I was all set to submit a column to my editor with reactions to the fact sheet I recently offered my readers called "When to Take Your Social Security Benefits." But then I woke up this morning to this headline in my morning paper: "Social Security Drain is Gaining Momentum." It was yet another news report predicting the demise of our nation's bedrock retirement insurance program. So I'm delaying that practical column about the best time to sign up for Social Security to write a more politically-charged newspaper story dealing with the hot button issue of Social Security reform.
The latest news stories focused on a recent report issued by Social Security's Board of Trustees, based on data compiled by Social Security Administration actuaries, that the program's trust funds will run dry in 2033, three years earlier than the estimate in last year's report. Lower than anticipated wages (and thus lower projected payroll tax receipts) were cited as the main reason for the sooner-than-expected funding shortfall.
This latest trustee's report will inevitably lead to all kinds of gloom and doom stories in the media — some of them predicting catastrophic consequences for the program and its beneficiaries. Indeed, the report in my local paper said, "Unless Congress acts — and forcefully — payments to millions of Americans will be cut."
And I know I will get emails from thousands of my readers. Some will be seriously concerned that their Social Security checks will soon be reduced. Others will make hasty and ill-advised decisions about starting their Social Security benefits (perhaps too soon) because they are worried that the rug will be pulled out from beneath them — that Social Security rules will change dramatically in the next couple of years.
My message to all concerned is to take a deep breath and calm down. Sure, Social Security has long-range funding problems — due almost entirely to the fact that baby boomers are turning into senior boomers at the rate of tens of thousands per day. But they are problems that can be dealt with in a rational and comprehensive manner. And they will be dealt with as soon as this country has the political will to take on the challenge. And I think that will is just about there.
This problem isn't new, of course. People have known about the demographic time bomb represented by the aging baby boom generation for many years now. And most folks have been inclined to blame Congress for inaction, wondering: "Why don't they do something to fix Social Security?"
I place a large part of the blame on the American people — on voters and our negatively-focused election process. For example, if I had run for Congress anytime in the recent past on a Social Security reform platform that called for an increase in the retirement age and a slight decrease in annual cost-of-living adjustments (two very realistic and rational reform scenarios), I would have lost the election in a landslide. My opponent would have run negative ads claiming that I was out to gut grandma's Social Security checks.
I can envision the 30 second spot now. There would have been a picture of me taken on my worst bad hair and ugly face day, and next to me would be a sweet little old lady staring at her Social Security check in horror. A very ominous-sounding voiceover would say, "Did you know that Tom Margenau has a plan to slash our Social Security?" Then we would have seen my opponent, as handsome as the day is long, walking though a field of flowers with lots of happy and smiling senior citizens surrounding him. And you'd have heard him say, "Vote for me, Wally Wonderful. I love my grandma and I won't touch her Social Security check with a ten foot pole." And sadly, the voters would have bought it.
But as I said, I think the mood of the country is changing. I think folks are ready to acknowledge that we have to do something to deal with Social Security's long-range problems.
So what can we do? I've used this column many times to offer some suggestions for reform. These aren't solutions that I dreamt up. They are commonly cited proposals for dealing with Social Security's funding problems. Even though you will hear all kinds of ideas over the next couple of years for changing Social Security — from radical right wing proposals to "privatize" the system to nonsense left wing suggestions to "leave well enough alone" — I will bet money that two or three of the following reforms will eventually be adopted and passed into law:
—A long-range increase in the retirement age, probably to age 68;
—An increase in the number of years used to compute a Social Security retirement benefit, from the current 35 year base to 38, which will have the effect of slightly reducing future retirement benefis;
—An increase in the Social Security taxable wage base, probably to $250,000;
—A long-range and small increase in the payroll tax, perhaps from the current 6.2 percent to 6.5 percent; and
—A small decrease in the annual cost-of-living-adjustment (COLA) paid to Social Security beneficiaries.
Here is one final note about the timeframe for dealing with Social Security reform. Most of my readers were in their 20s and 30s the last time the program faced a financial shortfall. This was in the late 1970s, and at the time, Social Security was only five years away from insolvency. Many of you were too young to give Social Security a second thought. But a series of amendments in 1983 set the system on the course it's still on today, putting the system in the black for the next half century. I'm not saying we should once again wait until Social Security is five years away from bankruptcy. The sooner we deal with Social Security reform, the better. But I am saying we don't need to panic.