The end of Social Security

On Thursday Feb.18 President Obama signed an executive order creating a “Deficit Reduction Commission” (DRC). Former Senator Alan Simpson and former Clinton Whitehouse Chief of Staff Erskine Bowles have been appointed to lead the commission. Both Simpson and Bowles acknowledge that serious consideration must be given to the Social Security Program which includes Medicare.

Senator Simpson stated that the President has told them that everything is “on the table” and Mr. Bowles says that the discussion cannot start with certain programs or tax increases being declared non-touchable. Sen. Simpson says there are really only two ways to fix Social Security; a) increase taxes or reduce benefits and/or b) institute an affluence test to see if individuals are in real need of benefits. Reducing benefits is a move that would surely anger progressive liberals that believe in big government programs.

Author Paul Waldman writes in 2009 for The American Prospect Magazine “Social Security is not going broke….in fact there is a $2 trillion surplus” (1). The truth is since 1977 the FICA tax that funds Social Security has collected over $14.5 trillion (2) while paying only $10.4 trillion in benefits (3). This has created a $4 trillion surplus over the past 33 years. Social Security suffered irreparable damage with the passage of the Social Security Act of 1965 which allowed any surpluses in the Social Security trust fund to be withdrawn and used by Congress as part of the general fund.

Congress would replace the $4 trillion withdrawn from the trust fund with I.O.U.’s that would be cashed in if the fund ever began to be depleted. Well Congress has managed to spend the extra $4 trillion and now Social Security, for the first time ever, will have outlays that total more than revenues. It is time to begin cashing in those I.O.U.’s but we will have to do that by borrowing from foreign countries as there is no money left in the treasury.

Some conservatives are proponents of abolishing Social Security and Medicare. This idea would create unimaginable hardships for millions of Americans and is the most unlikely if not inevitable conclusion of the DRC. The debate that would follow any such suggestion would surely be one that every American would watch with keen interest.

A co-worker of mine suggested each individual under the age of 65 that has contributed any FICA tax to the system for at least 20 years be refunded their contribution and let them invest it themselves. This would be a means of ending Social Security and still giving Americans back some of their money. This seems like a reasonable proposal (if you do not mind excluding the millions of people age 18 to 44 that have made some form of contribution) but some cursory fact checking reveals that our government cannot afford to even pay these people what is owed them.

Over the last 20 years the average American’s median income is $23,155 (4). The FICA tax paid on $23,155 is $1,435 per year or $28,700 over the last 20 years. There are approximately 85 million people under age 65 that have contributed FICA taxes for at least 20 years. To refund these 85 million people their contributions (without any earned interest) would cost the Treasury almost $2.5 trillion. Once again these payments would be made with money borrowed from foreign nations.

Americans must realize that Social Security and Medicare are the federal budget “busters” and must be reformed before our country can begin to repair its’ financial situation. It is time politicians began telling the citizenry the truth about our finances. Americans are tough and resilient and will deal with any problem that arises as long as we know the real score. I am afraid the only reform that will allow our country to avoid bankruptcy and becoming a third world nation is for everyone to realize there will be no Social Security for them and to plan accordingly.

Carl D. Goodson
Clute, TX

www.carldgoodson.com
www.conservativecarl.blogspot.com

(1) www.prospect.org/cs/article?article=there_is_no_social_security_crisis
(2) www.cbo.gov/budget/data/historical.pdf
(3) www.truthandpolitics.org/budget-numbers-intro.php
(4) www.bea.gov/bea/regional/spi/