Social Security is safe and relatively sound
We try to keep these pages lively and offer a variety of viewpoints. We don’t always agree with opinions offered by syndicated columnists whose work appears in this newspaper, or readers who write letters to the editor.
Nothing could have better illustrated this concept than remarks that appeared at the end of a column penned by Bruce Kauffmann on our Sunday Commentary page.
After outlining the history of Social Security’s creation and how President Franklin Roosevelt overcame an assortment of not-inconsiderable legal and political roadblocks to enact the program, Kauffmann’s column took a rare ideological turn when he stated that Social Security remains a “controversial” piece of legislation because “as currently constructed (Social Security) is going broke.”
Then, Kauffmann characterized Social Security as “a Ponzi scheme,” where the funds seniors collect “come from the taxes that younger workers pay into Social Security. Alas, because of stagnant birthrates in America … fewer workers are paying into Social Security while more retirees are collecting it. More money going out, less money coming in, eventually equals insolvency.”
In all due respect to Kauffmann, who does fine work, he’s not quite correct in this instance.
His assertions must be tackled in two parts; first, the notion that Social Security is “going broke.” While that conceit has been peddled by some on the right who would like to see the program privatized or don’t cotton to the idea of the government providing social insurance, however threadbare, it’s simply not borne out by concrete evidence. The 2013 annual report from the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Trust Funds found that Social Security would still be able to pay full benefits, if it stays on the current trajectory, until 2033. Then, even if no adjustments are made, it would be paying three-quarters of all benefits for decades after that point. It’s no excuse for inaction, but, with a $2 trillion surplus in reserve, it’s not “going broke.”
David Cay Johnston, a journalist who specializes in economics and tax issues, last year dismissed the “going broke” meme, pointing out that “the people who want to kill Social Security have for years worked hard to persuade the young that the Social Security taxes they pay to support today’s gray hairs will do nothing for them when their own hair turns gray. That narrative has become the conventional wisdom because it is easily reduced to a headline or sound bite. The facts, which require more nuance and detail, show that, with a few fixes, Social Security can be safe for as long as we want. The fixes could include raising the retirement age, boosting the Social Security tax rate or lifting the payroll tax cap, which currently exempts all earnings over $110,000.
And, as to whether Social Security is a Ponzi scheme, the argument is easily refuted. A Ponzi scheme is illegal, where investors are fraudulently lured into an investment plan, and their initial contribution is used to pay off other investors. It’s what notorious New York financier Bernard Madoff was up to before his house of cards collapsed in 2008. There is no fraud with Social Security; its workings, and finances, are completely transparent. It’s stable, and would be made more so with the modifications cited above. Ponzi schemes are bound to collapse, because more and more investors are needed to keep the game going. Madoff must have hoped his elaborate setup would come undone only after he died.
It didn’t. But, despite what the naysayers contend, there’s every likelihood Social Security will outlast us.