Wednesday, Jan. 5, 2005 | 9:19 a.m.
Since the federal government began making Social Security payments 65 years ago this month, it has been using the payroll taxes that finance the benefits for many programs other than retirement. It could do this because Social Security taxes amounted to considerably more than was necessary for paying beneficiaries. In exchange for the surplus cash, the government provided the Social Security Trust Fund with interest-bearing Treasury bonds. Unfortunately, the years of surplus tax collections are drawing to a close. Projections show that in 13 years the money being paid out in retirement benefits will exceed the money being collected from payroll checks.
The immediate solution seems simple. The Social Security Trust Fund should begin cashing in its Treasury bonds. Analysts say this would allow it to pay promised benefits until 2052. There are numerous other possible reforms that could be implemented in the meantime to keep Social Security healthy past that date, provided the government quits viewing the retirement program as a slush fund. But the government doesn't want to pay those Treasury bonds because that would mean cutting the programs that Social Security has been funding all these decades.
A second answer would be for Bush to scale back on his tax cuts for the wealthy, which the Washington Post reports will cost the Treasury $11 trillion over the next 75 years. It's estimated that the deficit faced by the Social Security Trust Fund is $4 trillion over that same time period. Take $4 trillion back from the tax cuts, transfer it to the Trust Fund, and the "crisis" would be solved. But just as Bush refuses to consider any payroll tax increases, he refuses to consider that option.
A third answer, Bush's, is to slash Social Security's promised benefits for future retirees in exchange for allowing them to put a portion of their payroll taxes into a private retirement plan. He exempts current retirees and those "near" retirement, although he refuses to define "near." A retiree's current annual benefit is based on wage increases over the past several years. Either next month or in March, according to a Washington Post story, Bush is expected to propose a benefits formula based instead on inflation rates, under which retirees' benefits would be cut from near 10 percent (for workers now heading toward retirement age) to 46 percent (for those now just entering the workforce). This would theoretically end the Trust Fund's deficit by cutting trillions from its obligated payouts. Bush says the slash in promised benefits would be compensated b y gains in the private accounts.
In our view, privatized accounts are a gamble. Gains could be negligible or not at all. We'd rather see the tax cuts for the wealthy diminished by a third rather than see the golden years of millions of ordinary Americans placed at risk.
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