opinion: if you want to 'save' Social Security (and I don't-I want to scrap the whole thing and I want my money back) take it back to being a safety net, rather than the hammock it is now. Make the payout poverty level + 10% for everyone, regardless of how much money they made when working. Make living on it suck, so that folks will save their own money for their own retirement.

Posted by: Heartless Libertarian at February 22, 2005

Thanks for usefull info.

Good luck

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