Time To Get A Grip On The Third Rail
Posted 03/15/2010 06:42 PM ET
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Unlimited Liability: While the Democratic leadership is trying to force a health care entitlement on a country that doesn't want it, the mother of all entitlements is in the red. Get used to it. It's only going to get worse.
While it doesn't have the voltage it once did, Social Security is still the third rail of politics. Politicians are afraid to touch it out of fear of damaging their careers.
Their decades of cowardice have led us to 2010, the year that Social Security begins its descent into the financial abyss. This year it will pay out $29 billion more in benefits than it takes in through the payroll tax that funds the retirement program.
A Sunday Associated Press report highlighting this deficit suggests that "it's time to start cashing" in the $2.5 trillion Social Security trust fund that has built up through the decades of the system taking in more than it has paid out.
Only problem: There is no trust fund.
As the story notes, "the federal government already spent that money over the years on other programs."
This year's shortfall isn't an anomaly. Social Security's deficits will continue, says the Congressional Budget Office, for three more years. Negligible surpluses ($6 billion in each year) are projected for 2014 and 2015. By 2016, the deficits will become permanent. The $2.5 trillion that Congress owes the program will have been paid out by 2037.
Social Security's unfunded liability for future decades now stands at $17.5 trillion, an inconceivable amount of money. How will Washington pay that bill? There won't be enough workers "contributing" to the system at the current rate to continue to pay the growing number of beneficiaries (see chart).
Will Congress raise the payroll tax? Will lawmakers cut benefits, either by trimming payments or raising the eligibility age (currently 62 for reduced benefits, 66 for full benefits for those born in 1960 and before, 67 for those born after)?
Avoiding the crash won't be a smooth ride. Who will be the first congressman to introduce legislation to slash payments? Who will be the first to suggest that with Americans living and working longer, the eligibility age should be bumped up significantly and right away?
No one interested in re-election will seriously propose these ideas.
Lawmakers on the left, though, would be happy to raise taxes to keep Social Security solvent, particularly taxes on the "rich" Americans they habitually demonize.
But their enthusiasm won't make a tax hike an easy political sell, even if it's structured to hit only the biggest incomes. Despite the widespread witlessness in Washington, a few in Congress know that a payroll tax hike to close Social Security's funding gap would crush the economy.
Give George Bush credit for trying to fix Social Security. He had the right idea — the only one, really — when he proposed privatizing Social Security.
Yet his modest plan, a partial privatization, never found political traction. The Republican Congress didn't have the courage to follow his lead. It was happy to leave the problem to someone else.
In all fairness, the Democrats' demagoguery on the issue has made it hard for Republicans to support the ideas they believe in in principle. With the help of the media, the Democratic Party has responded to any reasonable talk about overhauling the crumbling program with hysterics that have scared the voters. For decades, the left has poisoned the debate.
But those days might be coming to a close.
The Democratic Party is losing credibility and favor with voters because its leaders won't yield in their obsessive effort to make sweeping changes to health care that the public doesn't want.
Rejection at the polls this fall will be followed by a growing awareness that Democrats have been on the wrong side of almost every policy debate for generations. That's the opening this country needs to get its entitlement mess straightened out.
Time To Get A Grip On The Third Rail
