Your new retirement plan: eating dog food
by James A. Bacon
File this under the “Long, Slow Demise of America’s Democratic Welfare State”…
The Social Security and Medicare Boards of Trustees have published their 2012 annual report on the financial condition of Social Security and Medicare, and the news just keeps getting worse. The combination of a slowing economy and a payroll tax holiday have combined to put Social Security on its flimsiest footing since the 1983 reforms. State the trustees:
The Social Security outlook has worsened significantly relative to last year’s report. The actuarial deficit in its combined trust funds is now 2.67 percent of taxable payroll, the highest recorded since the last major Social Security financing reforms roughly three decades ago. The single-year deterioration in the 2012 report is the largest recorded since the 1994 report. While the projected depletion date (2033) for the combined trust funds is not the earliest recorded since the 1983 reforms, we are nevertheless now closer to the point of projected depletion than we have been since enactment of those reforms.
The Disability Insurance trust fund, one of the two components of Social Security, will run out in 2016. That’s only four years away. Unless Congress acts, 10.6 million Americans receiving disability payments will see a significant reduction in benefits.
Of course, Congress being the craven institution that it is, will follow the path of least resistance. Rather than raise taxes or cut benefits, in all likelihood it will merge the assets of the Disability Insurance (DI) and the Old-Age and Survivors Insurance (OASI) funds, allowing the combined program to stumble forward to 2033, when the whole thing will collapse. Just a reminder: That’s only 21 years from now.
Of all the social safety net programs we have in America, Social Security is the largest, hence most important, and it is the easiest to fix because Dooms Day is still two decades away and the changes can be phased in gradually. If we reformed Social Security now — nudging the retirement age higher, gently reducing Cost of Living allowances, tweaking the payroll tax, or some combination thereof — the pain would be far more tolerable than if we waited another 10 or 15 years to act.
So, what have we accomplished in the past two years? Have we bolstered Social Security in any way? No, Congress passed two years’ of payroll tax holidays, depriving Social Security of $215 billion in revenue. Two steps backwards, zero steps forward.
Here’s how badly the picture has deteriorated in the past two years:
You can blame whomever you want — the Democrats, the Republicans, political polarization, Americans’ entitlement mentality, whatever. The hard facts remain. It’s still the third rail of American politics and no one has the guts to do what needs to be done. Boomergeddon looms. The United States is only a few years behind Europe in the financial collapse of the welfare state. We’re all heading for a Big Fat Greek Drubbing.
