The State of Social Security and My Suggestions on How To Fix It

state of social securityWhat’s the State of Social Security? It’s Worse Than You Think

President Obama and Congress this year took big steps to stave off the “fiscal cliff” that everyone was talking about. But there is a looming fiscal cliff coming that will directly the lower and middle class in less than 20 years: Social Security.

Back in the fall during the General Election popularity contest, President Obama described Social Security as “structurally sound,” and Mr. Romney said that “neither the president nor I are proposing any changes” to the program. It was a rare issue on which both men agreed — and both were utterly wrong.

Social Security has run into problems before. It’s had deficits before. But it’s no less scary that for the first time in a quarter century, Social Security ran a deficit in 2010: It spent $49 billion dollars more in benefits than it received in revenues. That delta was covered with some of the $2.7 trillion buffer built in anticipation of retiring baby boomers — will be exhausted by 2033.

No one is hiding this information and it was all over the news just a few years ago. What’s not plastered on billboards and newspaper headings is that the Social Security Administration has underestimated how long US citizens will live and that the trust funds will run out two years earlier than the government has predicted.

People are living longer now than they were decades ago. Assuming that obesity doesn’t continue to worsen in America, and accounting for a continued drop in smoking, and prevention and treatment of cardiovascular and other deceases, people in the United States will live longer by the 2030s and will therefore be collecting Social Security for a longer period of time.

Remarkably, since Social Security was created in 1935, the government’s forecasting methods have barely changed, even as a revolution in big data and statistics has transformed everything from baseball to retailing.

If the amount of money coming in through payroll taxes does not increase and if the amount of money going out as benefits remains the same, the trust funds will become insolvent less than 20 years from now.

Check out this Social Security Infographic

To save Social Security and keep the checks flowing well past 2031, tough choices have to be made.

Social Security has helped lift many elderly out of absolute poverty for decades. What are the options to save this program? People won’t like any of these, but someone is going to have to make an unpopular decision or a dark day will be upon in less than 20 years. And the people who are currently in power—their generation will be the ones to first be affected. One option is to continue raising the retirement age, perhaps to as high as 69 or 70. While the full retirement age is gradually increasing to 67 (for people born in 1960 or later) from 65, this increase is not enough to counterbalance the gains in longevity.

A similar but associated issue is the need to ensure internet safety for seniors on social security.  The social security program should be well funded to account for the changing cyber threat landscape.

A second option is to increase payroll taxes, for those making well over 6 figures.

A third is to limit the annual cost-of-living adjustments, possibly by changing how those adjustments are calculated. A fourth is to reduce benefits — for example, by lowering the initial benefits for workers whose lifetime wages are above the national average (currently $43,000 a year). That one would hurt most of the readers reading this site—but Social Security, in principle, is socialism. And I believe we should help the most needy.

In 1983 (the year I was born), after the last time the trust funds ran a deficit, the National Commission on Social Security Reform, led by Alan Greenspan and with members appointed by President Ronald Reagan and Congressional leaders, produced a report that led to changes in payroll taxes. But in the quarter-century since, there have been only modest changes in the program.

What do you think the solutions are to the state of Social Security? Is there a voice we can make that can be rallied around and grab our elected leader’s collective attention?