Last week, Social Security celebrated its 77th birthday. But with the surplus in the trust fund due to be exhausted by 2033, its next 77 years face uncertainty. Yesterday, Stephen Ohlemacher of the Associated Press wrote a fantastic piece on the possible fixes for Social Security.
Ohlemacher considers a few different policies, a combination of which could eliminate the shortfall, however, the longer polticians wait, the more will need to be done and the less time they will have to phase changes in gradually.
Some options could affect people quickly, such as increasing payroll taxes or reducing annual cost-of-living adjustments for those who already get benefits. Others options, such as gradually raising the retirement age, wouldn't be felt for years but would affect millions of younger workers.
All of the options carry political risks because they have the potential to affect nearly every U.S. family while raising the ire of powerful interest groups. But the sooner changes are made, the more subtle they can be because they can be phased in slowly. Each year lawmakers wait, Social Security's financial problems loom larger and the need for bigger changes becomes greater, according to an analysis by The Associated Press.
|Options for Reforming Social Security|
|Raise the retirement age to 68 by 2033||15 percent|
|Raise the retirement age to 69 by 2039 and 70 by 2063||37 percent|
|Apply payroll tax to all wages above $110,100 (with increased benefits)||72 percent|
|Increase the payroll tax .1% each year until it reaches 14.2%||53 percent|
|Adopt a new COLA index using Chained CPI||19 percent|
|Change the benefits for those with lifetime wages above $44,000||34 percent|
While many more provisions to ensure solvency for the program exist, none will be free from criticism. But politicians are going to have to make tough choices in both Social Security (and the rest of the budget for that matter)—continuing the status quo will only force even more painful reforms tomorrow. Social Security Commissioner Michael Astrue doesn't believe that the difficulty of changing the program is a good excuse to give up efforts at reform.
Certainly, in the current environment, it would be very difficult to get changes made. It doesn't mean that we shouldn't try. And sometimes when you try hard things, surprising things happen.
Social Security is only one part of our unsustainable budget path, but the challenge of reigning in our deficit spending will require us to take a serious look at the program. A bipartisan plan to put the debt on a downward path will require us to put all of the options—even painful ones—on the table. But if we are willing to make sacrifices, as AP has shown, solutions are possible. As we have said before, Social Security options are well-known and we know how much they will save compared to the current shortfall. Coming up with reforms is the easy part; the hard part is gaining the political will to enact them.